Deck 10: Forecasting

Question 1

Using the data from Question 11,calculate the forecast for period 7 using a four-period moving average:

A) 60
B) 43.25
C) 57.75
D) 55.25

Answer 1

55.25

Question 2

If a sales representative tells his or her manager,"I hope to sell 20% more than last year," this should be considered

A) a forecast.
B) a performance measure.
C) a goal.
D) a production plan.

Answer 2

a goal.

Question 3

A small company that manufactures rubber boots is selecting a method to forecast demand for the next 10 years.The company recently expanded its facilities,doubling its capacity.Which of the following forecasting methods would be preferred?

A) Qualitative
B) Simple exponential smoothing
C) Econometric
D) Box-Jenkins

Answer 3

Qualitative

Question 4

A regression model is an example of which type of forecasting method?

A) Causal
B) Historical analogy
C) Qualitative
D) Life cycle analogy

Question 5

What is the exponentially smoothed forecast for week 2?
(Use F₁ = 25 and alpha = 0.2.)

A) 21
B) 24
C) 32
D) 53

Question 6

The difference between actual demand and the forecast is

A) forecast error.
B) mean absolute percentage error.
C) absolute deviation of forecast error.
D) mean absolute deviation of forecast error.

Question 7

Which of the following is NOT one of the most important factors in selecting a forecasting method?

A) Nature of the decision.
B) Patterns seen in the data.
C) Data availability.
D) Customer preferences.

Question 8

Given the following information for period 15,what will be the smoothed mean absolute deviation for period 16?
Demand = 120
Forecast = 180
MAD₁₅ = 50
Alpha = 0.3

A) 77
B) 53
C) 17
D) 43

Question 9

When should qualitative methods NOT be used?

A) When historic data are unreliable.
B) When it is impossible to obtain historic data.
C) For short-range, repetitive decisions.
D) When making major costly decisions, such as facilities location.

Question 10

A qualitative forecast would most likely be used for

A) aggregate planning.
B) scheduling.
C) process design.
D) inventory management.

Question 11

If one time series model is used for forecasting a low-demand item and another time series model is used for forecasting a high-demand item,which measure of forecast accuracy provides a valid comparison of the errors from these two time series?

A) CFE
B) MSE
C) MAD
D) MAPE

Question 12

Forecast error is used for all of the following EXCEPT

A) to monitor erratic demand observations or outliers.
B) to determine when the forecasting method is no longer tracking actual demand and needs to be reset.
C) to determine the capacity cushion.
D) to determine parameter values that provide the most accurate forecasts.

Question 13

A method of forecasting that best describes the flows from one sector of the economy to another is called

A) regression.
B) econometric model.
C) input-output model.
D) simulation model.

Question 14

Which of the following is NOT a measure of forecast accuracy?

A) Mean square error.
B) Cumulative sum of forecast error.
C) Mean absolute deviation of forecast error.
D) Cumulative absolute deviation of forecast error.

Question 15

The Grand Bakery produces 60 special sourdough rolls every day.Any rolls that are not sold each day are given to the employees.The bakery collected sales data from the past week: What is the value of F₆ if the bakery uses a 3-day weighted moving average with W₁ = 0.6,W₂ = 0.2,and W₃ = 0.2?

A) 51.4
B) 53.4
C) 58.6
D) None of the above

Question 16

Using exponential smoothing,if we want forecasts to be very responsive to recent demand,the value of alpha should be

A) large.
B) moderate.
C) small.
D) The value of alpha does not matter.

Question 17

The forecast was 70 units for the current period while actual demand was 76.The forecast for the next period is 75.8.What is alpha if a simple exponential smoothing forecast method is being used?

A) 0.004 .
B) 0.967
C) 0.040
D) 0.097

Question 18

What is the exponentially smoothed forecast for week 6?
(Use F₅ = 33 and alpha = 0.0.)

A) 33
B) 31.7
C) 30
D) 20

Question 19

Given the following weekly demand figures, using a three-week moving average,what is your forecast for week 6?

A) 30
B) 36.7
C) 32.5
D) 25

Question 20

Which phrase most closely describes the Delphi forecasting technique?

A) Consumer survey.
B) Individual opinions.
C) Rounds of anonymous data collection.
D) Test markets.

Question 21

A qualitative forecast would be most likely used for

A) aggregate planning.
B) production scheduling.
C) inventory management.
D) facilities expansion.

Question 22

The exponential smoothing forecasting technique slowly responds to changes in the mean level of demand when

A) a small alpha value is used.
B) a large alpha value is used.
C) an alpha value of 1.0 is used.
D) size of the alpha value does not affect the responsiveness.

Question 23

The moving average forecasting technique rapidly responds to changes in the mean level of demand when

A) a small number of periods is used.
B) a large number of periods is used.
C) an infinite number of periods is used.
D) the number of periods used does not affect the responsiveness.

Question 24

Which of the following is NOT a qualitative approach to forecasting?

A) Market survey
B) Life cycle analogy
C) Informed judgment
D) Box-Jenkins method

Question 25

The major components (patterns)of a time series consist of all of the following EXCEPT

A) trend.
B) seasonality.
C) random error.
D) correlation.

Question 26

Which of the following statements about forecasting is NOT correct?

A) Forecasts should have at least two numbers: one for the best estimate of demand and the other a measurement of forecasting error.
B) There is no universal forecasting method for all situations.
C) Forecasts of sales and demand will always be equal.
D) Forecasting is both an art and a science.

Question 27

Given the following weekly demand figures,what is the MAD at the end of week 5?

A) 10.8
B) 11.8
C) 12.0
D) 13.0

Question 28

Which of the following is likely to reveal a bias effect resulting from the forecast method in use?

A) MSE (mean squared error).
B) CFE (cumulative forecast error).
C) MAD (mean absolute deviation).
D) None of the above.

Question 29

Which of the following is NOT a measure of variance in the forecast error?

A) CFE (cumulative forecast error).
B) MAD (mean absolute deviation).
C) MAPE (mean absolute percentage errors).
D) All of the above are measures of variance.

Question 30

The life cycles analogy technique fits best with which of the following applications?

A) A retailer wants to develop an overall sales forecast for the coming summer season.
B) A cereal manufacturer has to decide how much new plant capacity will be required if it enters a new product category.
C) A parts distribution business needs to create a workforce plan for the remainder of the year.
D) A fishing lure manufacturer has to decide whether to invest in higher-capacity equipment this year to be ready for the next season's demand.

Question 31

_____ models are usually more accurate than ______ models for medium-to-long-range forecasts.

A) Time series, causal
B) Causal, time series
C) Time series, qualitative
D) Qualitative, time series

Question 32

Using a simple exponential smoothing model (alpha = 0.3),calculations for the most recent period generated a forecast of 25.10 units.Actual demand for that period was 31 units.What is the forecast of demand for the upcoming period?

A) 26.28
B) 26.87
C) 29.23
D) None of the above are correct.

Question 33

Measured by the mean absolute deviation,which of the forecast methods (1,2,or 3)provides the highest degree of forecast accuracy for the five weeks of data shown below?

A) Method 1.
B) Method 2.
C) Method 3.
D) Methods 1 and 2 are equal.
E) Methods 2 and 3 are equal.

Question 34

Which of the following best describes the MAPE measure of forecast error?

A) Calculate the deviation between the forecast and the actual value for each period. Divide each deviation by the level of demand. Take the absolute value of each deviation, sum all values, and multiply by 100. Divide by the number of forecast errors.
B) Calculate the absolute value of the deviation of the forecast from the actual value for all periods. Sum all of the absolute values of the deviations and divide by the number of forecast errors.
C) Calculate the difference between the forecasted value and the actual value for all periods. Square each of the differences. Sum all of the squared differences and divide by the number of differences.
D) Calculate the difference between the forecast and the actual value for all periods. Sequentially sum up the forecast errors.

Question 35

Which of the following is INCORRECT about a qualitative approach to forecasting?

A) Can include managerial judgment when developing forecast data.
B) Is useful when past data are not good indicators of future conditions.
C) Typically used for short-range forecasting decisions.
D) A market survey is one example method.

Question 36

A sports equipment retailer needs to forecast sales by product classes one to two years out.Which forecasting model is most appropriate?

A) Moving average model.
B) Weighted moving average model.
C) Informed judgment.
D) Econometric model.

Question 37

When selecting a forecasting method,which of the following is true?

A) The method with the best fit to historical data (least error) is the best predictive model.
B) The existence of complicated data patterns will affect the method chosen.
C) Stable data patterns over time are best suited to qualitative methods.
D) Time series methods use qualitative data to smooth the forecasts.

Question 38

Which of the following is NOT true about collaborative planning,forecasting,and replenishment (CPFR)?

A) The basic idea is to share forecasting information with the suppliers and customers in the supply chain.
B) It is best applied to business-to-business relationships.
C) It creates visibility in the supply chain, minimizing the occurrence of the bullwhip in supply chains.
D) It requires advanced forecasting tools such as Box-Jenkins to improve the forecasting accuracy.

Question 39

Using a three-period weighted moving average model with weights of W1 = 0.5,W2 = 0.4,and W3 = 0.1,what is the forecast of demand for week 6 using the same demand information from Problem 32?

A) 23.10
B) 28.10
C) 28.50
D) 28.67

Question 40

Assume you discovered from historical records that simple linear regression is an effective means of predicting the labor cost of some project tasks.You found that the weight associated with an item (in pounds)produced in historical projects is an accurate and reliable predictor of labor cost.You develop a linear equation expressing the relationship between item weight and labor cost: estimated demand = 1,300 + 0.25x For an upcoming project that includes the task of manufacturing an item weighing 7,000 pounds,estimate the task cost using this regression equation.

A) $1,750
B) $3,000
C) $3,050
D) None of the above are correct.

Question 41

Simple exponential smoothing forecasts are reliable for forecasting long-term demand patterns.

Question 42

Increasing the flexibility of operations and the supply chain is a main method for counteracting forecast error.

Question 43

Tracking signal is the ratio between cumulative forecast error and the most recent estimate of mean absolute deviation.

Question 44

United Colors of Benetton is facing a serious problem.The global fashion garment manufacturer and retailer is well known for its speed of new product introduction.The firm is planning to introduce its 2017 summer collection and wants to estimate demand.Demand levels from past years are shown below.

Question 45

Which of the following regarding linear regression is correct?

A) Linear regression is a form of exponential smoothing.
B) Linear regression is the most commonly used qualitative method.
C) Linear regression requires use of an independent variable to make estimates.
D) None of the above are correct.

Question 46

Which of the following is NOT one of the important points to remember about collaborative planning,forecasting,and replenishment (CPFR)?

A) Any organization entering into a CPFR arrangement must expect to pay for the benefits received.
B) Sensitive information is not shared among partners, so proprietary information is not a factor in CPFR arrangements.
C) Ongoing management attention will be needed to maintain a long-term CPFR relationship with another organization.
D) All are important considerations for CPFR arrangements.

Question 47

A time series forecast model includes only a level (average)term,representing past average demand.

Question 48

All forecasts should include two estimates: an estimate of the demand and an estimate of the forecasting error.

Question 49

The goal of forecasting is to select a method that delivers a balance between the lowest possible error along with acceptable forecasting costs.

Question 50

Actual demand is always equivalent to actual sales.

Question 51

Lengthening the forecast time horizon is a main method for counteracting forecast error.

Question 52

The Box-Jenkins method requires 12 past data points.

Question 53

Describe each of the five demand components in a time series (of past demand data).

Question 54

Quantitative forecasting methods should be used for predicting the demand patterns of new products introduced in the market.