Deck 11: Forecasting and Demand Planning

Question 1

Using the data shown below in Table 3 for the sales of a new CD at a store for the last 4 weeks, answer the questions
Table 3
$$\begin{array} { | l | c | c | c | c | } \hline \text { Week } & 1 & 2 & 3 & 4 \\\hline \text { Sales } & 112 & 105 & 125 & 118 \\\hline\end{array}$$

-The actual sales for week 5 were 105 units. The four-period moving average forecast for week 6 is:

A) less than or equal to 100.
B) more than 100 but less than or equal to 110.
C) more than 110 but less than or equal to 120.
D) more than 120 but less than or equal to 130.

Answer 1

more than 110 but less than or equal to 120.

Question 2

Using the data shown below in Table 3 for the sales of a new CD at a store for the last 4 weeks, answer the questions
Table 3
$$\begin{array} { | l | c | c | c | c | } \hline \text { Week } & 1 & 2 & 3 & 4 \\\hline \text { Sales } & 112 & 105 & 125 & 118 \\\hline\end{array}$$

-The four-period moving average for next week (week 5) is:

A) less than or equal to 100.
B) more than 100 but less than or equal to 110.
C) more than 110 but less than or equal to 120.
D) more than 120 but less than or equal to 130.

Answer 2

more than 110 but less than or equal to 120.

Question 3

Using the data shown below in Table 3 for the sales of a new CD at a store for the last 4 weeks, answer the questions
Table 3
$$\begin{array} { | l | c | c | c | c | } \hline \text { Week } & 1 & 2 & 3 & 4 \\\hline \text { Sales } & 112 & 105 & 125 & 118 \\\hline\end{array}$$

-The three-period moving average for the next week (week 5) is:

A) less than or equal to 100.
B) more than 100 but less than or equal to 110.
C) more than 110 but less than or equal to 120.
D) more than 120 but less than or equal to 130.

Answer 3

more than 110 but less than or equal to 120.

Question 4

_____ forecasts are necessary to plan for facility expansion.

A) Long-range
B) Intermediate-range
C) Short-range
D) Demand planning

Question 5

$\begin{array}{|l|l|l|l|}\hline\text { Month } & \text { Sales } & \text { Absolute Error, Forecast 1 } & \text { Absolute Error, Forecast 2 } \\\hline \text { Jan } & 35 & 5 & 2 \\\hline \text { Feb } & 29 & 1 & 3 \\\hline \text { Mar } & 39 & 4 & 4 \\\hline \text { Apr } & 42 & 2 & 3 \\\hline \text { May } & 51 & 3 & 1 \\\hline \text { Jun } & 56 & 1 & 4 \\\hline\end{array}$

-The forecasting error measurement that eliminates the measurement scale factor is the _____.

A) mean square error (MSE)
B) mean absolute deviation (MAD)
C) root mean square error (RMSE)
D) mean absolute percentage error(MAPE)

Question 6

Using the data shown below in Table 1, compute the mean square error, mean absolute deviation, and mean absolute percentage error for the forecasts shown and then answer Questions
Table 1
$\begin{array}{|l|c|c|}\hline \text { Month } & \text { Forecast Demand } & \text { Actual Demand } \\\hline \text { April } & 170 & 180 \\\hline \text { May } & 225 & 200 \\\hline \text { June } & 210 & 200 \\\hline \text { July } & 260 & 240 \\\hline \text { August } & 200 & 230 \\\hline\end{array}$

-The mean absolute percentage error (MAPE) is:

A) less than or equal to 5%.
B) more than 5% but less than or equal to 10%.
C) more than 10% but less than or equal to 15%.
D) more than 15% but less than or equal to 20%.

Question 7

Based on the information shown below in Table 5, develop a forecast for June using both the two-period moving average model and the exponential smoothing model with ? = 0.10. For the exponential smoothing model, assume the forecast for February is 800. Answer questions
Table 5
$\begin{array}{|l|c|}\hline \text { Month } & \text { Actual Demand } \\\hline \text { February } & 850 \\\hline \text { March } & 900 \\\hline \text { April } & 975 \\\hline \text { May } & 950 \\\hline\end{array}$

-The 2-period moving average forecast for June is:

A) less than or equal to 940.
B) more than 940 but less than or equal to 950.
C) more than 950 but less than or equal to 960.
D) more than or equal to 960.

Question 8

$\begin{array}{|l|l|l|l|}\hline\text { Month } & \text { Sales } & \text { Absolute Error, Forecast 1 } & \text { Absolute Error, Forecast 2 } \\\hline \text { Jan } & 35 & 5 & 2 \\\hline \text { Feb } & 29 & 1 & 3 \\\hline \text { Mar } & 39 & 4 & 4 \\\hline \text { Apr } & 42 & 2 & 3 \\\hline \text { May } & 51 & 3 & 1 \\\hline \text { Jun } & 56 & 1 & 4 \\\hline\end{array}$

-All of the following are important concepts in forecasting EXCEPT:

A) determining the planning horizon length.
B) determining the time bucket size (i.e., year, quarter, month, week, day, etc.).
C) determining a relationship between a single dependent variable and one or more independent variables.
D) identifying cyclical patterns.

Question 9

Using the sales data on a particular model of a DVD player shown below in Table 4, answer question
Table 4
$\begin{array}{|l|c|}\hline \text { Month } & \text { Sales } \\\hline \text { Jan } & 35 \\\hline \text { Feb } & 29 \\\hline \text { Mar } & 39 \\\hline \text { Apr } & 42 \\\hline \text { May } & 51 \\\hline \text { Jun } & 56 \\\hline\end{array}$

-The sales forecast for July using the data in Table 4, forecasts sales for May as 36.25, and a simple exponential smoothing model with a smoothing constant of 0.40 is:

A) less than or equal to 35.
B) more than 35 but less than or equal to 40.
C) more than 40 but less than or equal to 50.
D) more than 50 but less than or equal to 55.

Question 10

Using the data shown below in Table 1, compute the mean square error, mean absolute deviation, and mean absolute percentage error for the forecasts shown and then answer Questions
Table 1
$\begin{array}{|l|c|c|}\hline \text { Month } & \text { Forecast Demand } & \text { Actual Demand } \\\hline \text { April } & 170 & 180 \\\hline \text { May } & 225 & 200 \\\hline \text { June } & 210 & 200 \\\hline \text { July } & 260 & 240 \\\hline \text { August } & 200 & 230 \\\hline\end{array}$

-The mean absolute deviation (MAD) is:

A) less than or equal to 20.
B) more than 20 but less than or equal to 30.
C) more than 30 but less than or equal to 40.
D) more than 40 but less than or equal to 50.

Question 11

A(n) _____ is a one-time variation that is explainable.

A) cyclical pattern
B) random variation
C) irregular variation
D) seasonal variation

Question 12

_____ forecasts are needed to plan workforce levels, allocate budgets among divisions, and schedule jobs and resources.

A) Long-range
B) Intermediate-range
C) Short-range
D) Demand planning

Question 13

Using the sales data on a particular model of a DVD player shown below in Table 2, answer questions
Table 2
$\begin{array}{|l|c|c|c|}\hline \text { Month } & \text { Sales } & \text { Forecast 1 } & \text { Forecast 2 } \\\hline \text { Jan } & 35 & 30 & 33 \\\hline \text { Feb } & 29 & 28 & 32 \\\hline \text { Mar } & 39 & 43 & 35 \\\hline \text { Apr } & 42 & 40 & 45 \\\hline \text { May } & 51 & 48 & 52 \\\hline \text { Jun } & 56 & 55 & 52 \\\hline\end{array}$

-The mean absolute deviation (MAD) for forecast 2 is:

A) less than or equal to 2.0.
B) more than 2.0 but less than or equal to 2.5.
C) more than 2.5 but less than or equal to 3.0.
D) more than 3.0 but less than or equal to 3.5.

Question 14

Using the sales data on a particular model of a DVD player shown below in Table 2, answer questions
Table 2
$\begin{array}{|l|c|c|c|}\hline \text { Month } & \text { Sales } & \text { Forecast 1 } & \text { Forecast 2 } \\\hline \text { Jan } & 35 & 30 & 33 \\\hline \text { Feb } & 29 & 28 & 32 \\\hline \text { Mar } & 39 & 43 & 35 \\\hline \text { Apr } & 42 & 40 & 45 \\\hline \text { May } & 51 & 48 & 52 \\\hline \text { Jun } & 56 & 55 & 52 \\\hline\end{array}$

-The mean absolute deviation (MAD) for forecast 1 is:

A) less than or equal to 2.0.
B) more than 2.0 but less than or equal to 2.5.
C) more than 2.5 but less than or equal to 3.0.
D) more than 3.0 but less than or equal to 3.5.

Question 15

Repeatable periods of ups and downs over short periods of time are called _____.

A) trends
B) seasonal patterns
C) cyclical patterns
D) irregular variations

Question 16

Regular patterns in a data series that take place over long periods of time are called _____.

A) trends
B) seasonal patterns
C) cyclical patterns
D) irregular variations

Question 17

Using the sales data on a particular model of a DVD player shown below in Table 2, answer questions
Table 2
$\begin{array}{|l|c|c|c|}\hline \text { Month } & \text { Sales } & \text { Forecast 1 } & \text { Forecast 2 } \\\hline \text { Jan } & 35 & 30 & 33 \\\hline \text { Feb } & 29 & 28 & 32 \\\hline \text { Mar } & 39 & 43 & 35 \\\hline \text { Apr } & 42 & 40 & 45 \\\hline \text { May } & 51 & 48 & 52 \\\hline \text { Jun } & 56 & 55 & 52 \\\hline\end{array}$

-For the data in Table 2, which forecast is better using the mean absolute deviation (MAD) criterion given in the answer #11 and #12?

A) Forecast 1
B) Forecast 2
C) Forecast 1 and 2 are identical, with equal MADs
D) Neither forecast 1 nor forecast 2

Question 18

Which of the following is NOT a characteristic of a time series?

A) Time bucket
B) Trend
C) Cyclical pattern
D) Random variation

Question 19

_____ forecasts are needed for planning production schedules and to assign workers to jobs.

A) Long-range
B) Intermediate-range
C) Short-range
D) Demand planning

Question 20

Using the data shown below in Table 1, compute the mean square error, mean absolute deviation, and mean absolute percentage error for the forecasts shown and then answer Questions
Table 1
$\begin{array}{|l|c|c|}\hline \text { Month } & \text { Forecast Demand } & \text { Actual Demand } \\\hline \text { April } & 170 & 180 \\\hline \text { May } & 225 & 200 \\\hline \text { June } & 210 & 200 \\\hline \text { July } & 260 & 240 \\\hline \text { August } & 200 & 230 \\\hline\end{array}$

-The mean squared error (MSE) is:

A) less than or equal to 300.
B) more than 300 but less than or equal to 350.
C) more than 350 but less than or equal to 400.
D) more than 400 but less than or equal to 450.

Question 21

The manager of a gas station along an interstate highway has observed that gasoline sales generally increase each week over the summer months as more families travel by car on vacations. He also believes that sales are sensitive to fluctuations in the price of gasoline. He developed the following regression model:
Sales ($) = $59,407 + $509 (Week) + 16,463 (Price/gallon)
Which one of the following statements is TRUE?

A) Sales decrease as a function of time.
B) A $0.10 increase in the price of gas reduces weekly sales by 1,646 gallons.
C) As the price of a gallon of gas increases, sales increase.
D) None of the above is true.

Question 22

Based on the information shown below in Table 5, develop a forecast for June using both the two-period moving average model and the exponential smoothing model with ? = 0.10. For the exponential smoothing model, assume the forecast for February is 800. Answer questions
Table 5
$\begin{array}{|l|c|}\hline \text { Month } & \text { Actual Demand } \\\hline \text { February } & 850 \\\hline \text { March } & 900 \\\hline \text { April } & 975 \\\hline \text { May } & 950 \\\hline\end{array}$

-The exponential smoothing model forecast for June is _____.

A) less than or equal to 840
B) more than 840 but less than or equal to 850
C) more than 850 but less than or equal to 860
D) more than 870 but less than or equal to 880

Question 23

A Taiwan electronics company exports personal computers (PCs) to the U.S. Their PC sales (in thousands) over the past five years are given below in Table 6.
Table 6
$$\begin{array} { | c | c | } \hline \text { Year } & \text { Sales } \\\hline 1 & 6 \\\hline 2 & 9 \\\hline 3 & 13 \\\hline 4 & 15 \\\hline 5 & 20 \\\hline\end{array}$$

-Using the data in Table 6 the forecast for sales in year 6 using the simple regression equation is:

A) less than 20.
B) more than 20 but less than or equal to 25.
C) more than 25 but less than or equal to 30.
D) more than 30 but less than or equal to 35.

Question 24

All of the following are important criteria in choosing a forecasting method EXCEPT:

A) the smoothing constant (α).
B) the time span for which the forecast is made.
C) the data requirements.
D) the quantitative skills needed.

Question 25

Which is NOT true regarding simple exponential smoothing?

A) It forecasts the value of the time series in the next period
B) It has a smoothing constant ranging between 0 and 1.
C) It uses a weighted average of past time-series values.
D) It includes trend or seasonal effects.

Question 26

A tracking signal provides a method for monitoring a forecast by quantifying _____.

A) bias
B) error
C) accuracy
D) outliers

Question 27

The forecasting technique that works best for short planning horizons is _____.

A) regression
B) moving average
C) mean absolute percentage error (MAPE)
D) Delphi

Question 28

Which of the following is NOT a statistical forecasting method?

A) Delphi
B) Exponential smoothing
C) Moving average
D) Linear regression

Question 29

An R² of 0.80 means:

A) 80% of the variability in the independent variable is explained by the dependent variable.
B) 80% of the variability in the dependent variable is explained by the independent variable.
C) 80% of the variability in the dependent variable is not explained by the independent
Variable.
D) Multiple regression is used.

Question 30

A Taiwan electronics company exports personal computers (PCs) to the U.S. Their PC sales (in thousands) over the past five years are given below in Table 6.
Table 6
$$\begin{array} { | c | c | } \hline \text { Year } & \text { Sales } \\\hline 1 & 6 \\\hline 2 & 9 \\\hline 3 & 13 \\\hline 4 & 15 \\\hline 5 & 20 \\\hline\end{array}$$

-The simple regression intercept (a) and the slope (b) for the data in Table 6 is:

A) Y = 2.4 + 3.4X.
B) Y = 2.8 + 4.4X.
C) Y = 2.8 + 5.4X.
D) Y = 2.4 + 4.4X.

Question 31

Which of the following statements is TRUE about single exponential smoothing?

A) Large values of alpha (α) place more emphasis on recent data.
B) α values range from 0.6 to 1.
C) Smaller values of smoothing constant have the advantage of quickly adjusting the forecasts when forecasting errors occur.
D) Larger values of smoothing constant do not allow the forecast to react faster to changing conditions.

Question 32

A Taiwan electronics company exports personal computers (PCs) to the U.S. Their PC sales (in thousands) over the past five years are given below in Table 6.
Table 6
$$\begin{array} { | c | c | } \hline \text { Year } & \text { Sales } \\\hline 1 & 6 \\\hline 2 & 9 \\\hline 3 & 13 \\\hline 4 & 15 \\\hline 5 & 20 \\\hline\end{array}$$

-Regression analysis:

A) is limited to one dependent and one independent variable.
B) is best with nonlinear relationships.
C) maximizes the sum of the squared deviations between the actual time-series value and the estimated values of the dependent variable.
D) can be used with time as the independent variable.

Question 33

A moving average model works best when _____ in the time series.

A) only irregular variation is present
B) only a trend is present
C) there is no trend, seasonal, or cyclical pattern
D) trend, seasonal, and cyclical patterns exist

Question 34

Based on the information shown below in Table 5, develop a forecast for June using both the two-period moving average model and the exponential smoothing model with ? = 0.10. For the exponential smoothing model, assume the forecast for February is 800. Answer questions
Table 5
$\begin{array}{|l|c|}\hline \text { Month } & \text { Actual Demand } \\\hline \text { February } & 850 \\\hline \text { March } & 900 \\\hline \text { April } & 975 \\\hline \text { May } & 950 \\\hline\end{array}$

-The exponential smoothing model forecast for March is:

A) less than or equal to 840.
B) more than 840 but less than or equal to 850.
C) more than 850 but less than or equal to 860.
D) more than 870 but less than or equal to 880.

Question 35

A seven-month simple moving average would approximately equate with alpha (α) factor _____ for simple exponential smoothing.

A) less than or equal to 0.10
B) more than 0.10 but less than or equal to 0.15
C) more than 0.15 but less than or equal to 0.20
D) more than 0.20 but less than or equal to 0.25

Question 36

Which of the following statement is TRUE if the time series exhibits a negative trend in an exponential smoothing technique?

A) The forecast will lag the actual values.
B) The forecast will overshoot the actual values.
C) The mean square error will be zero.
D) The alpha value will be one.

Question 37

Which of the following is NOT a valid approach to gather data for judgmental forecasting?

A) Questionnaire
B) Telephone contact
C) Personal interview
D) Company records

Question 38

Which of the following statements is TRUE about exponential smoothing technique?

A) It uses a weighted average of past time-series values.
B) It includes seasonal effects.
C) It has the typical values of alpha in the range of 0.6 to 0.9.
D) It will not overshoot the actual values if a negative trend exists.

Question 39

Which of the following statements does NOT fit with the Delphi method?

A) Judgments and opinions of experts is gathered.
B) Group of people from only inside the organization are asked to make predictions.
C) Process iterates until a consensus is reached.
D) It is a complex approach in judgmental forecasting.

Question 40

The manager of a gas station along an interstate highway has observed that gasoline sales generally increase each week over the summer months as more families travel by car on vacations. He also believes that sales are sensitive to fluctuations in the price of gasoline. He developed the following regression model:
Sales ($) = $59,407 + $509 (Week) + 16,463 (Price/gallon)
The sales forecast for the 11^th week of the summer if the price per gallon is estimated to be $3.00 is:

A) less than or equal to 15,000.
B) more than 15,000 but less than or equal to 15,500.
C) more than 15,500 but less than or equal to 16,000.
D) more than 16,000 but less than or equal to 16,500.

Question 41

Top managers need small-range forecasts of unit sales for individual products (e.g., brands and sizes), for decisions involving financial planning, and for sizing and locating new facilities.

Question 42

The values of mean absolute deviation (MAD) and mean square error (MSE) depend on the measurement scale of the time-series data.

Question 43

A single moving average is most appropriate for data with identifiable trends.

Question 44

An alternate name for planning horizon is time bucket.

Question 45

Seasonal patterns can occur over the weeks during a month, over days during a week, or hours during a day.

Question 46

Forecasts are never 100% accurate because of random variations.

Question 47

A major difference between mean square error (MSE) and mean absolute deviation (MAD) is that MAD is influenced much more by large forecast errors than by small errors.

Question 48

Mean absolute deviation (MAD), mean square error (MSE), and mean absolute percentage error (MAPE) forecast error metrics generally giving similar numerical results so it does not matter which one is used.

Question 49

A group of international experts published a set of principles of forecasting that includes all of the following EXCEPT:

A) use quantitative rather than qualitative methods.
B) combine forecasts from approaches that are similar.
C) ask experts to justify their forecasts in writing.
D) use multiple measures of forecast accuracy.

Question 50

Trends are characterized by repeatable periods of ups and downs over short periods of time.

Question 51

Random variation is the unexplained deviation of a time series from a predictable pattern, such as a trend, seasonal, or cyclical pattern.

Question 52

In forecasting, irregular variation that is explainable can normally be discarded.

Question 53

A long-range forecast typically covers a planning horizon of 3 to 12 months.

Question 54

Statistical forecasting is based upon the assumption that the future will be an extrapolation of the past.

Question 55

Long-range forecasts expressed in sales dollars are more meaningful to top managers than to managers at the operations level.

Question 56

Irregular variation and random variation both refer to unexplainable deviation of a time series from a predictable pattern.

Question 57

The smoothing constant, α, used in the basic exponential smoothing model, can range in value from −1 to +1.

Question 58

Single exponential smoothing is a forecasting technique that uses a weighted average of past time-series values to forecast the value of the time series in the next period.

Question 59

Better operational decisions can be made by integrating forecasting with value chain and capacity management systems.

Question 60

As the value of k is increased in a moving average forecasting model, the forecast reacts more slowly to recent changes in the time series.

Question 61

In practice, managers rely almost exclusively on statistical forecasts.

Question 62

Aggregate forecasts are generally much easier to develop whereas detailed forecasts require more time and resources.

Question 63

Community General Hospital finds itself treating many bicycle accident victims. Data from the last seven 24-hour period is shown below:

a.
What is the forecast for day 4 using a moving average model with AP = 3?
b.With an alpha value of 0.5 and a starting forecast in day 4 equal to the actual data, what is the exponentially smoothed forecast for day 8?
c.What is the mean absolute deviation (MAD) for days 5 to 7 for an exponentially smoothed forecasting model with an alpha value of 0.5 and a starting forecast in day 4 equal to the actual data?
d.What is the tracking signal for days 5 to 7 for an exponentially smoothed forecasting model with an alpha value of 0.5 and a starting forecast in day 4 equal to the actual data?

Question 64

Define time series and its characteristics.

Question 65

An exponential smoothing model can be found easily by applying Excel's Add Trendline option to a time series.

Question 66

Exponential smoothing models never forget past data as long as the smoothing constant is strictly between 0 and 1. In contrast, moving average methods completely forget all data older than k periods in the past.

Question 67

Define forecast error and describe its metrics.

Question 68

Judgmental forecasting should only be used if no historical data are available.

Question 69

The method of least squares maximizes the sum of the squared deviations between the actual time-series values and the estimated values of the dependent variable.

Question 70

In a regression model, both the dependent and independent variables must be numerical.

Question 71

Regression models are often used in forecasting to incorporate causal variables that may influence a time series.

Question 72

Valentine's Day is the best day of the year for selling roses at River Road Florist. Dozens of roses sold on Valentine's Day over six years are as follows:

a.What is the forecast for Valentine's Day in 2011 using a three-period moving average?
b.What is the forecast for Valentine's Day in 2011 using a five-period moving average?
c.What is the mean absolute deviation (MAD) for years 2008-2010 using a three-period moving average?
d.What is the tracking signal for years 2008-2010 using a three-period moving average?

Question 73

Which one of the following statements is TRUE?

A) The longer the moving average period (k), the better the forecasts for these case data.
B) A simple exponential smoothing alpha value equal to 0.01 provided the best forecast for these case data.
C) Service management skills are required for good customer service representative (CSR) performance.
D) The customers of the BankUSA Help Desk were residential, external customers.

Question 74

The Delphi method is a forecasting approach that is based on expert opinion.

Question 75

Discuss the three planning horizons used in forecasting and the types of decisions made in each.

Question 76

An R² of 0.70 mean 30% of the variability in the dependent variable was explained by the independent variable.

Question 77

Ed Rogers owns an appliance store. Sales data on a particular model of a DVD player for the past six months are shown below along with the results of two different forecasting models that were developed. Which is the better forecasting model, based on the MAD criterion?

Question 78

Explain how forecasting is used at different levels of an organization.

Question 79

In an exponential smoothing model, larger values of alpha place less emphasis on recent data.

Question 80

Using the data shown below, compute the mean square error, mean absolute deviation, and mean absolute percentage error for the forecasts shown.