Deck 3: Demand Forecasting

Question 1

Generally the responsibility for preparing demand forecasts for finished goods or services lies with operations rather than marketing or sales departments.

Answer 1

False

Question 2

Since a primary goal of operations management is to match supply to demand,forecasts become a basic input to the decision process because they provide information on past demand.

Answer 2

False

Question 3

Forecasting techniques that are based on time series data assume that future values of the series will duplicate past values.

Answer 3

False

Question 4

The purpose of the forecast should be established first so that the level of detail,amount of resources,and accuracy level can be indicated.

Question 5

Time series techniques involve identification of explanatory variables that can be used to predict future demand.

Question 6

The primary difference between irregular and random variations is the ability to attribute variations to a specific cause.

Question 7

The naive approach to forecasting requires a linear trend line.

Question 8

Forecasts are rarely perfect.

Question 9

Forecasts for groups of items tend to be less accurate than forecasts for individual items because forecasts for individual items are not subject to as many influencing factors.

Question 10

As a forecasting technique,the Delphi technique is useful for technological forecasting.

Question 11

One weakness of the Delphi method is that there is a high risk that one person's opinion will prevail.

Question 12

A consumer survey is an easy and sure way to obtain direct input from existing customers.

Question 13

The naive forecast can serve as a standard of comparison against which to judge the cost and accuracy of other techniques.

Question 14

Organizations that are capable of responding quickly to changing requirements can use a shorter forecast horizon and therefore benefit from more accurate forecasts.

Question 15

The Delphi approach involves the use of a series of questionnaires to achieve a consensus forecast.

Question 16

Forecast accuracy tends to increase as the time horizon increases.

Question 17

Forecasts based on time series (historical)data are referred to as associative forecasts.

Question 18

The naive forecast is limited in its application to series that reflect no trend or seasonality.

Question 19

Forecasting techniques generally assume that the same causal system that existed in the past will continue to exist in the future.

Question 20

Increasing the number of data points included in a moving average will result in a forecast that is smoother but less responsive to changes.

Question 21

The MSE is the best measure to use in a control chart to monitor if forecast error is randomly distributed around a mean value of 0.

Question 22

MAD is equal to the square root of MSE.

Question 23

In order to update a moving average forecast,the values of each data point in the average must be known.

Question 24

The forecast error is the difference between the actual value and the forecast value for a given period.

Question 25

Multiple regression procedures permit us to extend associative models to relationships that involve more than one predictor variable.

Question 26

In exponential smoothing,an alpha of .30 will cause a forecast to react more quickly to a large error than will an alpha of .20.

Question 27

A moving average forecast tends to be more responsive to changes in the data series when more data points are included in the average.

Question 28

In order to compute seasonal relatives,the trend of past data must be computed or known.

Question 29

Trend adjusted exponential smoothing requires selection of two smoothing constants.

Question 30

An advantage of a weighted moving average is that more recent experience is given more weight than less recent experience.

Question 31

An advantage of "trend adjusted exponential smoothing" over the "linear trend equation" is its ability to adjust over time to changes in the trend.

Question 32

Removing the seasonal component from a data series (deseasonalizing)can be accomplished by dividing each data point by its appropriate seasonal relative.

Question 33

Exponential smoothing is a form of weighted averaging.

Question 34

Centred moving averages (CMA)is a better way to compute seasonal relatives than using a simple moving average if there is a linear trend in a time series.

Question 35

A smoothing constant of .1 will cause an exponential smoothing forecast to react more quickly to a sudden change than a value of .3 will.

Question 36

Positive forecast errors,the case when the forecast is low relative to the actual value,are preferable to negative forecast errors,the case when the forecast is higher than the actual value

Question 37

Trend-Adjusted Exponential Smoothing is also called double exponential smoothing.

Question 38

Correlation measures the strength and direction of a relationship between variables.

Question 39

A seasonal relative (or seasonal indexes)is expressed as a percentage of the average or trend in a time series.

Question 40

A simple moving average assigns equal weight to each data point that is represented by the average.

Question 41

A random pattern of errors within the limits of a control chart signals a need for corrective action.

Question 42

The two general approaches to forecasting are:

A)mathematical and statistical.
B)qualitative and quantitative.
C)judgmental and quantitative.
D)historical and associative.
E)judgmental and associative.

Question 43

The use of a control chart assumes that errors are normally distributed about a mean of zero.

Question 44

A control chart involves setting control limits to monitor cumulative forecast error.

Question 45

A proactive approach to forecasts might involve advertising or other attempts to influence the demand level.

Question 46

The square root of MSE is used to estimate the sample standard deviation of forecast errors.

Question 47

Which of the following is not necessarily an element of a good forecast?

A)The degree of accuracy is stated.
B)Time horizon long enough so forecast results can be used.
C)Expressed in meaningful units.
D)Low cost to complete.
E)Technique is simple to understand and use.

Question 48

When all the forecast errors plotted on a control chart are either all positive,or all negative,this shows that the forecasting technique is performing adequately.

Question 49

Using control charts to monitor forecast error are best suited for forecasting applications involving a single forecast rather than applications involving a series of forecasts (e.g.monthly sales).

Question 50

In operations,forecasts are the basis for all of the following EXCEPT:

A)capacity planning
B)project management
C)inventory planning
D)work assignments and workloads
E)pricing and promotion Forecasts are used for all of the responses,however,specific to operations answer E does not apply.E relates to marketing use of forecasts.

Question 51

The best forecast is always the one that is the most accurate.

Question 52

All of the following are true about forecasts EXCEPT:

A)become less accurate with longer time horizons.
B)are less accurate for individual items than for groups of items.
C)are always perfect.
D)are usually the responsibility of operating managers to prepare.
E)assume the same underlying causal system in the future as the past.

Question 53

Which of the following is not a step in the forecasting process?

A)Determine the purpose of the purpose.
B)Eliminate any assumptions and rely solely on verifiable factual data.
C)Establish a forecasting horizon.
D)Select a forecasting technique.
E)Monitor the forecast.

Question 54

Which of the following is not part of determining the purpose of the forecast?

A)The level of detail required in the forecast
B)The amount of personnel that can be justified
C)The level of accuracy required
D)The forecasting time interval
E)The amount of dollars that can be justified

Question 55

A proactive approach to forecasting views forecasts as probable descriptions of future demand,assuming actions can be taken to meet that demand.

Question 56

Which of the following is not a requirement of a properly prepared forecast?

A)Timely
B)Accurate
C)Reliable
D)Simple to understand and use
E)Inexpensive

Question 57

When error values fall outside the limits of a control chart,this signals a need for corrective action

Question 58

Which would not generally be considered a feature common to all forecasts?

A)An assumption of a stable underlying causal system.
B)Actual results will differ somewhat from predicted values.
C)Historical data is available on which to base the forecast.
D)Forecasts for groups of items tend to be more accurate than forecasts for individual items.
E)Accuracy decreases as the time horizon increases.

Question 59

Forecasts can help a manager to do all of the following EXCEPT:

A)reduce uncertainty in planning.
B)design the system.
C)plan the medium-term use of the system.
D)schedule the short-term use of the system.
E)predict the future precisely.

Question 60

Moving average and exponential smoothing forecasting techniques are used for long range forecasts.

Question 61

Which of the following steps is considered the last step in the forecasting process?

A)Gather and analyze relevant historical data.
B)Determine the purpose of the forecast.
C)Monitor the forecast.
D)Prepare the forecast.
E)Establish a time horizon.

Question 62

Which of the following is not a characteristic of Naive forecasting methods

A)are quick and easy to prepare.
B)are easy for users to understand.
C)can serve as an accuracy standard for other techniques.
D)able to quickly identify changes in demand.
E)have virtually no cost.

Question 63

Time series data may exhibit all but which of the following behaviours?

A)Trend
B)Seasonality
C)Cycles
D)Irregularities
E)Identification of variables.

Question 64

Which of the following is not a type of judgmental forecasting?

A)Executive opinions
B)Sales force opinions
C)Consumer surveys
D)Expert opinions
E)Time series analysis

Question 65

The forecasting method which uses anonymous questionnaires to achieve a consensus forecast is:

A)sales force opinions.
B)consumer surveys.
C)the Delphi method.
D)time series analysis.
E)executive opinions.

Question 66

Moving average forecasting techniques:

A)immediately reflect changing patterns in the time series.
B)lead changes in the time series.
C)smooth variations in the time series.
D)exhibit more variability than the original data.
E)are best used when demand shows a steady increase.

Question 67

The primary difference between seasonality and cycles is:

A)the duration of the repeating patterns.
B)the magnitude of the variation.
C)the ability to attribute the pattern to a cause.
D)There is more forecasting "noise" in a cycle.
E)There is less forecasting "noise" in a cycle.

Question 68

Averaging forecasting techniques are useful for:

A)distinguishing between random and non-random variations
B)forecasting cyclical time series
C)smoothing out fluctuations in data
D)forecasting seasonal indexes
E)identifying variables in the demand

Question 69

A network security company is securing input from information technology managers trying to anticipate when Wi Fi networks might be available in at least half of their client's businesses.Which method are they most likely to use?

A)The Delphi method
B)Consumer surveys
C)Regression models
D)Naive method
E)Trend models

Question 70

One reason for using the Delphi method in forecasting is:

A)responses are anonymous.
B)to achieve a high degree of accuracy.
C)to maintain accountability and responsibility.
D)to be able to replicate results.
E)the ability to directly meet with customers

Question 71

Which phrase most closely describes the Delphi technique?

A)Associative forecast
B)Consumer survey
C)Series of questionnaires
D)Double smoothing
E)Historical data

Question 72

Which of the following would be an advantage of using opinions of a sales force to develop a demand forecast?

A)The sales staff is least affected by changing customer needs.
B)The sales force can easily distinguish between customer desires and probable actions.
C)The sales staff is often aware of customers' future plans.
D)Salespeople are least likely to be influenced by recent events.
E)Salespeople are least likely to be biased by sales quotas.

Question 73

Using the latest observation in a sequence of data to forecast the next period is:

A)a moving average forecast.
B)a naive forecast.
C)an exponentially smoothed forecast.
D)an associative forecast.
E)a judgmental forecast.

Question 74

Given the following historical data and weights of .5 for the most recent period,.3 for the next most recent,and .2 for the next after that,what is the weighted three-period moving average forecast for period 5? 11eab92b_c4aa_791d_99e6_99583bf8c7ce

A)144.20
B)144.80
C)144.67
D)143.00
E)144.00

Question 75

Persistent upward or downward movement in time series data is called:

A)seasonal variation.
B)cycles.
C)irregular variation.
D)trend.
E)random variation.

Question 76

Which is not a characteristic of simple moving averages applied to time series data?

A)Smooths random variations in the data
B)Weights each historical value equally
C)Lags changes in the data
D)Has minimal reliance on historical data
E)Smooths real variations in the data

Question 77

Given the following historical data,what is the simple three-period moving average forecast for period 6? 11eab92b_c4aa_520c_99e6_b5ddfd1d6a27

A)67
B)115
C)69
D)68
E)68.67

Question 78

For the data given below,if the time series was assumed to be stable,what would the naive forecast be for the next period? 11eab92b_c4aa_520b_99e6_515bc8f703b6

A)58
B)62
C)59.5
D)61
E)60.5 Stable series.

Question 79

In order to increase the responsiveness of a forecast made using the moving average technique,the number of data points in the average should be:

A)decreased.
B)increased.
C)multiplied by a larger alpha.
D)multiplied by a smaller alpha.
E)divided by alpha.

Question 80

Disadvantages of naive forecasts include:

A)time-consuming to prepare
B)it is expensive to use
C)the technique is difficult to understand
D)inability to provide highly accurate forecasts
E)time to develop a forecast is lengthy