# Question

The Andes Mining Company mines and ships copper ore. The company’s sales manager, Juanita Valdes, has been using the moving-average method based on the last three years of sales to forecast the demand for the next year. However, she has become dissatisfied with the inaccurate forecasts being provided by this method.

Here are the annual demands (in tons of copper ore) over the past 10 years: 382 405 398 421 426 415 443 451 446 464

(a) Explain why this pattern of demands inevitably led to significant inaccuracies in the moving-average forecasts.

(b) Determine the moving-average forecasts for the past 7 years. What is MAD? What is the forecast for next year?

(c) Determine what the forecasts would have been for the past 10 years if the exponential smoothing method had been used instead with an initial estimate of 380 and a smoothing constant of α = 0.5. What is MAD? What is the forecast for next year?

(d) Determine what the forecasts would have been for the past 10 years if exponential smoothing with trend had been used instead. Use initial estimates of 370 for the expected value and 10 for the trend, with smoothing constants α = 0.25 and β = 0.25.

(e) Based on the MAD values, which of these three methods do you recommend using hereafter

Here are the annual demands (in tons of copper ore) over the past 10 years: 382 405 398 421 426 415 443 451 446 464

(a) Explain why this pattern of demands inevitably led to significant inaccuracies in the moving-average forecasts.

(b) Determine the moving-average forecasts for the past 7 years. What is MAD? What is the forecast for next year?

(c) Determine what the forecasts would have been for the past 10 years if the exponential smoothing method had been used instead with an initial estimate of 380 and a smoothing constant of α = 0.5. What is MAD? What is the forecast for next year?

(d) Determine what the forecasts would have been for the past 10 years if exponential smoothing with trend had been used instead. Use initial estimates of 370 for the expected value and 10 for the trend, with smoothing constants α = 0.25 and β = 0.25.

(e) Based on the MAD values, which of these three methods do you recommend using hereafter

## Answer to relevant Questions

Reconsider Prob. 27.7-11. For each of the forecasting methods specified in parts (b), (c), and (d), use the corresponding procedure in the forecasting area of your IOR Tutorial to obtain the requested forecasts. After ...Reconsider Probs. 27.7-3 and 27.6-1. Since the number of applications for admission submitted to Ivy College has been increasing at a steady rate, causal forecasting can be used to forecast the number of applications in ...The following data relate road width x and accident frequency y. Road width (in feet) was treated as the independent variable, and values y of the random variable Y, in accidents per 108 vehicle miles, were observed. Assume ...A company uses exponential smoothing with α = ½ to forecast demand for a product. For each month, the company keeps a record of the forecast demand (made at the end of the preceding month) and the actual demand. Some of ...Consider the Reliable Construction Co. bidding problem discussed in Sec. 28.1. The spreadsheet model is available on this website. The parameter analysis report generated in Sec. 28.7 (see Fig. 28.31) for this problem ...Post your question

0