Reconsider Prob. 27.5-3. Ralph Billett realizes that the last-value method is considered to be the naive forecasting method, so he wonders whether he should be using another method. Therefore, he has decided to use the available Excel templates that consider seasonal effects to apply various statistical forecasting methods retrospectively to the past three years of data and compare their MAD values.
(a) Determine the seasonal factors for the four quarters.
(b) Apply the last-value method.
(c) Apply the averaging method.
(d) Apply the moving-average method based on the four most recent quarters of data.
(e) Apply the exponential smoothing method with an initial estimate of 25 and a smoothing constant of α = 0.25.
(f) Apply exponential smoothing with trend with smoothing constants of α = 0.25 and β = 0.25. Use initial estimates of 25 for the expected value and 0 for the trend.
(g) Compare the MAD values for these methods. Use the one with April 84 August 108 December 110 the smallest MAD to forecast sales in Quarter 1 of next year.
(h) Use the forecast in part (g) and the seasonal factors to make long-range forecasts now of the sales in the remaining quarters of next year.