20 points] Discuss some forecasting issues that you encounter in your daily life. How do you make your forecasts? (minimum 200 words).

[20 points] A general manager in a restaurant wants your help to plan for the next year. The manager asked whether they can use time series forecasting models of regression-based forecasting modes. Write a memorandum explaining the difference between two methods. Also discuss which method should be used in the restaurant and providing reasons. (min. 200 words)

[20 points] Following table shows the sales data of new satellite tv services by an agent of last 6 months.

Month

1

2

3

4

5

6

Sales

19

21

22

24

23

26

Calculate the forecast sales for month 7 using four-month moving average [5 points]

If the weights for last three months are 0.5, 0.3, and 0.2 (0.5 being for the most recent), forecast sales the weighted moving average for months 7? [5 points]

If the actual sales for month 7 is 28, calculate the error for each method (MA and WMA) for months 7. [5 points]

Which method is better? Explain why. [5 points]

[20 points] Sales data of Travel Mugs in a store is as follows:

Month

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Actual Sales

1623

1533

1455

1386

1209

1348

1581

1332

The managers are trying to choose a good forecasting model for forecasting the demand. They are considering Single Exponential Smoothening (SES) method as the forecasting model. One manager suggested that value should be 0.2 and another experienced manager suggested that value should be 0.5. They decided to test the values by comparing the mean square error for each value.

Help the managers to decide value is better for SES model. Show all calculations.

(A non-analytical discussion is not acceptable as the answer).

[20 points] Crossroad Inn is a small bed-and-breakfast inn. It also has a restaurant, which serves the guests of the inn. Due to poor forecasting, the restaurant is losing money on food inventory. The general manager seeks a better way to forecast the demand for restaurant patrons and belies that the demand of patrons is related to advertising expenditures. The following are number of patrons and advertising data for the past 7 months.

Month

Patrons

Advertising (Thousands of $)

1

564

2.6

2

418

1.3

3

463

1.4

4

402

1

5

501

2

6

534

2.1

7

484

1.7

Develop a simple linear regression model that relates advertising cost to number of patrons.

The manager has decided to spend $2,750 next month (8th month) on advertising. Use linear regression model and forecast the number of patrons for next month.