DigiSonic has been the leading supplier of Blu-Ray discs to the U.S. movie studios since 2006....

 

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DigiSonic has been the leading supplier of Blu-Ray discs to the U.S. movie studios since 2006. For nearly a decade, the sales of Blu-Ray discs were high thanks to the popularity of the format. However, the demand for the Blu-Ray discs started to decrease last year, as customers started to watch movies from online platforms such as Amazon Instant Video, Google Play Movies and Netflix. DigiSonic is in critical need of a better forecasting method. They need your help to evaluate alternative forecasting methods and provide suggestions. The following table contains the past 12 months' sales data (Note: Month 1 refers to sales made 12 months ago, month 12 refers to sales made last month.) Month 1 2 3 4 5 6 Sales 1376 1269 1342 1298 1277 1183 Month 7 8 9 10 11 12 Sales 969 992 852 839 873 791 a. Use a 3-month simple moving average to forecast sales. Compute the Mean Absolute Error (MAE) and the Mean Square Error (MSE) of the forecasts for months 4 to 12. (4pt) b. Using a 3-month weighted average method with weights of 0.5, 0.3 and 0.2 (which are the weights for the most recent, next most recent, and the third most recent month, respectively). Again, compute the MAE and MSE of the forecasts with the weighted moving average method. (3pt) c. Using MAE as the measure, compare the performance of the two forecasting methods (moving average, weighted moving average). Which forecasting method is better? (ii) If you use MSE as the measure (instead of MAE) to compare the performance of the two forecasting methods (moving average, weighted moving average), which forecasting method is better? (3pt) DigiSonic has been the leading supplier of Blu-Ray discs to the U.S. movie studios since 2006. For nearly a decade, the sales of Blu-Ray discs were high thanks to the popularity of the format. However, the demand for the Blu-Ray discs started to decrease last year, as customers started to watch movies from online platforms such as Amazon Instant Video, Google Play Movies and Netflix. DigiSonic is in critical need of a better forecasting method. They need your help to evaluate alternative forecasting methods and provide suggestions. The following table contains the past 12 months' sales data (Note: Month 1 refers to sales made 12 months ago, month 12 refers to sales made last month.) Month 1 2 3 4 5 6 Sales 1376 1269 1342 1298 1277 1183 Month 7 8 9 10 11 12 Sales 969 992 852 839 873 791 a. Use a 3-month simple moving average to forecast sales. Compute the Mean Absolute Error (MAE) and the Mean Square Error (MSE) of the forecasts for months 4 to 12. (4pt) b. Using a 3-month weighted average method with weights of 0.5, 0.3 and 0.2 (which are the weights for the most recent, next most recent, and the third most recent month, respectively). Again, compute the MAE and MSE of the forecasts with the weighted moving average method. (3pt) c. Using MAE as the measure, compare the performance of the two forecasting methods (moving average, weighted moving average). Which forecasting method is better? (ii) If you use MSE as the measure (instead of MAE) to compare the performance of the two forecasting methods (moving average, weighted moving average), which forecasting method is better? (3pt)

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To evaluate the forecasting methods and provide suggestions lets calculate the Mean Absolute Error MAE and Mean Square Error MSE for both the 3month simple moving average and the 3month weighted movin... View the full answer