Forecasting Problems

I strongly encourage you to attempt these problems by working through the problems on paper and using your

calculators for calculations $($round to two decimal places$).$ I also encourage you to verify your answers by using

Excel to check your work.

The table below contains average monthly price data in two recent years from Acme Inc, a leading provider for

online ad placement based on web$-$based searches.

Month Year $1$ Year $2$

January $$22\mathrm{.}14$ $$23\mathrm{.}61$

February $19\mathrm{.}6621\mathrm{.}67$

March $20\mathrm{.}4722\mathrm{.}02$

April $18\mathrm{.}0116\mathrm{.}23$

May $15\mathrm{.}4117\mathrm{.}92$

June $16\mathrm{.}0418\mathrm{.}71$

July $13\mathrm{.}2114\mathrm{.}82$

August $12\mathrm{.}5813\mathrm{.}01$

September $13\mathrm{.}5314\mathrm{.}55$

October $14\mathrm{.}2615\mathrm{.}12$

November $15\mathrm{.}1417\mathrm{.}89$

December $18\mathrm{.}7420\mathrm{.}23$

Problem $1($na$$ve forecasting$)$

a$.$ Use the data from above to create the following two na$$ve forecasted values:

i$.$ Use the actual value in the previous period to forecast price for January of Year $3.$

ii$.$ Use the actual value in the same month of the previous year to forecast price for January of

Year $3.$

b$.$ Using the na$$ve previous period forecasting technique and the na$$ve same period previous year

forecasting technique, determine the forecasts for each month in the first two years $($Years $1$ and

$2)$ and construct a table summarizing the forecasted values for both years. You should have two sets

$($from two techniques$)$ of forecasted values.

Problem $2($moving average$),$ Use the data to complete the following:

a$.$ Construct the worksheet for four period moving average for the months of May through December

of Year $1$ and all of Year $2.$

b$.$ Graph the actual values and the forecasted values for Years $1$ and $2.$ Does the forecasted value

provide $$good fit$$ relative to the actual values? Justify your response.

Problem $3($weighted moving average$),$ Use the data to complete the following:

a$.$ Construct the worksheet for four period weighted moving average for the months of May through

December of Year $1$ and all of Year $2.$ Use w$1=0\mathrm{.}45,$ w$2=0\mathrm{.}25,$ w$3=0\mathrm{.}15,$ w$4=0\mathrm{.}15$

b$.$ Graph the actual values and the forecasted values for Years $1$ and $2.$ Does the forecasted value

provide $$good fit$$ relative to the actual values? Justify your response.