Problem 3 Forecasting [7 points]

A gas station in Los Angles is planning to forecast its future sales. The owner decided to use the simple moving average technique, but she is not sure how many quarters to average (n). She asked you for help finding the best n for her data. Past quarterly gasoline sales (in thousands of gallons) are given in the table below. Calculate a two-quarter and a four-quarter simple moving average forecasts. Calculate the forecasting error for each technique and decide which technique the owner should use.

Time Period	Quarter	Gasoline Sales	2-Quarter Forecast	2-Quarter Absolute Error	4-Quarter Forecast	4-Quarter Absolute Error
1	1	41
2	2	39
3	3	28
4	4	30
5	1	23
6	2	45
7	3	27
8	4	35
MAD
MAPE

1. [2 points] Calculate the two-quarter and four-quarter simple moving average forecasts. Write your calculations in the table above (columns 4 & 6). Use 2 decimal places.

2. [2 points] Calculate the absolute error for each of the two techniques. Write your calculations in the table above (columns 5 & 7). Use 2 decimal places.

3. [2 points] Calculate MAD and MAPE for each technique and write them in the table (last 2 rows). Use 2 decimal places.

4. [1 point] Which technique would you recommend to the gas stations owner and why?

I recommend ____________ , because __________