Section D: Forecasting (worth 30 marks) A local caf, the Cool Caf, keeps record of its demand for blueberry muffins to help with the demand forecasting. The following table provides demand figures and forecasts for a six-week period. The demand column shows the actual demand that was experienced for the period. The exponentially smoothed forecast is the calculated forecast for each week using the exponential smoothing method and an alpha factor (a) of 0.25. 6. Each week the Cool Caf prints handouts to advertise their special meals. The manager discovered that when more handouts are printed they sell more special meals. The manager wants to quantify the relationship using a regression equation of the format: y=ax+b. Below the data of the number of handouts printed and the sales of the special meals are presented in an Excel spreadsheet. Which one should be used to get the value of b and why? (3 marks) (A) SLOPE(D3:D8, C3:08) (B) INTERCEPT(D3:D8, C3:C8) (C) SLOPE(C3:C8, D3:08) (D) INTERCEPT(C3:C8, D3:D8) (E) INTERCEPT(D3:08, B3:B8) Week Actual Demand Forecast (exponential smoothing with a= 0.25) 262 280 267 248 277 262 266 A B D 263 269 209 265 266 Week Number of Handouts Sales (in $) 100 753 120 817 761 105 130 829 125821 95 1. Calculate the exponentially smoothed forecast of the blueberry muffins demand for Week 7 using an alpha factor (a) of 0.25. (4 marks) 778 2. Calculate a three-week simple moving average forecast of the blueberry muffins demand for Week 7. (3 marks) 3. Calculate a four-week weighted average forecast of the blueberry muffins demand for Week 7 using the weights: 0.4, 0.3, 0.2, and 0.1. (4 marks) 7. Using the historical data, the manager got the regression equation: y = 2.25x + 540 In week 7, they will print 140 copies of handouts. Calculate the sales forecast for Week 7 using this regression model. (3 marks) 4. The manager of the Cool Caf found the forecasts are very stable. For example, the forecasts are between 262 and 267, while the actual demand varies from 280 to 209. To make the forecasts more responsive to the changes in actual demand, the manager plans to use a smaller value of alpha factor (say, a=0.15) in forecasting. Would you agree with the manager? Why or why not? (4 marks) 8. The demand experienced by the caf can show different patterns. Describe one possible cause for seasonal demand patterns, and one possible cause for cyclical demand patterns, that may have influenced the actual demand for the caf. (5 marks) 5. The manager of the Cool Caf wasn't able to explain what made this forecasting "exponential," so he decided to switch to simple moving average forecasting. How many weeks should he include in his forecast, in order to be consistent with his old exponential smoothing model? (4 marks)