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The number of heart surgeries performed at Hartville General Hospital has increased steadily over the past several years. The hospital’s administration is seeking the best method to forecast the demand for such surgeries in year 6. The data for the past five years are shown.

Year Demand

1 ........... 45

2 ........... 50

3 ........... 52

4 ........... 56

5 ........... 8

The hospital’s administration is considering the following forecasting methods. Begin error measurement in year 3, so all methods are compared for the same years.

i. Exponential smoothing with α = 0.6. Let the initial forecast for year 1 be 45 the same as the actual demand.

ii. Exponential smoothing, with α = 0.9. Let the initial forecast for year 1 be 45, the same as the actual demand.

iii. Trend-adjusted exponential smoothing, with α = 0.6 and β = 0.1, Use the actual demand for year 1 for the initial average for the first year and 0 for the initial trend.

iv. Two-year moving average.

v. Two-year weighted moving average, using weights 0.6 and 0.4 with more recent data given more weight.

vi. Regression model, Y= 42.6 + 32X, where Y is the number of surgeries and X is the index for the year (e.g. X= I for year 1, X=2 for year 2, and so forth).

a. If MAD is the performance criterion chosen by the administration, which forecasting method should It choose?

b. If MSE is the performance criterion chosen by the administration, which forecasting method should it choose?

c. If MAPE is the performance criterion chosen by the administration, which forecasting method should it choose?

Year Demand

1 ........... 45

2 ........... 50

3 ........... 52

4 ........... 56

5 ........... 8

The hospital’s administration is considering the following forecasting methods. Begin error measurement in year 3, so all methods are compared for the same years.

i. Exponential smoothing with α = 0.6. Let the initial forecast for year 1 be 45 the same as the actual demand.

ii. Exponential smoothing, with α = 0.9. Let the initial forecast for year 1 be 45, the same as the actual demand.

iii. Trend-adjusted exponential smoothing, with α = 0.6 and β = 0.1, Use the actual demand for year 1 for the initial average for the first year and 0 for the initial trend.

iv. Two-year moving average.

v. Two-year weighted moving average, using weights 0.6 and 0.4 with more recent data given more weight.

vi. Regression model, Y= 42.6 + 32X, where Y is the number of surgeries and X is the index for the year (e.g. X= I for year 1, X=2 for year 2, and so forth).

a. If MAD is the performance criterion chosen by the administration, which forecasting method should It choose?

b. If MSE is the performance criterion chosen by the administration, which forecasting method should it choose?

c. If MAPE is the performance criterion chosen by the administration, which forecasting method should it choose?

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