Acct 4400 CH3

Chapter 03
Forecasting
True / False Questions
1. Forecasting techniques generally assume an existing causal system that will continue
to exist in the future.
True
False
2. For new products in a strong growth mode, a low alpha will minimize forecast errors
when using exponential smoothing techniques.
True
False
3. Once accepted by managers, forecasts should be held firm regardless of new input
since many plans have been made using the original forecast.
True
False
4. Forecasts for groups of items tend to be less accurate than forecasts for individual
items because forecasts for individual items don't include as many influencing
factors.
True
False
5. Forecasts help managers both to plan the system itself and to provide valuable
information for using the system.
True
False
6. Organizations that are capable of responding quickly to changing requirements can

use a shorter forecast horizon and therefore benefit from more accurate forecasts.
True
False
7. When new products or services are introduced, focus forecasting models are an
attractive option.
True
False
3-1
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McGraw-Hill Education.
8. The purpose of the forecast should be established first so that the level of detail,
amount of resources, and accuracy level can be understood.
True
False
9. Forecasts based on time-series (historical) data are referred to as associative

forecasts.
True
False
10. Time-series techniques involve the identification of explanatory variables that can be
used to predict future demand.
True
False
11. A consumer survey is an easy and sure way to obtain accurate input from future
customers since most people enjoy participating in surveys.
True
False
12. The Delphi approach involves the use of a series of questionnaires to achieve a
consensus forecast.
True
False
13. Exponential smoothing adds a percentage (called alpha) of the last period's forecast
to estimate the next period's demand.
True
False
14. The shorter the forecast period, the more accurately the forecasts tend to track what
actually happens.
True
False
15. Forecasting techniques that are based on time-series data assume that future values
of the series will duplicate past values.
True
False
16. Trend-adjusted exponential smoothing uses double smoothing to add twice the
forecast error to last period's actual demand.
True
False
17. Forecasts based on an average tend to exhibit less variability than the original data.
True
False
3-2
18. The naive approach to forecasting requires a linear trend line.

True
False
19. The naive forecast is limited in its application to series that reflect no trend or
seasonality.
True
False
20. The naive forecast can serve as a quick and easy standard of comparison against
which to judge the cost and accuracy of other techniques.
True
False
21. A moving average forecast tends to be more responsive to changes in the data series
when more data points are included in the average.
True
False
22. In order to update a moving average forecast, the values of each data point in the
average must be known.
True
False
23. Forecasts of future demand are used by operations people to plan capacity.
True
False
24. An advantage of a weighted moving average is that recent actual results can be given
more importance than what occurred a while ago.
True
False
25. Exponential smoothing is a form of weighted averaging.

True
False
26. A smoothing constant of .1 will cause an exponential smoothing forecast to react

more quickly to a sudden change than a smoothing constant value of .3.
True
False
27. The T in the model TAF = S + T represents the time dimension (which is usually
expressed in weeks or months).
True
False
28. Trend-adjusted exponential smoothing requires selection of two smoothing constants.

True
False
3-3
29. An advantage of trend-adjusted exponential smoothing over the linear trend equation
is its ability to adjust over time to changes in the trend.
True
False
30. A seasonal relative (or seasonal indexes) is expressed as a percentage of average or

trend.
True
False
31. In order to compute seasonal relatives, the trend of past data must be computed or
known, which means that for brand-new products this approach cannot be used.
True
False
32. Removing the seasonal component from a data series (deseasonalizing) can be
accomplished by dividing each data point by its appropriate seasonal relative.
True
False
33. If a pattern appears when a dependent variable is plotted against time, one should
use time series analysis instead of regression analysis.
True
False
34. Curvilinear and multiple regression procedures permit us to extend associative models
to relationships that are nonlinear or involve more than one predictor variable.
True
False
35. The sample standard deviation of forecast error is equal to the square root of MSE.
True
False
36. Correlation measures the strength and direction of a relationship between variables.
True
False
37. MAD is equal to the square root of MSE, which is why we calculate the easier MSE and
then calculate the more difficult MAD.
True
False
38. In exponential smoothing, an alpha of 1.0 will generate the same forecast that a naive
forecast would yield.
True
False
3-4
39. A forecast method is generally deemed to perform adequately when the errors exhibit
an identifiable pattern.
True
False
40. A control chart involves setting action limits for cumulative forecast error.
True
False
41. A tracking signal focuses on the ratio of cumulative forecast error to the
corresponding value of MAD.
True
False
42. The use of a control chart assumes that errors are normally distributed about a mean
of zero.
True
False
43. Bias exists when forecasts tend to be greater or less than the actual values of time
series.
True
False
44. Bias is measured by the cumulative sum of forecast errors.

True
False
45. Seasonal relatives can be used to deseasonalize data or incorporate seasonality in a

forecast.
True
False
46. The best forecast is not necessarily the most accurate.

True
False
Multiple Choice Questions
3-5
47. Which of the following is a potential shortcoming of using sales force opinions in
demand forecasting?
A. Members of the sales force often have substantial histories of working with and
understanding their customers.
B. Members of the sales force often are well aware of customers' future plans.
C. Members of the sales force have direct contact with consumers.
D. Members of the sales force can have difficulty distinguishing between what
customers would like to do and what they actually will do.
E. Customers often are quite open with members of the sales force with regard to
future plans.
48. Suppose a four-period weighted average is being used to forecast demand. Weights
for the periods are as follows: wt-4 = 0.1, wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.4. Demand
observed in the previous four periods was as follows: A t-4 = 380, At-3 = 410, At-2 = 390,
At-1 = 400. What will be the demand forecast for period t?
A.
B.
C.
D.
E.
402
397
399
393
403
49. Suppose a three-period weighted average is being used to forecast demand. Weights
for the periods are as follows: wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.5. Demand observed in
the previous three periods was as follows: At-3 = 2,200, At-2 = 1,950, At-1 = 2,050. What
will be the demand forecast for period t?
A.
B.
C.
D.
E.
2,000
2,095
1,980
2,050
1,875
50. When choosing a forecasting technique, a critical trade-off that must be considered is
that between:
A.
B.
C.
D.
E.
time series and associative.

seasonality and cyclicality.
length and duration.
simplicity and complexity.
cost and accuracy.
3-6
51. The more novel a new product or service design is, the more forecasters have to rely
on:
A.
B.
C.
D.
E.
subjective estimates.
seasonality.
cyclicality.
historical data.
smoothed variation.
52. Forecasts based on judgment and opinion do not include:
A.
B.
C.
D.
E.
executive opinion.
salesperson opinion.
second opinions.
customer surveys.
Delphi methods.
53. Which of the following is/are a primary input into capacity, sales, and production
planning?
A.
B.
C.
D.
E.
product design
market share
ethics
globalization
demand forecasts
54. Which of the following features would not generally be considered common to all
forecasts?
A. Assumption of a stable underlying causal system.

B. Actual results will differ somewhat from predicted values.
C. Historical data is available on which to base the forecast.
D. Forecasts for groups of items tend to be more accurate than forecasts for individual
items.
E. Accuracy decreases as the time horizon increases.
55. Which of the following is not a step in the forecasting process?
A.
B.
C.
D.
E.
Determine the purpose and level of detail required.

Eliminate all assumptions.
Establish a time horizon.
Select a forecasting model.
Monitor the forecast.
3-7
56. Minimizing the sum of the squared deviations around the line is called:
A.
B.
C.
D.
E.
mean squared error technique.

mean absolute deviation.
double smoothing.
least squares estimation.
predictor regression.
57. The two general approaches to forecasting are:
A.
B.
C.
D.
E.
mathematical and statistical.

qualitative and quantitative.
judgmental and qualitative.
historical and associative.
precise and approximation.
58. Which of the following is not a type of judgmental forecasting?
A.
B.
C.
D.
E.
executive opinions
sales force opinions
consumer surveys
the Delphi method
time series analysis
59. Accuracy in forecasting can be measured by:
A.
B.
C.
D.
E.
MSE.
MRP.
MPS.
MTM.
MTE.
60. Which of the following would be an advantage of using a sales force composite to
develop a demand forecast?
A. The sales staff is least affected by changing customer needs.

B. The sales force can easily distinguish between customer desires and probable
actions.
C. The sales staff is often aware of customers' future plans.
D. Salespeople are least likely to be influenced by recent events.
E. Salespeople are least likely to be biased by sales quotas.
3-8
61. Which phrase most closely describes the Delphi technique?
A.
B.
C.
D.
E.
associative forecast
consumer survey
series of questionnaires
developed in India
historical data
62. The forecasting method which uses anonymous questionnaires to achieve a

consensus forecast is:
A.
B.
C.
D.
E.
sales force opinions.

consumer surveys.
the Delphi method.
time series analysis.
executive opinions.
63. One reason for using the Delphi method in forecasting is to:
A.
B.
C.
D.
E.
avoid premature consensus (bandwagon effect).

achieve a high degree of accuracy.
maintain accountability and responsibility.
be able to replicate results.
prevent hurt feelings.
64. Detecting nonrandomness in errors can be done using:
A.
B.
C.
D.
E.
MSEs.
MAPs.
control charts.
correlation coefficients.
strategies.
65. Gradual, long-term movement in time series data is called:
A.
B.
C.
D.
E.
seasonal variation.
cycles.
irregular variation.
trend.
random variation.
3-9
66. The primary difference between seasonality and cycles is:
A.
B.
C.
D.
E.
the duration of the repeating patterns.

the magnitude of the variation.
the ability to attribute the pattern to a cause.
the direction of the movement.
there are only four seasons but 30 cycles.
67. Averaging techniques are useful for:
A. distinguishing between random and nonrandom variations.

B.
smoothing out fluctuations in time series.
C.
eliminating historical data.
D.
providing accuracy in forecasts.
E.
average people.
68. Putting forecast errors into perspective is best done using
A.
B.
C.
D.
E.
exponential smoothing.
MAPE.
linear decision rules.
MAD.
hindsight.
69. Using the latest observation in a sequence of data to forecast the next period is:
A.
B.
C.
D.
E.
a moving average forecast.

a naive forecast.
an exponentially smoothed forecast.
an associative forecast.
regression analysis.
3-10
70. For the data given below, what would the naive forecast be for period 5?
A.
B.
C.
D.
E.
58
62
59.5
61
cannot tell from the data given
71. Moving average forecasting techniques do the following:
A.
B.
C.
D.
E.
Immediately reflect changing patterns in the data.

Lead changes in the data.
Smooth variations in the data.
Operate independently of recent data.
Assist when organizations are relocating.
72. Which is not a characteristic of simple moving averages applied to time series data?
A.
B.
C.
D.
E.
smoothes random variations in the data

weights each historical value equally
lags changes in the data
requires only last period's forecast and actual data
smoothes real variations in the data
73. In order to increase the responsiveness of a forecast made using the moving average
technique, the number of data points in the average should be:
A.
B.
C.
D.
E.
decreased.
increased.
multiplied by a larger alpha.
multiplied by a smaller alpha.
eliminated if the MAD is greater than the MSE.
3-11
74. A forecast based on the previous forecast plus a percentage of the forecast error is:
A.
B.
C.
D.
E.
a naive forecast.
a simple moving average forecast.
a centered moving average forecast.
75. Which is not a characteristic of exponential smoothing?
A.
B.
C.
D.
E.

has an easily altered weighting scheme
has minimal data storage requirements
76. Which of the following smoothing constants would make an exponential smoothing
forecast equivalent to a naive forecast?
A.
B.
C.
D.
E.
0
.01
.1
.5
1.0
77. Simple exponential smoothing is being used to forecast demand. The previous
forecast of 66 turned out to be four units less than actual demand. The next forecast
is 66.6, implying a smoothing constant, alpha, equal to:
A.
B.
C.
D.
E.
.01.
.10.
.15.
.20.
.60.
78. Given an actual demand of 59, a previous forecast of 64, and an alpha of .3, what
would the forecast for the next period be using simple exponential smoothing?
A.
B.
C.
D.
E.
36.9
57.5
60.5
62.5
65.5
3-12
79. Given an actual demand of 105, a forecasted value of 97, and an alpha of .4, the
simple exponential smoothing forecast for the next period would be:
A.
B.
C.
D.
E.
80.8.
93.8.
100.2.
101.8.
108.2.
80. Which of the following possible values of alpha would cause exponential smoothing to
respond the most quickly to forecast errors?
A.
B.
C.
D.
E.
0
.01
.05
.10
.15
81. A manager uses the following equation to predict monthly receipts: Y t = 40,000 +
150t. What is the forecast for July if t = 0 in April of this year?
A.
B.
C.
D.
E.
40,450
40,600
42,100
42,250
42,400
82. In trend-adjusted exponential smoothing, the trend-adjusted forecast consists of:
A. an exponentially smoothed forecast and a smoothed trend factor.

B. an exponentially smoothed forecast and an estimated trend value.
C.
the old forecast adjusted by a trend factor.
D.
the old forecast and a smoothed trend factor.
E.
a moving average and a trend factor.
3-13
83. In the additive model for seasonality, seasonality is expressed as a ______________

adjustment to the average; in the multiplicative model, seasonality is expressed as a
__________ adjustment to the average.
A.
B.
C.
D.
E.
quantity; percentage
percentage; quantity
quantity; quantity
percentage; percentage
qualitative; quantitative
84. Which technique is used in computing seasonal relatives?
A.
B.
C.
D.
E.
double smoothing
Delphi
mean squared error
centered moving average
exponential smoothing
85. A persistent tendency for forecasts to be greater than or less than the actual values is
called:
A.
B.
C.
D.
E.
bias.
tracking.
control charting.
positive correlation.
linear regression.
86. Which of the following might be used to indicate the cyclical component of a
forecast?
A.
B.
C.
D.
E.
leading variable
mean squared error
Delphi technique
mean absolute deviation
87. The primary method for associative forecasting is:
A.
B.
C.
D.
E.
sensitivity analysis.
simple moving averages.
centered moving averages.
3-14
88. Which term most closely relates to associative forecasting techniques?
A.
B.
C.
D.
E.
time series data

expert opinions
Delphi technique
consumer survey
predictor variables
89. Which of the following corresponds to the predictor variable in simple linear
regression?
A.
B.
C.
D.
E.
regression coefficient
dependent variable
independent variable
predicted variable
demand coefficient
90. The mean absolute deviation is used to:
A.
B.
C.
D.
E.
estimate the trend line.

eliminate forecast errors.
measure forecast accuracy.
seasonally adjust the forecast.
compute periodic forecast errors.
91. Given forecast errors of 4, 8, and -3, what is the mean absolute deviation?
A.
B.
C.
D.
E.
4
3
5
6
12
92. Given forecast errors of 5, 0, -4, and 3, what is the mean absolute deviation?
A.
B.
C.
D.
E.
4
3
2.5
2
1
3-15
93. Given forecast errors of 5, 0, -4, and 3, what is the bias?
A.
B.
C.
D.
E.
-4
4
5
12
6
94. Which of the following is used for constructing a control chart?
A.
B.
C.
D.

mean squared error
tracking signal
bias
95. The two most important factors in choosing a forecasting technique are:
A.
B.
C.
D.
E.
cost and time horizon.

accuracy and time horizon.
cost and accuracy.
quantity and quality.
objective and subjective components.
96. The degree of management involvement in short-range forecasts is:
A.
B.
C.
D.
E.
none.
low.
moderate.
high.
total.
97. Which of the following is not necessarily an element of a good forecast?
A.
B.
C.
D.
E.
estimate of accuracy
timeliness
meaningful units
low cost
written
3-16
98. Forecasting techniques generally assume:
A.
the absence of randomness.
B.
continuity of some underlying causal system.
C. a linear relationship between time and demand.
D. accuracy that increases the farther out in time the forecast projects.
E. accuracy that is better when individual items, rather than groups of items, are
being considered.
99. A managerial approach toward forecasting which seeks to actively influence demand
is:
A.
B.
C.
D.
E.
reactive.
proactive.
influential.
protracted.
retroactive.
100 Customer service levels can be improved by better:

.
A.
B.
C.
D.
E.
mission statements.
control charting.
short-term forecast accuracy.
customer selection.
101 Given the following historical data, what is the simple three-period moving average
.
forecast for period 6?
A.
B.
C.
D.
E.
67
115
69
68
68.67
3-17
102 Given the following historical data and weights of .5, .3, and .2, what is the three.
period moving average forecast for period 5?
A.
B.
C.
D.
E.
144.20
144.80
144.67
143.00
144.00
103 Use of simple linear regression analysis assumes that:

.
A.
variations around the line are nonrandom.
B. deviations around the line are normally distributed.
C. predictions can easily be made beyond the range of observed values of the
predictor variable.
D. all possible predictor variables are included in the model.
E. the variance of error terms (deviations) varies directly with the predictor variable.
104 Given forecast errors of -5, -10, and +15, the MAD is:
.
A.
B.
C.
D.
E.
0.
10.
30.
175.
225.
3-18
105 The president of State University wants to forecast student enrollments for this
.
academic year based on the following historical data:
What is the forecast for this year using the naive approach?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,000
22,800
.
What is the forecast for this year using a four-year simple moving average?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
3-19
.
What is the forecast for this year using exponential smoothing with alpha = .5, if the
forecast for two years ago was 16,000?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
.
What is the forecast for this year using the least squares trend line for these data?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
3-20
.
What is the forecast for this year using trend-adjusted (double) smoothing with alpha
= .05 and beta = .3, if the forecast for last year was 21,000, the forecast for two
years ago was 19,000, and the trend estimate for last year's forecast was 1,500?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
110 The business analyst for Video Sales, Inc. wants to forecast this year's demand for
.
DVD decoders based on the following historical data:
A.
B.
C.
D.
E.
163
180
300
420
510
3-21
.
What is the forecast for this year using a three-year weighted moving average with
weights of .5, .3, and .2?
A.
B.
C.
D.
E.
163
180
300
420
510
.
What is the forecast for this year using exponential smoothing with alpha = .4, if the
forecast for two years ago was 750?
A.
B.
C.
D.
E.
163
180
300
420
510
3-22
.
A.
B.
C.
D.
E.
163
180
300
420
510
.
What is the forecast for this year using trend-adjusted (double) smoothing with alpha
= .3 and beta = .2, if the forecast for last year was 310, the forecast for two years
ago was 430, and the trend estimate for last year's forecast was -150?
A.
B.
C.
D.
E.
162.4
180.3
301.4
403.2
510.0
3-23
115 Professor Very Busy needs to allocate time next week to include time for office hours.
.
He needs to forecast the number of students who will seek appointments. He has
gathered the following data:
What is this week's forecast using the naive approach?
A.
B.
C.
D.
E.
45
50
52
65
78
.
What is this week's forecast using a three-week simple moving average?
A.
B.
C.
D.
E.
49
50
52
65
78
3-24
.
What is this week's forecast using exponential smoothing with alpha = .2, if the
forecast for two weeks ago was 90?
A.
B.
C.
D.
E.
49
50
52
65
77
.
What is this week's forecast using the least squares trend line for these data?
A.
B.
C.
D.
E.
49
50
52
65
78
3-25
.
What is this week's forecast using trend-adjusted (double) smoothing with alpha = .5
and beta = .1, if the forecast for last week was 65, the forecast for two weeks ago
was 75, and the trend estimate for last week's forecast was -5?
A.
B.
C.
D.
E.
49.3
50.6
51.3
65.4
78.7
120 A concert promoter is forecasting this year's attendance for one of his concerts based
.
on the following historical data:
What is this year's forecast using the naive approach?
A.
B.
C.
D.
E.
22,000
20,000
18,000
15,000
12,000
3-26
.
What is this year's forecast using a two-year weighted moving average with weights
of .7 and .3?
A.
B.
C.
D.
E.
19,400
18,600
19,000
11,400
10,600
.
What is this year's forecast using exponential smoothing with alpha = .2, if last year's
smoothed forecast was 15,000?
A.
B.
C.
D.
E.
20,000
19,000
17,500
16,000
15,000
3-27
.
What is this year's forecast using the least squares trend line for these data?
A.
B.
C.
D.
E.
20,000
21,000
22,000
23,000
24,000
.
The previous trend line had predicted 18,500 for two years ago, and 19,700 for last
year. What was the mean absolute deviation for these forecasts?
A.
B.
C.
D.
E.
100
200
400
500
800
3-28
125 The dean of a school of business is forecasting total student enrollment for this year's
.
summer session classes based on the following historical data:
A.
B.
C.
D.
E.
2,000
2,200
2,800
3,000
4,300
.
What is this year's forecast using a three-year simple moving average?
A.
B.
C.
D.
E.
2,667
2,600
2,500
2,400
2,333
3-29
.
What is this year's forecast using exponential smoothing with alpha = .4, if last year's
smoothed forecast was 2,600?
A.
B.
C.
D.
E.
2,600
2,760
2,800
3,840
3,000
.
What is the annual rate of change (slope) of the least squares trend line for these
data?
A.
B.
C.
D.
E.
0
200
400
180
360
3-30
.
A.
B.
C.
D.
E.
3,600
3,500
3,400
3,300
3,200
130 The owner of Darkest Tans Unlimited in a local mall is forecasting this month's
.
(October's) demand for the one new tanning booth based on the following historical
data:
What is this month's forecast using the naive approach?
A.
B.
C.
D.
E.
100
160
130
140
120
3-31
.
data:
What is this month's forecast using a four-month weighted moving average with
weights of .4, .3, .2, and .1?
A.
B.
C.
D.
E.
120
129
141
135
140
.
data:
What is this month's forecast using exponential smoothing with alpha = .2, if August's
forecast was 145?
A.
B.
C.
D.
E.
144
140
142
148
163
3-32
.
data:
What is the monthly rate of change (slope) of the least squares trend line for these
data?
A.
B.
C.
D.
E.
320
102
8
-.4
-8
.
data:
What is this month's forecast using the least squares trend line for these data?
A.
B.
C.
D.
E.
1,250
128.6
102
158
164
3-33
135 Which of the following mechanisms for enhancing profitability is most likely to result
.
from improving short-term forecast performance?
A.
B.
C.
D.
E.
increased inventory
reduced flexibility
higher-quality products
greater customer satisfaction
greater seasonality
136 Which of the following changes would tend to shorten the time frame for short-term
.
forecasting?
A.
bringing greater variety into the product mix
B. increasing the flexibility of the production system
C.
ordering fewer weather-sensitive items
D.
adding more special-purpose equipment
E. investing in the production system to make it more task-specific
137 Which of the following helps improve supply chain forecasting performance?
.
A.
B.
C.
D.
E.
contracts that require supply chain members to formulate long-term forecasts

penalties for supply chain members that adjust forecasts
sharing forecasts or demand data across the supply chain
increasing lead times for critical supply chain members
increasing the number of suppliers at critical junctures in the supply chain
138 Which of the following would tend to decrease forecast accuracy?

.
A.
a reduction in demand variability
B.
a shortening of the forecast time horizon
C. an attempt to forecast demand for a group of similar items rather than an
individual item
D.
a change in the underlying causal system
139 Which of the following is the most valuable piece of information the sales force can
.
bring into forecasting situations?
A. what customers are most likely to do in the future

B.
what customers most want to do in the future
C.
what customers' future plans are
D. whether customers are satisfied or dissatisfied with their performance in the past
E. what the salesperson's appropriate sales quota should be
3-34
Essay Questions
140 Develop a forecast for the next period, given the data below, using a three-period
.
moving average.
141 Consider the data below:

.
Using exponential smoothing with alpha = .2, and assuming the forecast for period 11
was 80, what would the forecast for period 14 be?
3-35
142 A manager is using exponential smoothing to predict merchandise returns at a

.
suburban branch of a department store chain. Given a previous forecast of 140 items,
an actual number of returns of 148 items, and a smoothing constant equal to .15,
what is the forecast for the next period?
143 A manager is using the equation below to forecast quarterly demand for a product:
.
Yt = 6,000 + 80t where t = 0 at Q2 of last year
Quarter relatives are Q1 = .6, Q2 = .9, Q3 = 1.3, and Q4 = 1.2.
What forecasts are appropriate for the last quarter of this year and the first quarter of
next year?
144 Over the past five years, a firm's sales have averaged 250 units in the first quarter of
.
each year, 100 units in the second quarter, 150 units in the third quarter, and 300
units in the fourth quarter. What are appropriate quarter relatives for this firm's sales?
Hint: Only minimal computations are necessary.
3-36
145 A manager has been using a certain technique to forecast demand for gallons of ice
.
cream for the past six periods. Actual and predicted amounts are shown below. Would
a naive forecast have produced better results?
146 A new car dealer has been using exponential smoothing with an alpha of .2 to
.
forecast weekly new car sales. Given the data below, would a naive forecast have
provided greater accuracy? Explain. Assume an initial exponential forecast of 60 units
in period 2 (i.e., no forecast for period 1).
3-37
147 A CPA firm has been using the following equation to predict annual demand for tax
.
audits: Yt = 55 + 4t. Demand for the past few years is shown below. Is the forecast
performing as well as it might? Explain.
148 Given the data below, develop a forecast for period 6 using a four-period weighted
.
moving average and weights of .4, .3, .2 and .1.
3-38
149 Use linear regression to develop a predictive model for demand for burial vaults
.
based on sales of caskets.
150 Given the following data, develop a linear regression model for y as a function of x.
.
3-39
151 Given the following data, develop a linear regression model for y as a function of x.
.
152 Develop a linear trend equation for the data on bread deliveries shown below.
.
Forecast deliveries for period 11 through 14.
3-40
153 Demand for the last four months was:

.
A) Predict demand for July using each of these methods:

1) a three-period moving average
2) exponential smoothing with alpha equal to .20 (use a naive forecast for April for
your first forecast)
B) If the naive approach had been used to predict demand for April through June,
what would MAD have been for those months?
3-41
154 A manager wants to choose one of two forecasting alternatives. Each alternative was
.
tested using historical data. The resulting forecast errors for the two are shown in the
table. Analyze the data and recommend a course of action to the manager.
155 A manager uses this equation to predict demand: Y t = 20 + 4t. Over the past eight
.
periods, demand has been as follows. Are the results acceptable? Explain.
3-42
156 Data on demand over the last few years are available as follows:
.
What would this year's forecast be if we were using the naive approach?
3-43
.
What is this year's forecast using a four-year simple moving average?
3-44
.
What is this year's forecast using exponential smoothing with alpha = .25, if last
year's smoothed forecast was 45?
3-45
.
What are this and next year's forecasts using the least squares trend line for these
data?
3-46
.
What is this year's forecast using trend-adjusted (double) smoothing with alpha = .2
and beta = .1, if the forecast for last year was 56, the forecast for two years ago was
46, and the trend estimate for last year's forecast was 7?
161 Data on the last three years of demand are available as follows:
.
What is the centered moving average for spring two years ago?
3-47
.
What is the spring's seasonal relative?
.
What is the linear regression trend line for these data (t = 0 for spring, three years
ago)?
3-48
.
What is this year's seasonally adjusted forecast for each season?
3-49
Chapter 03 Forecasting Answer Key
True / False Questions
1.
Forecasting techniques generally assume an existing causal system that will

continue to exist in the future.
TRUE
Forecasts depend on the rules of the game remaining reasonably constant.
AACSB: Reflective Thinking

Accessibility: Keyboard Navigation
Blooms: Remember
Learning Objective: 03-16 Describe the key factors and trade-offs to consider when choosing a forecasting
technique.
Level of Difficulty: 2 Medium
Topic: Features Common to All Forecasts
2.
For new products in a strong growth mode, a low alpha will minimize forecast errors
when using exponential smoothing techniques.
FALSE
If growth is strong, alpha should be large so that the model will catch up more
quickly.

Blooms: Understand
Learning Objective: 03-10 Prepare an exponential smoothing forecast.
Topic: Forecasts Based on Time-Series Data
3.
Once accepted by managers, forecasts should be held firm regardless of new input
since many plans have been made using the original forecast.
FALSE
Flexibility to accommodate major changes is important to good forecasting.

3-50
Blooms: Understand
Learning Objective: 03-04 Outline the steps in the forecasting process.
Level of Difficulty: 1 Easy
Topic: Steps in the Forecasting Process
4.
Forecasts for groups of items tend to be less accurate than forecasts for individual
items because forecasts for individual items don't include as many influencing
factors.
FALSE
Forecasting for an individual item is more difficult than forecasting for a number of
items.

Blooms: Understand
Learning Objective: 03-01 List features common to all forecasts.
5.
Forecasts help managers both to plan the system itself and to provide valuable
information for using the system.
TRUE
Both planning and use are shaped by forecasts.

Blooms: Remember
Topic: Forecasting
6.
Organizations that are capable of responding quickly to changing requirements can

use a shorter forecast horizon and therefore benefit from more accurate forecasts.
TRUE
If an organization can react more quickly, its forecasts need not be so long term.

Blooms: Understand
Learning Objective: 03-03 List the elements of a good forecast.
Topic: Elements of a Good Forecast
3-51
7.
When new products or services are introduced, focus forecasting models are an
attractive option.
FALSE
Because focus forecasting models depend on historical data, they're not so
attractive for newly introduced products or services.

Blooms: Remember
technique.
8.
The purpose of the forecast should be established first so that the level of detail,
amount of resources, and accuracy level can be understood.
TRUE
All of these considerations are shaped by what the forecast will be used for.

Blooms: Remember
technique.
Topic: Steps in the Forecasting Process
9.
Forecasts based on time-series (historical) data are referred to as associative

forecasts.
FALSE
Forecasts based on time-series data are referred to as time-series forecasts.

Blooms: Remember
Learning Objective: 03-14 Compute and use regression and correlation coefficients.
Topic: Associative Forecasting Techniques
3-52
10.
Time-series techniques involve the identification of explanatory variables that can

be used to predict future demand.
FALSE
Associative forecasts involve identifying explanatory variables.

Blooms: Remember
technique.
Level of Difficulty: 3 Hard
11.
A consumer survey is an easy and sure way to obtain accurate input from future
customers since most people enjoy participating in surveys.
FALSE
Most people do not enjoy participating in surveys.

Blooms: Remember
Learning Objective: 03-06 Describe four qualitative forecasting techniques.
Topic: Qualitative Forecasts
12.
The Delphi approach involves the use of a series of questionnaires to achieve a

consensus forecast.
TRUE
A consensus among divergent perspectives is developed using questionnaires.

Blooms: Remember
3-53
13.
Exponential smoothing adds a percentage (called alpha) of the last period's

forecast to estimate the next period's demand.
FALSE
Exponential smoothing adds a percentage to the last period's forecast error.

Blooms: Remember
14.
The shorter the forecast period, the more accurately the forecasts tend to track
what actually happens.
TRUE
Long-term forecasting is much more difficult to do accurately.

Blooms: Understand
Topic: Monitoring the Forecast Error
15.
Forecasting techniques that are based on time-series data assume that future
values of the series will duplicate past values.
FALSE
Time-series forecasts assume that future patterns in the series will mimic past
patterns in the series.

Blooms: Understand
technique.
3-54
16.
Trend-adjusted exponential smoothing uses double smoothing to add twice the

forecast error to last period's actual demand.
FALSE
Trend-adjusted smoothing smoothes both random and trend-related variation.

Blooms: Remember
17.
Forecasts based on an average tend to exhibit less variability than the original
data.
TRUE
Averaging is a way of smoothing out random variability.

Blooms: Understand
18.
The naive approach to forecasting requires a linear trend line.

FALSE
The naive approach is useful in a wider variety of settings.

Blooms: Remember
Learning Objective: 03-07 Use a naive method to make a forecast.
3-55
19.
The naive forecast is limited in its application to series that reflect no trend or
seasonality.
FALSE
When a trend or seasonality is present, the naive forecast is more limited in its
application.

Blooms: Understand
20.
The naive forecast can serve as a quick and easy standard of comparison against
which to judge the cost and accuracy of other techniques.
TRUE
Often the naive forecast performs reasonably well when compared to more
complex techniques.

Blooms: Understand
21.
A moving average forecast tends to be more responsive to changes in the data

series when more data points are included in the average.
FALSE
More data points reduce a moving average forecast's responsiveness.

Blooms: Understand
Learning Objective: 03-08 Prepare a moving average forecast.
3-56
22.
In order to update a moving average forecast, the values of each data point in the
average must be known.
TRUE
The moving average cannot be updated until the most recent value is known.

Blooms: Understand
23.
Forecasts of future demand are used by operations people to plan capacity.

TRUE
Capacity decisions are made for the future and therefore depend on forecasts.

Blooms: Remember
Topic: Forecasting
24.
An advantage of a weighted moving average is that recent actual results can be

given more importance than what occurred a while ago.
TRUE
Weighted moving averages can be adjusted to make more recent data more
important in setting the forecast.

Blooms: Understand
25.
Exponential smoothing is a form of weighted averaging.

TRUE
The most recent period is given the most weight, but prior periods also factor in.

3-57

Blooms: Understand
26.
A smoothing constant of .1 will cause an exponential smoothing forecast to react

more quickly to a sudden change than a smoothing constant value of .3.
FALSE
Smaller smoothing constants result in less reactive forecast models.

Blooms: Understand
27.
The T in the model TAF = S + T represents the time dimension (which is usually
expressed in weeks or months).
FALSE
The T represents the trend dimension.

Blooms: Remember
28.
Trend-adjusted exponential smoothing requires selection of two smoothing

constants.
TRUE
One is for the trend and one is for the random error.

Blooms: Remember
3-58
29.
An advantage of trend-adjusted exponential smoothing over the linear trend

equation is its ability to adjust over time to changes in the trend.
TRUE
A linear trend equation assumes a constant trend; trend-adjusted smoothing allows
for changes in the underlying trend.

Blooms: Remember
30.
A seasonal relative (or seasonal indexes) is expressed as a percentage of average

or trend.
TRUE
Seasonal relatives are used when the seasonal effect is multiplicative rather than
additive.

Blooms: Remember
Learning Objective: 03-13 Compute and use seasonal relatives.
31.
In order to compute seasonal relatives, the trend of past data must be computed or
known, which means that for brand-new products this approach cannot be used.
TRUE
Computing seasonal relatives depends on past data being available.

Blooms: Understand
3-59
32.
Removing the seasonal component from a data series (deseasonalizing) can be

accomplished by dividing each data point by its appropriate seasonal relative.
TRUE
Deseasonalized data points have been adjusted for seasonal influences.

Blooms: Remember
33.
If a pattern appears when a dependent variable is plotted against time, one should
use time series analysis instead of regression analysis.
TRUE
Patterns reflect influences such as trends or seasonality that go against regression
analysis assumptions.

Blooms: Remember
34.
Curvilinear and multiple regression procedures permit us to extend associative

models to relationships that are nonlinear or involve more than one predictor
variable.
TRUE
Regression analysis can be used in a variety of settings.

Blooms: Remember
3-60
35.
The sample standard deviation of forecast error is equal to the square root of MSE.
TRUE
The MSE is equal to the sample variance of the forecast error.

Blooms: Remember
Topic: Forecast Accuracy
36.
Correlation measures the strength and direction of a relationship between

variables.
TRUE
The association between two variations is summarized in the correlation coefficient.

Blooms: Remember
37.
MAD is equal to the square root of MSE, which is why we calculate the easier MSE
and then calculate the more difficult MAD.
FALSE
MAD is the mean absolute deviation.

Blooms: Remember
Learning Objective: 03-05 Summarize forecast errors and use summaries to make decisions.
38.
In exponential smoothing, an alpha of 1.0 will generate the same forecast that a
naive forecast would yield.
TRUE
With alpha equal to 1 we are using a naive forecasting method.

3-61

Blooms: Understand
39.
A forecast method is generally deemed to perform adequately when the errors

exhibit an identifiable pattern.
FALSE
Forecast methods are generally considered to be performing adequately when the
errors appear to be randomly distributed.

Blooms: Understand
40.
A control chart involves setting action limits for cumulative forecast error.
FALSE
Control charts set action limits for the tracking signal.

Blooms: Remember
Learning Objective: 03-15 Construct control charts and use them to monitor forecast errors.
41.
A tracking signal focuses on the ratio of cumulative forecast error to the

corresponding value of MAD.
TRUE
Large absolute values of the tracking signal suggest a fundamental change in the
forecast model's performance.

Blooms: Remember
3-62
42.
The use of a control chart assumes that errors are normally distributed about a
mean of zero.
TRUE
Over time, a forecast model's tracking signal should fluctuate randomly about a
mean of zero.

Blooms: Remember
43.
Bias exists when forecasts tend to be greater or less than the actual values of time
series.
TRUE
A tendency in one direction is defined as bias.

Blooms: Remember
44.
Bias is measured by the cumulative sum of forecast errors.

TRUE
Bias would result in the cumulative sum of forecast errors being large in absolute
value.

Blooms: Remember
3-63
45.
Seasonal relatives can be used to deseasonalize data or incorporate seasonality in

a forecast.
TRUE
Seasonal relatives are used to deseasonalize data to forecast future values of the
underlying trend, and they are also used to reseasonalize deseasonalized forecasts.

Blooms: Remember
46.
The best forecast is not necessarily the most accurate.

TRUE
More accuracy often comes at too high a cost to be worthwhile.

Blooms: Understand
Multiple Choice Questions
3-64
47.
Which of the following is a potential shortcoming of using sales force opinions in

demand forecasting?
A. Members of the sales force often have substantial histories of working with and
understanding their customers.
B. Members of the sales force often are well aware of customers' future plans.
C. Members of the sales force have direct contact with consumers.
D. Members of the sales force can have difficulty distinguishing between what
customers would like to do and what they actually will do.
E. Customers often are quite open with members of the sales force with regard to
future plans.
Customers themselves may be unclear regarding what they'd like to do versus
what they'll actually do.

Blooms: Understand
48.
Suppose a four-period weighted average is being used to forecast demand. Weights

for the periods are as follows: wt-4 = 0.1, wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.4.
Demand observed in the previous four periods was as follows: A t-4 = 380, At-3 = 410,
At-2 = 390, At-1 = 400. What will be the demand forecast for period t?
A.
B.
C.
D.
E.
402
397
399
393
403
The forecast will be (.1 * 380) + (.2 * 410) + (.3 * 390) + (.4 * 400) = 397.
AACSB: Analytic
Blooms: Apply
Learning Objective: 03-09 Prepare a weighted-average forecast.
3-65
49.
Suppose a three-period weighted average is being used to forecast demand.

Weights for the periods are as follows: wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.5. Demand
observed in the previous three periods was as follows: A t-3 = 2,200, At-2 = 1,950, At-1
= 2,050. What will be the demand forecast for period t?
A.
B.
C.
D.
E.
2,000
2,095
1,980
2,050
1,875
The forecast for will be (.2 * 2,200) + (.3 * 1,950) + (.5 * 2,050) = 2,050.
AACSB: Analytic
Blooms: Apply
50.
When choosing a forecasting technique, a critical trade-off that must be considered

is that between:
A.
B.
C.
D.
E.
time series and associative.

seasonality and cyclicality.
length and duration.
simplicity and complexity.
cost and accuracy.
The trade-off between cost and accuracy is the critical consideration when
choosing a forecasting technique.

Blooms: Understand
technique.
Topic: Choosing a Forecasting Technique
3-66
51.
The more novel a new product or service design is, the more forecasters have to
rely on:
A.
B.
C.
D.
E.
subjective estimates.
seasonality.
cyclicality.
historical data.
smoothed variation.
New products and services lack historical data, so forecasts for them must be
based on subjective estimates.

Blooms: Understand
technique.
52.
Forecasts based on judgment and opinion do not include:
A.
B.
C.
D.
E.
executive opinion.
salesperson opinion.
second opinions.
customer surveys.
Delphi methods.
Second opinions generally refer to medical diagnoses, not demand forecasting.

Blooms: Remember
3-67
53.
Which of the following is/are a primary input into capacity, sales, and production
planning?
A.
B.
C.
D.
E.
product design
market share
ethics
globalization
demand forecasts
Demand forecasts are direct inputs into capacity, sales, and production plans.

Blooms: Remember
54.
Which of the following features would not generally be considered common to all
forecasts?
A.
Assumption of a stable underlying causal system.
B. Actual results will differ somewhat from predicted values.
C. Historical data is available on which to base the forecast.
D. Forecasts for groups of items tend to be more accurate than forecasts for
individual items.
E.
Accuracy decreases as the time horizon increases.
In some forecasting situations historical data are not available.

Blooms: Understand
3-68
55.
Which of the following is not a step in the forecasting process?
A.
B.
C.
D.
E.
Determine the purpose and level of detail required.

Eliminate all assumptions.
Establish a time horizon.
Select a forecasting model.
Monitor the forecast.
We cannot eliminate all assumptions.

Blooms: Remember
56.
Minimizing the sum of the squared deviations around the line is called:
A.
B.
C.
D.
E.
mean squared error technique.

mean absolute deviation.
double smoothing.
least squares estimation.
predictor regression.
Least squares estimations minimize the sum of squared deviations around the
estimated regression function.

Blooms: Remember
57.
The two general approaches to forecasting are:
A.
B.
C.
D.
E.
mathematical and statistical.

qualitative and quantitative.
judgmental and qualitative.
historical and associative.
precise and approximation.
Forecast approaches are either quantitative or qualitative.

3-69

Blooms: Remember
technique.
Topic: Approaches to Forecasting
58.
Which of the following is not a type of judgmental forecasting?
A.
B.
C.
D.
E.
executive opinions
sales force opinions
consumer surveys
the Delphi method
time series analysis
Time series analysis is a quantitative approach.

Blooms: Remember
59.
Accuracy in forecasting can be measured by:
A.
B.
C.
D.
E.
MSE.
MRP.
MPS.
MTM.
MTE.
MSE is mean squared error.

Blooms: Remember
3-70
60.
Which of the following would be an advantage of using a sales force composite to

develop a demand forecast?
A. The sales staff is least affected by changing customer needs.

B. The sales force can easily distinguish between customer desires and probable
actions.
C. The sales staff is often aware of customers' future plans.
D. Salespeople are least likely to be influenced by recent events.
E. Salespeople are least likely to be biased by sales quotas.
Members of the sales force should be the organization's tightest link with its
customers.

Blooms: Understand
61.
Which phrase most closely describes the Delphi technique?
A.
B.
C.
D.
E.
associative forecast
consumer survey
series of questionnaires
developed in India
historical data
The questionnaires are a way of fostering a consensus among divergent

perspectives.

Blooms: Remember
3-71
62.
The forecasting method which uses anonymous questionnaires to achieve a

consensus forecast is:
A.
B.
C.
D.
E.
sales force opinions.

consumer surveys.
the Delphi method.
time series analysis.
executive opinions.
Anonymity is important in Delphi efforts.

Blooms: Remember
63.
One reason for using the Delphi method in forecasting is to:
A.
B.
C.
D.
E.
avoid premature consensus (bandwagon effect).

achieve a high degree of accuracy.
maintain accountability and responsibility.
be able to replicate results.
prevent hurt feelings.
A bandwagon can lead to popular but potentially inaccurate viewpoints to drown

out other important considerations.

Blooms: Remember
3-72
64.
Detecting nonrandomness in errors can be done using:
A.
B.
C.
D.
E.
MSEs.
MAPs.
control charts.
correlation coefficients.
strategies.
Control charts graphically depict the statistical behavior of forecast errors.

Blooms: Remember
65.
Gradual, long-term movement in time series data is called:
A.
B.
C.
D.
E.
seasonal variation.
cycles.
irregular variation.
trend.
random variation.
Trends move the time series in a long-term direction.

Blooms: Remember
Learning Objective: 03-11 Prepare a linear trend forecast.
66.
The primary difference between seasonality and cycles is:
A.
B.
C.
D.
E.
the duration of the repeating patterns.

the magnitude of the variation.
the ability to attribute the pattern to a cause.
the direction of the movement.
there are only four seasons but 30 cycles.
Seasons happen within time periods; cycles happen across multiple time periods.

3-73
Blooms: Remember
67.
Averaging techniques are useful for:
A.
B.
C.
D.
E.
distinguishing between random and nonrandom variations.

smoothing out fluctuations in time series.
eliminating historical data.
providing accuracy in forecasts.
average people.
Smoothing helps forecasters see past random error.

Blooms: Remember
68.
Putting forecast errors into perspective is best done using
A.
B.
C.
D.
E.
MAPE.
linear decision rules.
MAD.
hindsight.
MAPE depicts the forecast error relative to what was being forecast.

Blooms: Understand
3-74
69.
Using the latest observation in a sequence of data to forecast the next period is:
A.
B.
C.
D.
E.
a moving average forecast.

a naive forecast.
Only one piece of information is needed for a naive forecast.

Blooms: Remember
70.
For the data given below, what would the naive forecast be for period 5?
A.
B.
C.
D.
E.
58
62
59.5
61
cannot tell from the data given
Period 5's forecast would be period 4's demand.
AACSB: Analytic
Blooms: Apply
3-75
71.
Moving average forecasting techniques do the following:
A.
B.
C.
D.
E.
Immediately reflect changing patterns in the data.

Lead changes in the data.
Smooth variations in the data.
Operate independently of recent data.
Assist when organizations are relocating.
Variation is smoothed out in moving average forecasts.

Blooms: Remember
72.
Which is not a characteristic of simple moving averages applied to time series

data?
A.
B.
C.
D.
E.

lags changes in the data
requires only last period's forecast and actual data
Simple moving averages can require several periods of data.

Blooms: Understand
3-76
73.
In order to increase the responsiveness of a forecast made using the moving

average technique, the number of data points in the average should be:
A.
B.
C.
D.
E.
decreased.
increased.
multiplied by a larger alpha.
multiplied by a smaller alpha.
eliminated if the MAD is greater than the MSE.
Fewer data points result in more responsive moving averages.

Blooms: Understand
74.
A forecast based on the previous forecast plus a percentage of the forecast error
is:
A.
B.
C.
D.
E.
a naive forecast.
a simple moving average forecast.
a centered moving average forecast.
Exponential smoothing uses the previous forecast error to shape the next forecast.

Blooms: Remember
3-77
75.
Which is not a characteristic of exponential smoothing?
A.
B.
C.
D.
E.

has an easily altered weighting scheme
has minimal data storage requirements
The most recent period of demand is given the most weight in exponential
smoothing.

Blooms: Remember
76.
Which of the following smoothing constants would make an exponential smoothing

forecast equivalent to a naive forecast?
A.
B.
C.
D.
E.
0
.01
.1
.5
1.0
An alpha of 1.0 leads to a naive forecast.

Blooms: Understand
3-78
77.
Simple exponential smoothing is being used to forecast demand. The previous

forecast of 66 turned out to be four units less than actual demand. The next
forecast is 66.6, implying a smoothing constant, alpha, equal to:
A.
B.
C.
D.
E.
.01.
.10.
.15.
.20.
.60.
A previous period's forecast error of 4 units would lead to a change in the forecast
of 0.6 if alpha equals 0.15.
AACSB: Analytic
Blooms: Apply
78.
Given an actual demand of 59, a previous forecast of 64, and an alpha of .3, what
would the forecast for the next period be using simple exponential smoothing?
A.
B.
C.
D.
E.
36.9
57.5
60.5
62.5
65.5
Multiply the previous period's forecast error (-5) by alpha and then add to the
previous period's forecast.
AACSB: Analytic
Blooms: Apply
3-79
79.
Given an actual demand of 105, a forecasted value of 97, and an alpha of .4, the
simple exponential smoothing forecast for the next period would be:
A.
B.
C.
D.
E.
80.8.
93.8.
100.2.
101.8.
108.2.
Multiply the previous period's forecast error (8) by alpha and then add to the
previous period's forecast.
AACSB: Analytic
Blooms: Apply
80.
Which of the following possible values of alpha would cause exponential smoothing
to respond the most quickly to forecast errors?
A.
B.
C.
D.
E.
0
.01
.05
.10
.15
Larger values for alpha correspond with greater responsiveness.

Blooms: Understand
3-80
81.
A manager uses the following equation to predict monthly receipts: Y t = 40,000 +

150t. What is the forecast for July if t = 0 in April of this year?
A.
B.
C.
D.
E.
40,450
40,600
42,100
42,250
42,400
July would be period 3, so the forecast would be 40,000 + 150(3).
AACSB: Analytic
Blooms: Apply
82.
In trend-adjusted exponential smoothing, the trend-adjusted forecast consists of:
A. an exponentially smoothed forecast and a smoothed trend factor.

B. an exponentially smoothed forecast and an estimated trend value.
C.
the old forecast adjusted by a trend factor.
D.
the old forecast and a smoothed trend factor.
E.
a moving average and a trend factor.
Both random variation and the trend are smoothed in TAF models.

Blooms: Remember
3-81
83.
In the additive model for seasonality, seasonality is expressed as a ______________

adjustment to the average; in the multiplicative model, seasonality is expressed as
a __________ adjustment to the average.
A.
B.
C.
D.
E.
quantity; percentage
percentage; quantity
quantity; quantity
percentage; percentage
qualitative; quantitative
The additive model simply adds a seasonal adjustment to the deseasonalized

forecast. The multiplicative model adjusts the deseasonalized forecast by
multiplying it by a season relative or index.

Blooms: Remember
84.
Which technique is used in computing seasonal relatives?
A.
B.
C.
D.
E.
double smoothing
Delphi
mean squared error
centered moving average
The centered moving average serves as the basis point for computing seasonal
relatives.

Blooms: Remember
3-82
85.
A persistent tendency for forecasts to be greater than or less than the actual values
is called:
A.
B.
C.
D.
E.
bias.
tracking.
control charting.
positive correlation.
linear regression.
Bias is a tendency for a forecast to be above (or below) the actual value.

Blooms: Remember
86.
Which of the following might be used to indicate the cyclical component of a

forecast?
A.
B.
C.
D.
E.
leading variable
mean squared error
Delphi technique
Leading variables, such as births in a given year, can correlate strongly with longterm phenomena such as cycles.

Blooms: Remember
3-83
87.
The primary method for associative forecasting is:
A.
B.
C.
D.
E.
sensitivity analysis.
simple moving averages.
centered moving averages.
Regression analysis is an associative forecasting technique.

Blooms: Remember
88.
Which term most closely relates to associative forecasting techniques?
A.
B.
C.
D.
E.
time series data

expert opinions
Delphi technique
consumer survey
predictor variables
Associative techniques use predictor variables.

Blooms: Remember
3-84
89.
Which of the following corresponds to the predictor variable in simple linear

regression?
A.
B.
C.
D.
E.
regression coefficient
dependent variable
independent variable
predicted variable
demand coefficient
Demand is the typical dependent variable when forecasting with simple linear
regression.

Blooms: Remember
90.
The mean absolute deviation is used to:
A.
B.
C.
D.
E.
estimate the trend line.

eliminate forecast errors.
measure forecast accuracy.
seasonally adjust the forecast.
compute periodic forecast errors.
MAD is one way of evaluating forecast performance.

Blooms: Remember
3-85
91.
Given forecast errors of 4, 8, and -3, what is the mean absolute deviation?
A.
B.
C.
D.
E.
4
3
5
6
12
Convert each error into an absolute value and then average.
AACSB: Analytic
Blooms: Apply
92.
Given forecast errors of 5, 0, -4, and 3, what is the mean absolute deviation?
A.
B.
C.
D.
E.
4
3
2.5
2
1
Convert each error into an absolute value and then average.
AACSB: Analytic
Blooms: Apply
93.
Given forecast errors of 5, 0, -4, and 3, what is the bias?
A.
B.
C.
D.
E.
-4
4
5
12
6
Sum the forecast errors.
AACSB: Analytic
3-86
Blooms: Apply
94.
Which of the following is used for constructing a control chart?
A.
B.
C.
D.

mean squared error
tracking signal
bias
The mean squared error leads to an estimate for the sample forecast standard
deviation.

Blooms: Remember
95.
The two most important factors in choosing a forecasting technique are:
A.
B.
C.
D.
E.
cost and time horizon.

accuracy and time horizon.
cost and accuracy.
quantity and quality.
objective and subjective components.
More accurate forecasts cost more but may not be worth the additional cost.

Blooms: Remember
technique.
3-87
96.
The degree of management involvement in short-range forecasts is:
A.
B.
C.
D.
E.
none.
low.
moderate.
high.
total.
Short-range forecasting tends to be fairly routine.

Blooms: Remember
97.
Which of the following is not necessarily an element of a good forecast?
A.
B.
C.
D.
E.
estimate of accuracy
timeliness
meaningful units
low cost
written
A good forecast can be quite costly if necessary.

Blooms: Understand
3-88
98.
Forecasting techniques generally assume:
A.
the absence of randomness.
B.
continuity of some underlying causal system.
C.
a linear relationship between time and demand.
D. accuracy that increases the farther out in time the forecast projects.
E. accuracy that is better when individual items, rather than groups of items, are
being considered.
Forecasting techniques generally assume that the same underlying causal system
that existed in the past will continue to exist in the future.

Blooms: Remember
99.
A managerial approach toward forecasting which seeks to actively influence

demand is:
A.
B.
C.
D.
E.
reactive.
proactive.
influential.
protracted.
retroactive.
Simply responding to demand is a reactive approach.

Blooms: Remember
technique.
Topic: Using Forecast Information
3-89
100. Customer service levels can be improved by better:
A.
B.
C.
D.
E.
mission statements.
control charting.
short-term forecast accuracy.
customer selection.
More accurate short-term forecasts enable organizations to better accommodate

customer requests.

Blooms: Understand
Topic: Operations Strategy
101. Given the following historical data, what is the simple three-period moving average
forecast for period 6?
A.
B.
C.
D.
E.
67
115
69
68
68.67
Average demand from periods 3 through 5.
AACSB: Analytic
Blooms: Apply
3-90
102. Given the following historical data and weights of .5, .3, and .2, what is the threeperiod moving average forecast for period 5?
A.
B.
C.
D.
E.
144.20
144.80
144.67
143.00
144.00
Multiply period 4 (144) by .5, period 3 (148) by .3, and period 2 (142) by .2, then
sum these products.
AACSB: Analytic
Blooms: Apply
103. Use of simple linear regression analysis assumes that:
A.
variations around the line are nonrandom.
B.
deviations around the line are normally distributed.
C. predictions can easily be made beyond the range of observed values of the
predictor variable.
D. all possible predictor variables are included in the model.
E. the variance of error terms (deviations) varies directly with the predictor
variable.
That deviations conform to the normal distribution is a very important assumption
underpinning simple linear regression.

Blooms: Remember
3-91
104. Given forecast errors of -5, -10, and +15, the MAD is:
A.
B.
C.
D.
E.
0.
10.
30.
175.
225.
Convert these errors into absolute value, then average.
AACSB: Analytic
Blooms: Apply
105. The president of State University wants to forecast student enrollments for this
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,000
22,800
This year's forecast would be last year's enrollment.
AACSB: Analytic
Blooms: Apply
3-92
What is the forecast for this year using a four-year simple moving average?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
Average enrollment from the last four years.
AACSB: Analytic
Blooms: Apply
3-93
What is the forecast for this year using exponential smoothing with alpha = .5, if
the forecast for two years ago was 16,000?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
Multiply last year's forecast error by the smoothing constant, then add that
adjusted error to last year's forecast to get this year's forecast.
AACSB: Analytic
Blooms: Apply
3-94
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
Treat 5 years ago as period 0.
AACSB: Analytic
Blooms: Apply
3-95
What is the forecast for this year using trend-adjusted (double) smoothing with
alpha = .05 and beta = .3, if the forecast for last year was 21,000, the forecast for
two years ago was 19,000, and the trend estimate for last year's forecast was
1,500?
A.
B.
C.
D.
E.
18,750
19,500
21,000
22,650
22,800
Smooth both the trend and the forecast to get this year's forecast.
AACSB: Analytic
Blooms: Apply
3-96
110. The business analyst for Video Sales, Inc. wants to forecast this year's demand for
A.
B.
C.
D.
E.
163
180
300
420
510
This year's forecast is last year's demand.
AACSB: Analytic
Blooms: Apply
3-97
What is the forecast for this year using a three-year weighted moving average with
weights of .5, .3, and .2?
A.
B.
C.
D.
E.
163
180
300
420
510
Multiply the last three periods of demand by the appropriate weights, then sum the
resulting products.
AACSB: Analytic
Blooms: Apply
3-98
What is the forecast for this year using exponential smoothing with alpha = .4, if
the forecast for two years ago was 750?
A.
B.
C.
D.
E.
163
180
300
420
510
First formulate last year's exponentially smoothed forecast, then proceed.
AACSB: Analytic
Blooms: Apply
3-99
A.
B.
C.
D.
E.
163
180
300
420
510
Treat the earliest period of demand as period 0, then formulate least squares
estimates and proceed.
AACSB: Analytic
Blooms: Apply
3-100
What is the forecast for this year using trend-adjusted (double) smoothing with
alpha = .3 and beta = .2, if the forecast for last year was 310, the forecast for two
years ago was 430, and the trend estimate for last year's forecast was -150?
A.
B.
C.
D.
E.
162.4
180.3
301.4
403.2
510.0
AACSB: Analytic
Blooms: Apply
Learning Objective: 03-12 Prepare a trend-adjusted exponential smoothing forecast.
3-101
115. Professor Very Busy needs to allocate time next week to include time for office
hours. He needs to forecast the number of students who will seek appointments.
He has gathered the following data:
What is this week's forecast using the naive approach?
A.
B.
C.
D.
E.
45
50
52
65
78
This week's forecast is last week's demand.
AACSB: Analytic
Blooms: Apply
3-102
What is this week's forecast using a three-week simple moving average?
A.
B.
C.
D.
E.
49
50
52
65
78
Average the three most recent weeks of demand.
AACSB: Analytic
Blooms: Apply
3-103
What is this week's forecast using exponential smoothing with alpha = .2, if the
forecast for two weeks ago was 90?
A.
B.
C.
D.
E.
49
50
52
65
77
Formulate the forecast for last week, then use that to get this week's forecast.
AACSB: Analytic
Blooms: Apply
3-104
What is this week's forecast using the least squares trend line for these data?
A.
B.
C.
D.
E.
49
50
52
65
78
Treat the earliest period as period 0, then formulate least squares coefficients and
proceed.
AACSB: Analytic
Blooms: Apply
3-105
What is this week's forecast using trend-adjusted (double) smoothing with alpha = .
5 and beta = .1, if the forecast for last week was 65, the forecast for two weeks ago
was 75, and the trend estimate for last week's forecast was -5?
A.
B.
C.
D.
E.
49.3
50.6
51.3
65.4
78.7
AACSB: Analytic
Blooms: Apply
3-106
120. A concert promoter is forecasting this year's attendance for one of his concerts
based on the following historical data:
A.
B.
C.
D.
E.
22,000
20,000
18,000
15,000
12,000
This year's forecast is last year's attendance.
AACSB: Analytic
Blooms: Apply
3-107
What is this year's forecast using a two-year weighted moving average with
weights of .7 and .3?
A.
B.
C.
D.
E.
19,400
18,600
19,000
11,400
10,600
Multiply the two most recent periods by the appropriate weights, then sum the
resulting products.
AACSB: Analytic
Blooms: Apply
3-108
year's smoothed forecast was 15,000?
A.
B.
C.
D.
E.
20,000
19,000
17,500
16,000
15,000
Multiply last year's forecast error by the smoothing constant, then add that product
to last year's forecast to get this year's forecast.
AACSB: Analytic
Blooms: Apply
3-109
A.
B.
C.
D.
E.
20,000
21,000
22,000
23,000
24,000
Treat the earliest year as period zero in formulating least squares coefficients.
AACSB: Analytic
Blooms: Apply
3-110
The previous trend line had predicted 18,500 for two years ago, and 19,700 for last
year. What was the mean absolute deviation for these forecasts?
A.
B.
C.
D.
E.
100
200
400
500
800
Convert each period's forecast error into absolute value, then average.
AACSB: Analytic
Blooms: Apply
3-111
125. The dean of a school of business is forecasting total student enrollment for this
year's summer session classes based on the following historical data:
A.
B.
C.
D.
E.
2,000
2,200
2,800
3,000
4,300
This year's forecast would be last year's enrollment.
AACSB: Analytic
Blooms: Apply
3-112
What is this year's forecast using a three-year simple moving average?
A.
B.
C.
D.
E.
2,667
2,600
2,500
2,400
2,333
Average the most recent periods of enrollment.
AACSB: Analytic
Blooms: Apply
3-113
year's smoothed forecast was 2,600?
A.
B.
C.
D.
E.
2,600
2,760
2,800
3,840
3,000
Multiply last year's forecast error by the smoothing constant. Add the product to
last year's forecast to get this year's forecast.
AACSB: Analytic
Blooms: Apply
3-114
What is the annual rate of change (slope) of the least squares trend line for these
data?
A.
B.
C.
D.
E.
0
200
400
180
360
Treat the earliest period as period 0, then formulate the least squares slope.
AACSB: Analytic
Blooms: Apply
3-115
A.
B.
C.
D.
E.
3,600
3,500
3,400
3,300
3,200
Treat the earliest period as period 0, then formulate the least squares coefficients
and proceed.
AACSB: Analytic
Blooms: Apply
3-116
130. The owner of Darkest Tans Unlimited in a local mall is forecasting this month's
data:
What is this month's forecast using the naive approach?
A.
B.
C.
D.
E.
100
160
130
140
120
This month's forecast is last month's demand.
AACSB: Analytic
Blooms: Apply
3-117
data:
What is this month's forecast using a four-month weighted moving average with
weights of .4, .3, .2, and .1?
A.
B.
C.
D.
E.
120
129
141
135
140
Multiply the four most recent periods of demand by the appropriate weights, then
sum the resulting products.
AACSB: Analytic
Blooms: Apply
3-118
data:
What is this month's forecast using exponential smoothing with alpha = .2, if
August's forecast was 145?
A.
B.
C.
D.
E.
144
140
142
148
163
First calculate September's forecast, then use that to calculate this month's
forecast.
AACSB: Analytic
Blooms: Apply
3-119
data:
What is the monthly rate of change (slope) of the least squares trend line for these
data?
A.
B.
C.
D.
E.
320
102
8
-.4
-8
Treat the earliest period as period 0, then formulate the least squares slope.
AACSB: Analytic
Blooms: Apply
3-120
data:
What is this month's forecast using the least squares trend line for these data?
A.
B.
C.
D.
E.
1,250
128.6
102
158
164
Treat the earliest period as period 0, then formulate the least squares coefficients
and proceed.
AACSB: Analytic
Blooms: Apply
135. Which of the following mechanisms for enhancing profitability is most likely to
result from improving short-term forecast performance?
A.
B.
C.
D.
E.
increased inventory
reduced flexibility
higher-quality products
greater customer satisfaction
greater seasonality
Short-term forecast performance won't necessarily improve product quality, but it

does allow firms to better satisfy their customers.

Blooms: Understand
3-121
technique.
136. Which of the following changes would tend to shorten the time frame for short-term
forecasting?
A.
B.
C.
D.
E.
bringing greater variety into the product mix

increasing the flexibility of the production system
ordering fewer weather-sensitive items
adding more special-purpose equipment
investing in the production system to make it more task-specific
An increasingly flexible system permits more rapid responses to changing

conditions, which allows firms to reduce their forecast time horizon.

Blooms: Understand
technique.
137. Which of the following helps improve supply chain forecasting performance?
A. contracts that require supply chain members to formulate long-term forecasts

B. penalties for supply chain members that adjust forecasts
C. sharing forecasts or demand data across the supply chain
D. increasing lead times for critical supply chain members
E. increasing the number of suppliers at critical junctures in the supply chain
Sharing forecasts and/or demand data is a means of ensuring that the supply
chain's overall forecast is as accurate as it can be.

Blooms: Understand
Topic: Forecasting and the Supply Chain
3-122
138. Which of the following would tend to decrease forecast accuracy?
A.
a reduction in demand variability
B.
a shortening of the forecast time horizon
C. an attempt to forecast demand for a group of similar items rather than an
individual item
D.
a change in the underlying causal system
Forecasting techniques generally assume that the same underlying causal system
that existed in the past will continue to exist in the future.

Blooms: Understand
Learning Objective: 03-02 Explain why forecasts are generally wrong.
Topic: Forecasting and the Supply Chain
139. Which of the following is the most valuable piece of information the sales force can
bring into forecasting situations?
A.
what customers are most likely to do in the future
B.
what customers most want to do in the future
C.
what customers' future plans are
D. whether customers are satisfied or dissatisfied with their performance in the
past
E. what the salesperson's appropriate sales quota should be
Knowledge about what customers are likely to do is much more valuable than
information regarding what customers plan or want to do.

Blooms: Understand
Essay Questions
3-123
140. Develop a forecast for the next period, given the data below, using a three-period
moving average.
Feedback: Average demand from periods 3 through 5.
AACSB: Analytic
Blooms: Apply
3-124
141. Consider the data below:
Using exponential smoothing with alpha = .2, and assuming the forecast for period
11 was 80, what would the forecast for period 14 be?
Feedback: The forecast error in period 13 (2.84) is multiplied by the smoothing

constant. This is then added to the period 13 forecast to get the period 14 forecast.
AACSB: Analytic
Blooms: Apply
142. A manager is using exponential smoothing to predict merchandise returns at a

suburban branch of a department store chain. Given a previous forecast of 140
items, an actual number of returns of 148 items, and a smoothing constant equal
to .15, what is the forecast for the next period?
Feedback: The forecast error in the previous period is multiplied by the smoothing
constant. This is then added to the previous period's forecast to get the upcoming
period's forecast.
AACSB: Analytic
Blooms: Apply
3-125
143. A manager is using the equation below to forecast quarterly demand for a product:
Yt = 6,000 + 80t where t = 0 at Q2 of last year
Quarter relatives are Q1 = .6, Q2 = .9, Q3 = 1.3, and Q4 = 1.2.
What forecasts are appropriate for the last quarter of this year and the first quarter
of next year?
For Q4 of this year t = 6

For Q1 of next year t = 7
Feedback: Adjust deseasonalized forecasts by the quarterly seasonal relatives.
AACSB: Analytic
Blooms: Apply
144. Over the past five years, a firm's sales have averaged 250 units in the first quarter
of each year, 100 units in the second quarter, 150 units in the third quarter, and
300 units in the fourth quarter. What are appropriate quarter relatives for this firm's
sales? Hint: Only minimal computations are necessary.
Feedback: Since a trend is not present, quarter relatives are simply a percentage of
average, which is 200 units.
AACSB: Analytic
Blooms: Apply
3-126
145. A manager has been using a certain technique to forecast demand for gallons of ice
cream for the past six periods. Actual and predicted amounts are shown below.
Would a naive forecast have produced better results?
Current method: MAD = 3.67; MSE = 16.8; 2s control limits 8.2 (OK)
Naive method: MAD = 4.40; MSE = 30.0; 2s control limits 11.0 (OK)
Feedback: Either MSE or MAD should be computed for both forecasts and
compared. The demand data are stable. Therefore, the most recent value of the
series is a reasonable forecast for the next period of time, justifying the naive
approach. The current method is slightly superior both in terms of MAD and MSE.
Either method would be considered in control.
AACSB: Analytic
Blooms: Apply
3-127
146. A new car dealer has been using exponential smoothing with an alpha of .2 to
forecast weekly new car sales. Given the data below, would a naive forecast have
provided greater accuracy? Explain. Assume an initial exponential forecast of 60
units in period 2 (i.e., no forecast for period 1).
Exponential method: MAD = 1.70; MSE = 6.34

Naive method: MAD = 3.00; MSE = 15.25
Feedback: The exponential forecast method appears to be superior because both
MAD and MSE are lower when it is used.
AACSB: Analytic
Blooms: Apply
3-128
147. A CPA firm has been using the following equation to predict annual demand for tax
audits: Yt = 55 + 4t. Demand for the past few years is shown below. Is the forecast
performing as well as it might? Explain.
MSE = 11/6 and s =

= 3.41. Even with 2s limits (6.82), all values are
within the limits. It seems, then, that only random variation is present, so one
might say that the forecast is working. One might also observe that the first three
errors are negative and the last three are positive. Although six observations
constitute a relatively small sample, it may be that the errors are cycling, and this
would be a matter to investigate with additional data.
Feedback: Either a tracking signal or a control chart is called for. To conduct these
assessments, it is necessary to generate the forecasts so that errors can be
determined.
AACSB: Analytic
Blooms: Apply
3-129
148. Given the data below, develop a forecast for period 6 using a four-period weighted
moving average and weights of .4, .3, .2 and .1.
.4(17) + .3(19) + .2(18) + .1(20) = 18.1

Feedback: Multiply demand observed in periods 2 through 5 by the appropriate
weight, then sum these products.
AACSB: Analytic
Blooms: Apply
3-130
149. Use linear regression to develop a predictive model for demand for burial vaults
based on sales of caskets.
Feedback: Least-squares estimation leads to this regression equation.
AACSB: Analytic
Blooms: Apply
3-131
150. Given the following data, develop a linear regression model for y as a function of x.
Feedback: Least squares estimation leads to this regression equation.
AACSB: Analytic
Blooms: Apply
3-132
151. Given the following data, develop a linear regression model for y as a function of x.
Feedback: Least squares estimation leads to this regression equation.
AACSB: Analytic
Blooms: Apply
3-133
152. Develop a linear trend equation for the data on bread deliveries shown below.
Forecast deliveries for period 11 through 14.
Yt = 518.2 + 52.164t r = +.935
Feedback: Formulate the regression equation using least squares estimation, then
apply the result to periods 11 through 14.
AACSB: Analytic
Blooms: Apply
3-134
153. Demand for the last four months was:
A) Predict demand for July using each of these methods:

1) a three-period moving average
2) exponential smoothing with alpha equal to .20 (use a naive forecast for April for
your first forecast)
B) If the naive approach had been used to predict demand for April through June,
what would MAD have been for those months?
Feedback: The naive approach leads to absolute forecast errors of two units in each
period.
AACSB: Analytic
Blooms: Apply
3-135
154. A manager wants to choose one of two forecasting alternatives. Each alternative
was tested using historical data. The resulting forecast errors for the two are shown
in the table. Analyze the data and recommend a course of action to the manager.
Although Alternative 1 has the smaller MSE, it appears to be cycling and steady;
Alternative 2 errors after the first three periods are small or zero. For the last six
periods, Alternative 2 was much better, suggesting that approach would be better.
Feedback: Although Alternative 1 has the smaller MSE, it appears to be cycling and
steady; Alternative 2 errors after the first three periods are small or zero. For the
last six periods, Alternative 2 was much better, suggesting that approach would be
better.
AACSB: Analytic
Blooms: Apply
3-136
155. A manager uses this equation to predict demand: Yt = 20 + 4t. Over the past eight
periods, demand has been as follows. Are the results acceptable? Explain.
s = 2.10; 2s control limits are 4.20. Although all values are within control limits,
the errors may be exhibiting cyclical patterns, which would suggest
nonrandomness.
Feedback: s = 2.10; 2s control limits are 4.20. Although all values are within
control limits, the errors may be exhibiting cyclical patterns, which would suggest
nonrandomness.
AACSB: Analytic
Blooms: Apply
3-137
156. Data on demand over the last few years are available as follows:
What would this year's forecast be if we were using the naive approach?
49
Feedback: This year's forecast would be last year's demand.
AACSB: Analytic
Blooms: Apply
3-138
What is this year's forecast using a four-year simple moving average?
45.5
Feedback: Average the four most recent periods of demand.
AACSB: Analytic
Blooms: Apply
3-139
year's smoothed forecast was 45?
45.8
Feedback: Multiply last year's forecast error by the smoothing constant. Add the
resulting product to last year's forecast to get this year's forecast.
AACSB: Analytic
Blooms: Apply
3-140
What are this and next year's forecasts using the least squares trend line for these
data?
62; 69
Feedback: Treat the earliest period as period 0 in formulating least squares
coefficients, then proceed.
AACSB: Analytic
Blooms: Apply
3-141
What is this year's forecast using trend-adjusted (double) smoothing with alpha = .
2 and beta = .1, if the forecast for last year was 56, the forecast for two years ago
was 46, and the trend estimate for last year's forecast was 7?
61.76
Feedback: Smooth both the trend and the forecasts using the appropriate
smoothing coefficients.
AACSB: Analytic
Blooms: Apply
3-142
161. Data on the last three years of demand are available as follows:
What is the centered moving average for spring two years ago?
29
Feedback: First average the four periods beginning fall three years ago. Then
average the four periods beginning spring two years ago. Then average these two
averages.
AACSB: Analytic
Blooms: Apply
What is the spring's seasonal relative?
Spring = 0.91
Feedback: Divide data points by centered moving averages where moving averages
are available. Average the resulting values across the seasons to get the seasonal
relatives.
AACSB: Analytic
Blooms: Apply
3-143
What is the linear regression trend line for these data (t = 0 for spring, three years
ago)?
y = 17 + 2.33t
Feedback: Used deseasonalized data points to formulate least squares coefficients.
AACSB: Analytic
Blooms: Apply
What is this year's seasonally adjusted forecast for each season?
Spring = 40.93; Summer = 29.81; Fall = 51.14; Winter = 74.37

Feedback: First forecast each period's deseasonalized value (e.g., Spring is period
12). Then multiply the deseasonalized forecast by the appropriate seasonal
relative.
AACSB: Analytic
Blooms: Apply
3-144
3-145

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Chapter 03

True / False Questions

6. Organizations that are capable of responding quickly to changing requirements can

9. Forecasts based on time-series (historical) data are referred to as associative

18. The naive approach to forecasting requires a linear trend line.

25. Exponential smoothing is a form of weighted averaging.

26. A smoothing constant of .1 will cause an exponential smoothing forecast to react

28. Trend-adjusted exponential smoothing requires selection of two smoothing constants.

30. A seasonal relative (or seasonal indexes) is expressed as a percentage of average or

44. Bias is measured by the cumulative sum of forecast errors.

45. Seasonal relatives can be used to deseasonalize data or incorporate seasonality in a

46. The best forecast is not necessarily the most accurate.

Multiple Choice Questions

time series and associative.

52. Forecasts based on judgment and opinion do not include:

A. Assumption of a stable underlying causal system.

Determine the purpose and level of detail required.

mean squared error technique.

57. The two general approaches to forecasting are:

mathematical and statistical.

58. Which of the following is not a type of judgmental forecasting?

59. Accuracy in forecasting can be measured by:

A. The sales staff is least affected by changing customer needs.

61. Which phrase most closely describes the Delphi technique?

62. The forecasting method which uses anonymous questionnaires to achieve a

sales force opinions.

avoid premature consensus (bandwagon effect).

64. Detecting nonrandomness in errors can be done using:

65. Gradual, long-term movement in time series data is called:

66. The primary difference between seasonality and cycles is:

the duration of the repeating patterns.

67. Averaging techniques are useful for:

A. distinguishing between random and nonrandom variations.

a moving average forecast.

71. Moving average forecasting techniques do the following:

Immediately reflect changing patterns in the data.

smoothes random variations in the data

75. Which is not a characteristic of exponential smoothing?

smoothes random variations in the data

82. In trend-adjusted exponential smoothing, the trend-adjusted forecast consists of:

A. an exponentially smoothed forecast and a smoothed trend factor.

83. In the additive model for seasonality, seasonality is expressed as a ______________

84. Which technique is used in computing seasonal relatives?

87. The primary method for associative forecasting is:

88. Which term most closely relates to associative forecasting techniques?

time series data

90. The mean absolute deviation is used to:

estimate the trend line.

93. Given forecast errors of 5, 0, -4, and 3, what is the bias?

94. Which of the following is used for constructing a control chart?

mean absolute deviation

cost and time horizon.

96. The degree of management involvement in short-range forecasts is:

97. Which of the following is not necessarily an element of a good forecast?

98. Forecasting techniques generally assume:

100 Customer service levels can be improved by better:

103 Use of simple linear regression analysis assumes that:

What is this week's forecast using the naive approach?

What is this week's forecast using a three-week simple moving average?

What is this year's forecast using the naive approach?

What is this year's forecast using the naive approach?

What is this year's forecast using a three-year simple moving average?

What is this month's forecast using the naive approach?