1.

A commercial bakery has recorded sales for two products, as shown below:

Day Blueberry Muffins Cupcakes

1 30 17
2 34 19
3 32 22
4 34 23
5 35 25

Predict orders for the following day for each of the products using an appropriate
naïve method.

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Solution:

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Blueberry muffin orders are stable, varying around an average. Therefore,

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the naïve forecast is the last value, 35. The demand for Cupcakes has a trend.

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The last change was from 23 to 25 (25 – 23 = 2). Using the last value and
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adding the last trend change, the forecast is 25 + 2 = 27.
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 2. Given the following data:

Period Number of Complaints

1 60
2 65
3 55
4 58
5 64

Prepare a forecast for period 6 using each of these approaches:

a. The appropriate naïve approach.
b. A three-period moving average.
c. A weighted average using weights of 0.50 (most recent), 0.30, and 0.20.
d. Exponential smoothing with a smoothing constant of 0.40.

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a. 64

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b.

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55  58  64
59
3 rs e
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c. 0.5* 64 + 0.3* 58 + 0.2* 55 = 60.4
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d. F2= 60
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F3 = 60+0.4*(65-60)=62
F4 = 62+0.4*(55-62)=59.2
F5 = 59.2+0.4*(58-59.2)=58.72
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F6 = 58.72+0.4*(64-58.72)=60.83
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 3. Two different forecasting techniques (F1 and F2) were used to forecast demand
for cases of bottled water. Actual demand and the two sets of forecasts are as
follows:

Period Demand F1 F2
1 68 66 66
2 75 68 68
3 70 72 70
4 74 71 72
5 69 72 74
6 72 70 76

a. Compute MAD for each set of forecasts. Given your results, which forecast

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appears to be more accurate?

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b. Compute the MSE for each set of forecasts. Given your results, which forecast

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appears to be more accurate?

eH w
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rs e
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Period Demand F1 e e e2 F2 e e e2
1 68 66 2 2 4 66 2 2 4
2 75 68 7 7 49 68 7 7 49
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3 70 72 –2 2 4 70 0 0 0
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4 74 71 3 3 9 72 2 2 4
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5 69 72 –3 3 9 74 –5 5 25
6 72 70 +2 2 4 76 –4 4 16
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19 79 20 98
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a. MAD F1: 19/6 = 3.17

MAD F2: 20/6 = 3.33 F1 appears to be more accurate.
b. MSE F1: 79/5 = 15.8
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MSE F2: 98/5 = 19.6 F1 appears to be more accurate.

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 4. Daily high temperatures in St. Louis for the last week were as follows: 93, 94, 93,
95, 96, 88, 90 (yesterday).
(a) Forecast the high temperature today, using a 2-day moving average.
(b) Calculate the mean absolute deviation based on a 2-day moving average.
(c) Compute the mean squared error for the 2-day moving average.
(d) Calculate the mean absolute percent error for the 2-day moving average.

(a) (88+90)/2=89

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Period
2.22%Temperatures Ft e e e2 e/Actual

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1
14.94% 93 -

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2 94 -
3
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93 93.5 –0.5 0.5 0.25 0.54%
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4 95 93.5 1.5 1.5 2.25 1.58%
5 96 94 2 2 4 2.08%
6 88 95.5 -7.5 7.5 56.25 8.52%
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7 90 92 -2 2 4
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13.5 66.75
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(b)
MAD=13.5/5=2.7
(c) MSE=66.75/4=16.69
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(d) MAPE=14.94%/5=2.99%
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 Name Formula Definition
n-period n
n =number of periods
moving A t i

average Ft  i 1
n

Weighted Ft  w1 At  1  w2 At  2  ...  wn At  n =weight for period t-i

Moving wi
Average

Exponential Ft  Ft  1   ( At  1  Ft  1 )
Smoothing =smoothing constant


n MAD = Mean Absolute Deviation

MAD | e i | ei  Ai  Fi

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MAD  i 1

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n

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n

MSE e 2
i MSE = Mean Squared Error

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MSE  i 1
rs e n 1
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n
| ei |
MAPE A *100 MAPE = Mean Absolute Percent
MAPE  i 1 i
% Error
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