Chapter 10 Forecasting Chapter 10 Forecasting Answer Key Multiple Choice Questions 1 A qualitative forecast would most likely be used for A aggregate planning B scheduling C process design D inventory management LO 10 2 Topic Qualitative Forecasting Methods Difficulty 1 Easy AACSB Reflective thinking Bloom s Understand Feedback Qualitative methods typically are used for medium and long range forecasting for decisions such as process design 2 A regression model is an example of which type of forecasting method A Causal B Historical analogy C Qualitative D Life cycle analogy LO 10 5 Topic Causal Forecasting Methods Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback One of the best known causal methods is regression 3 When should qualitative methods NOT be used A When historic data are unreliable B When it is impossible to obtain historic data C For short range repetitive decisions D When making major costly decisions such as facilities location LO 10 2 Topic Qualitative Forecasting Methods Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback Time series methods not qualitative methods are best suited to repetitive short range forecasting 11 1 Chapter 10 Forecasting 4 A small company that manufactures rubber boots is selecting a method to forecast demand for the next 10 years The company recently expanded its facilities doubling its capacity Which of the following forecasting methods would be preferred A Qualitative B Simple exponential smoothing C Econometric D Box Jenkins LO 10 2 Topic Qualitative Forecasting Methods Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback 10 years is a long range application so qualitative methods will be most applicable 5 The difference between actual demand and the forecast is A forecast error B mean absolute percentage error C absolute deviation of forecast error D mean absolute deviation of forecast error LO 10 4 Topic Forecast Accuracy Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Error for a given period equals the actual demand minus the forecast demand for that period 6 If a sales representative tells his or her manager I hope to sell 20 more than last year this should be considered A a forecast B a performance measure C a goal D a production plan LO 10 1 Topic Forecasting for Decision Making Difficulty 1 Easy AACSB Reflective thinking Bloom s Remember Feedback Forecasting deals with what we think will happen A hope to sell more is best described as a goal 7 Given the following weekly demand figures 11 2 Chapter 10 Forecasting Week 1 2 3 4 5 Demand 20 60 30 20 40 using a three week moving average what is your forecast for week 6 A 30 B 36 7 C 32 5 D 25 LO 10 3 Topic Moving Average Difficulty 2 Moderate AACSB Application of knowledge Bloom s Apply Feedback 30 week 3 20 week 4 40 week 5 90 90 3 30 8 What is the exponentially smoothed forecast for week 2 Use F1 25 and alpha 0 2 A 21 B 24 C 32 D 53 LO 10 3 Topic Exponential Smoothing Difficulty 1 Easy AACSB Application of knowledge Bloom s Apply Feedback F2 F1 alpha D1 F1 25 0 2 25 20 24 9 What is the exponentially smoothed forecast for week 6 Use F5 33 and alpha 0 0 A 33 B 31 7 C 30 D 20 LO 10 3 Topic Exponential Smoothing Difficulty 2 Moderate AACSB Application of knowledge Bloom s Apply Feedback F2 F1 alpha D1 F1 33 0 0 35 40 33 11 3 Chapter 10 Forecasting 10 Given the following information for period 15 what will be the smoothed mean absolute deviation for period 16 Demand 120 Forecast 180 MAD15 50 Alpha 0 3 A 77 B 53 C 17 D 43 LO 10 4 Topic Forecast Accuracy Difficulty 3 Hard AACSB Application of knowledge Bloom s Apply Feedback MADt alpha absolute value Dt Ft 1 alpha MADt 1 0 3 60 0 7 50 53 11 The Grand Bakery produces 60 special sourdough rolls every day Any rolls that are not sold each day are given to the employees The bakery collected sales data from the past week Day 1 2 3 4 5 6 Rolls Sold 50 50 48 60 53 60 What is the value of F6 if the bakery uses a 3 day weighted moving average with W1 0 6 W2 0 2 and W3 0 2 A 51 4 B 53 4 C 58 6 D None of the above LO 10 3 Topic Moving Average Difficulty 1 Easy AACSB Application of knowledge Bloom s Apply Feedback 0 6 53 0 2 60 0 2 48 53 4 11 4 Chapter 10 Forecasting 12 Using the data from Question 11 calculate the forecast for period 7 using a four period moving average A 60 B 43 25 C 57 75 D 55 25 LO 10 4 Topic Forecast Accuracy Difficulty 1 Easy AACSB Application of knowledge Bloom s Apply Feedback 48 60 53 60 221 221 4 55 25 13 Which of the following is NOT a measure of forecast accuracy A Mean square error B Cumulative sum of forecast error C Mean absolute deviation of forecast error D Cumulative absolute deviation of forecast error LO 10 4 Topic Forecast Accuracy Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback A B and C are measures of forecast accuracy see Section 10 6 14 Which phrase most closely describes the Delphi forecasting technique A Consumer survey B Individual opinions C Rounds of anonymous data collection D Test markets LO 10 2 Topic Qualitative Forecasting Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback The Delphi technique collects input from panel members feeds information back to the members and follows with another round of anonymous input 11 5 Chapter 10 Forecasting 15 Which of the following statements is are true about time series forecasting A The basic strategy is to identify the magnitude and form of each component based on available past data B It is used to make detailed analyses of past demand patterns over time and to project these patterns forward into the future C Demand can be divided into components such as average level trend seasonality cycle and error D All of the above LO 10 3 Topic Time Series Forecasting Difficulty 3 Hard AACSB Reflective thinking Bloom s Understand Feedback All are true see Section 10 3 16 Using exponential smoothing if we want forecasts to be very responsive to recent demand the value of alpha should be A large B moderate C small D The value of alpha does not matter LO 10 2 Topic Exponential Smoothing Difficulty 2 Moderate AACSB Reflective thinking Bloom s Understand Feedback Increasing the alpha value increases the responsiveness of the forecast to the most recent error 17 The forecast was 70 units for the current period while actual demand was 76 The forecast for the next period is 75 8 What is alpha if a simple exponential smoothing forecast