MIDDLE EAST TECHNICAL UNIVERSITY

DEPARTMENT OF BUSINESS ADMINISTRATION

BA 2601- OPERATIONS MANAGEMENT
FALL 2022
RECITATION #1

Q1) The Future Company is considering the purchase of new school buses for the new semester. The
decision will be made partly based on the anticipated mileage to be driven next year. The miles driven
during the past 6 years are as follows:

Year Mileage
1 3,000
2 4,000
3 3,560
4 3,600
5 3,850
6 3,500

a) Forecast the mileage for next year using a 3-year moving average.
b) Find the MAD for the forecast method in part a.
c) Use a weighted 2-year moving average with weights of 0.4 and 0.6 to forecast next year’s mileage.
(The weight of 0.6 is for the most recent year.) What is the MAD of this forecast?

Q2) (Heizer & Render, Ed. 12, P. 4.23)

Sales of quilt covers at Bud Banis’s department store in Carbondale over the past year are shown below.
Management prepared a forecast using a combination of exponential smoothing and its collective judgment
for the 4 months (March, April, May, and June):
Month Unit Sales Forecast
July 100
August 93
September 96
October 110
November 124
December 119
January 92
February 83
March 101 120
April 96 114
May 89 110
June 108 108
a) Compute MAPE for management’s technique.
b) Do management’s results outperform (i.e., have smaller MAPE than) a naive forecast?
c) Which forecast do you recommend, based on lower forecast error?
Q3) A supplier offers a seasonal product and its quarterly demand has been as follows:

Demand (in thousands)

Quarter 2019 2020 2021
Winter 73 65 89
Spring 104 82 146
Summer 168 124 205
Fall 74 52 98

Compute seasonal indices using all of the data.

Q4) (Heizer & Render, Ed. 8, P. 4.39)

Dr. Susan Sweeney, a Providence psychologist, specializes in treating patients who are agoraphobic
(afraid to leave their homes). The following table indicates how many patients Dr. Sweeney has seen
each year for the past 10 years. Using trend analysis, predict the number of patients Dr. Sweeney will
see in years 11 and 12.

Year 1 2 3 4 5 6 7 8 9 10
Number
36 33 40 41 40 55 60 54 58 61
of Patients
ANSWERS:

Q1)

a) Forecast the mileage for next year using a 3-year moving average.
∑ demand in previous n periods
𝑀𝑜𝑣𝑖𝑛𝑔 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 (𝑀𝐴) =
𝑛

3500 + 3850 + 3600

𝑀𝐴 = = 3,650
3

b) Find the MAD for your forecast in part a.

∑ |𝐴𝑐𝑡𝑢𝑎𝑙 − 𝐹𝑜𝑟𝑒𝑐𝑎𝑠𝑡|
𝑀𝑒𝑎𝑛 𝐴𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 (𝑀𝐴𝐷) =
𝑛

Year Mileage 3-Year MA Error |Error|

1 3000
2 4000
3 3560
4 3600 3520 80 80
5 3850 3720 130 130
6 3500 3670 -170 170
380

380
𝑀𝐴𝐷 = 127
3

c) Use a weighted 2-year moving average with weights of 0.4 and 0.6 to forecast next year’s mileage.
(The weight of 0.6 is for the most recent year.) What is the MAD of this forecast?

𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑀𝑜𝑣𝑖𝑛𝑔 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 (𝑊𝑀𝐴)

∑[𝑤𝑒𝑖𝑔ℎ𝑡 𝑜𝑓 𝑝𝑒𝑟𝑖𝑜𝑑 𝑛)(𝑎𝑐𝑡𝑢𝑎𝑙 𝑑𝑒𝑚𝑎𝑛𝑑 𝑓𝑜𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 𝑛)]
=
∑ 𝑤𝑒𝑖𝑔ℎ𝑡𝑠

Year Mileage Forecast Error |Error|

1 3000
2 4000
3600
3 3560 -40 40
(0.4x3000+0.6x4000)
4 3600 3736 -136 136
5 3850 3584 266 266
6 3500 3750 -250 250
7 3640 Sum 692
 And forecast for year 7,
∑(0,4𝑥3850) + (0,6𝑥3500)
𝐹6 = = 3640 𝑀𝑖𝑙𝑒𝑠
0,6 + 0,4

40 + 136 + 266 + 250 692

𝑀𝐴𝐷 = = = 173
4 4

Q2) (Heizer & Render, Ed. 12, P. 4.23)

a)
Managament's Method Naive Method
Month Unit Sales Forecast |Error| APE Forecast |Error| APE
July 100
August 93
September 96
October 110
November 124
December 119
January 92
February 83
March 101 120 19 18.8 83 18 17.8
April 96 114 18 18.8 101 5 5.2
May 89 110 21 23.6 96 7 7.9
June 108 108 0 0.0 89 19 17.6
SUM 61.2 48.5

100𝑥|𝐴𝑐𝑡𝑢𝑎𝑙𝑖 − 𝐹𝑜𝑟𝑒𝑐𝑎𝑠𝑡𝑖 |
∑
𝐴𝑐𝑡𝑢𝑎𝑙𝑖
𝑀𝐴𝑃𝐸 =
𝑛

61.2
𝑀𝐴𝑃𝐸𝑚𝑎𝑛 = = 15.3
4
b)
48.5
𝑀𝐴𝑃𝐸𝑛𝑎𝑖𝑣𝑒 = = 12.1
4

Since 15.3>12.1, management’s method doesn’t outperform the naïve method.

c) Since the naïve method has a lover MAPE than management’s method, naïve method is
recommended.
Q3) Compute seasonal indices using all of the data.

Average
Average Seasonal
Quarter 2019 2020 2021 Quarterly
Demand Index
Demand
Winter 73 65 89 75.67 106.67 0.709
Spring 104 82 146 110.67 106.67 1.038
Summer 168 124 205 165.67 106.67 1.553
Fall 74 52 98 74.67 106.67 0.700

Q4) (Heizer & Render, Ed. 8, P. 4.39)

Number of
Year (X) X2 Y2 XY
Patients (Y)
1 36 1 1296 36
2 33 4 1089 66
3 40 9 1600 120
4 41 16 1681 164
5 40 25 1600 200
6 55 36 3025 330
7 60 49 3600 420
8 54 64 2916 432
9 58 81 3364 522
10 61 100 3721 610
Total 55 478 385 23892 2900

Given: 𝑌 = 𝑎 + 𝑏𝑋 where:

̅̅̅̅
∑ 𝑋𝑌 − 𝑛𝑋𝑌
𝑏=
̅̅̅̅
∑ 𝑋 2 − 𝑛𝑋̅2

𝑎 = 𝑌̅ − 𝑏𝑋̅

2900 − 10𝑥5.5𝑥47.8
𝑏= = 3.28
385 − 10𝑥5.52
𝑎 = 47.8 − 3.28𝑥5.5 = 29.76

and 𝑌 = 29.76 + 3.28𝑋 For:

𝑋 = 11, 𝑌 = 29.76 + 3.28𝑥11 = 65.8

𝑋 = 12, 𝑌 = 29.76 + 3.28𝑥12 = 69.1