1.

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:

Month Number of Visits

April 100
May 140
June 110
July 150
August 120
September 160

What is this month's forecast using exponential smoothing with alpha = .2, if August's forecast was 145?

A. 144
B. 140
C. 142
D. 148
E. 163
First calculate September's forecast, then use that to calculate this month's forecast.

FSeptember= 145 + 0.2*(120 – 145) = 140

FOctober= 140 + 0.2*(160 – 140) = 144

2. 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:

Month Number of Visits

April 100
May 140
June 110
July 150
August 120
September 160
What is this month's forecast using a four-month weighted moving average with weights of .4, .3, .2,
and .1?

A. 120
B. 129
C. 141
D. 135
E. 140

Multiply September (160) by .4, August (120) by .3, July (150) by .2, and June (110) by .1, then sum these
products. 0.4*160 + 0.3*120 + 0.2*150 + 0.1*110 = 141

3. 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:

Year Enrollment
Four years ago 2000
Three years ago 2200
Two years ago 2800
Last year 3000

What is the annual rate of change (slope) of the least squares trend line for these data?

A. 0
B. 200
C. 400
D. 180
E. 360

Treat 4 years ago as period 0 and this year as period 4. The slope of the trend line is:

b = [4*((0*2000)+(1*2200)+(2*2800)+(3*3000)) – (0+1+2+3)*(2000+2200+2800+3000)] /
[4*(02+12+22+32) – (0+1+2+3)2] = 360

4. 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:

Year Enrollment
Four years ago 2000
Three years ago 2200
Two years ago 2800
Last year 3000
What is this year's forecast using the least squares trend line for these data?

A. 3,600
B. 3,500
C. 3,400
D. 3,300
E. 3,200

Treat 4 years ago as period 0 and this year as period 4. The coefficients of the trend line are:

b = [4*((0*2000)+(1*2200)+(2*2800)+(3*3000)) – (0+1+2+3)*(2000+2200+2800+3000)] /
[4*(02+12+22+32) – (0+1+2+3)2] = 360

a = [(2000+2200+2800+3000) – 360*(0+1+2+3)] / 4 = 1960

F4= 1960 + 360*4 = 3400

5. 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:

Year Enrollment
Four years ago 2000
Three years ago 2200
Two years ago 2800
Last year 3000

What is this year's forecast using exponential smoothing with alpha = .4, if last year's smoothed forecast
was 2,600?

A. 2,600
B. 2,760
C. 2,800
D. 3,840
E. 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. 2600 + 0.4*(3000 – 2600) = 2760

6. 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:

Year Enrollment
Four years ago 2000
Three years ago 2200
Two years ago 2800
Last year 3000
What is this year's forecast using a three-year simple moving average?

A. 2,667
B. 2,600
C. 2,500
D. 2,400
E. 2,333

Average the most recent periods of enrollment. (3000 + 2800 + 2200) / 3 = 2667

7. A concert promoter is forecasting this year's attendance for one of his concerts based on the
following historical data:

Year Attendance
Four Years ago 10,000
Three Years ago 12,000
Two Years ago 18,000
Last Year 20,000

What is this year's forecast using the least squares trend line for these data?

A. 20,000
B. 21,000
C. 22,000
D. 23,000
E. 24,000

Treat 4 years ago as period 0 and this year as period 4. The coefficients of the trend line are:

b = [4*((0*10000)+(1*12000)+(2*18000)+(3*20000)) – (0+1+2+3)*(10000+12000+18000+20000)] /
[4*(02+12+22+32) – (0+1+2+3)2] = 3600

a = [(10000+12000+18000+20000) – 3600*(0+1+2+3)] / 4 = 9600

F4= 9600 + 3600*4 = 24000

8. Given forecast errors of -5, -10, and +15, the MAD is:

A. 0.
B. 10.
C. 30.
D. 175.
E. 225.

Convert these errors into absolute value, then average.

 9. 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.

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

A. estimate of accuracy
B. timeliness
C. meaningful units
D. low cost
E. written

A good forecast can be quite costly if necessary as long as the benefits outweigh the costs

11. 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: At-4 = 380, At-3 = 410, At-2 = 390, At-1 = 400. What will be the
demand forecast for period t?

A. 402
B. 397
C. 399
D. 393
E. 403

The forecast will be (.1 * 380) + (.2 * 410) + (.3 * 390) + (.4 * 400) = 397.

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

A. seasonal variation.
B. cycles.
C. irregular variation.
D. trend.
E. random variation.

Trends move the time series in a long-term direction

 13. Putting forecast errors into perspective is best done using

A. exponential smoothing.
B. MAPE.
C. linear decision rules.
D. MAD.
E. hindsight.

MAPE depicts the forecast error relative to what was being forecast.

14. Which of the following smoothing constants would make an exponential smoothing forecast
equivalent to a naive forecast?

A. 0
B. .01
C. .1
D. .5
E. 1.0

An alpha of 1.0 leads to a naive forecast.

15. 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. .01.
B. .10.
C. .15.
D. .20.
E. .60.

16. 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.
17. Given forecast errors of 4, 8, and -3, what is the mean absolute deviation?

A. 4
B. 3
C. 5
D. 6
E. 12

Convert each error into an absolute value and then average

 18. Given forecast errors of 5, 0, -4, and 3, what is the tracking signal?

A. 3
B. 1.33
C. 4
D. 12
E. 0.75

Sum the forecast errors and divide the total by the mean absolute deviation. The mean absolute deviation is
the sum of the absolute deviations divided by the number of observations.

19. The president of State University wants to forecast student enrollments for this academic year
based on the following historical data:

Year Enrollments
5 Years ago 15,000
4 Years ago 16,000
3 Years ago 18,000
2 Years ago 20,000
Last Year 21,000

What is the forecast for this year using a four-year simple moving average?

A. 18,750
B. 19,500
C. 21,000
D. 22,650
E. 22,800

Average enrollment from the last four years.

(21000 + 20000 + 18000 + 16000) / 4 = 18750