Operations Management Chapter 13 Problem 4

Problem #4 a-e

Sales for the past 12 months at Dalworth Company are given here.

Month Sales($ Millions) Month Sales ($Millions)
January 20 July 53
February 24 August 62
March 27 September 54
April 31 October 36
May 37 November 32
June 47 December 29

Consider the sales data for Dalworth Company given in problem 2.

a) Use a three-month weighted moving average to forecast the sales for the months April through December. Use weights of (3/6), (2/6), and (1/6), giving more weight to more recent data.

b) Use exponential smoothing with a =0.6 to forecast the sales for the months April through December. Assume that the initial forecast for January was $22 million. Start error measurement in April.

c) Compare the performance of the two methods by using the mean absolute deviation as the performance criterion, with error measurement beginning in April. Which method would you recommend?

d) Compare the performance of the two methods by using the mean absolute percent error as the performance criterion, with error measurement beginning in April. Which method would you recommend?

e) Compare the performance of the two methods by using the mean squared error as the performance criterion, with error measurement beginning in April. Which method would you recommend?