1 Your manager is trying to determine what forecasting metho

1. Your manager is trying to determine what forecasting method to use. Based upon the following historical data, calculate the following forecast and specify what procedure you would utilize. Use both MAD and TS to compare the solutions obtained with the different models tested. In addition, for your method of choice (the best method you can identify), provide the forecast for period 13 as well as a confidence interval estimate (95% confidence level).

Month (t)

Demand

1

62

2

65

3

67

4

68

5

71

6

73

7

76

8

78

9

78

10

80

11

84

12

85

A. Calculate the simple three-month moving average forecast for periods 3-12, and generate a forecast for months 13-15.

B.Calculate a weighted three-month moving average using weights of w_t = 0.5, w_t-1=0.3, and w_t-10.2, and generate a forecast for months 13-15.

C. Calculate the forecast for months 13-15 using Simple Exponential Smoothing with a=0.30.

D. Calculate the forecast for months 13-15 using Holt’s Model a=0.30 and b=0.30.

Calculate the forecast for months 13-15 using Holt’s Model optimizing the values of a and b in order to minimize MAD.

Solution