Deck 8: Forecasting

Question 1

MAD is:

A) period average demand * deseasonalized demand
B) the number of observations/the sum of absolute deviations
C) the sum of absolute deviations * the number of observations
D) the sum of absolute deviations/number of observations

Answer 1

D

Question 2

What factors influence the demand for a firm's products and services?

Answer 2

Some of the major factors which influence the demand for a firm's products are services are: general business and economic conditions, competitive factors, market trends such as changing demand, and the firm's own plans for advertising,k promotion, pricing, and product change.

Question 3

A product that is seasonally based on quarterly demand and the demand for the past three years is given below. There is no trend but there is seasonality. Average quarterly demand is 100 units. Calculate the seasonal index for the four quarters.

Answer 3

Q1 128/100 = 1.28
Q2 102/100 = 1.02 Q3 75/100 = 0.75 Q4 95/100 = 0.95
Total of the seasonal indices = 4.0

Question 4

What is the purpose of a tracking signal?

Question 5

The old forecast for May was 220 and the actual demand for May was 190. If alpha a) is 0.15, calculate the forecast for June. If June demand turns out to be 218, calculate the forecast for July.

Question 6

The formula for the seasonal index is:

A) period average demand * deseasonalized demand
B) average demand for all periods/ period average demand
C) period average demand * average demand for all periods
D) period average demand/average demand for all periods

Question 7

Exponential smoothing:

A) will detect trends
B) will lag demand
C) will lead demand and detect trends
D) will detect trends but lag demand

Question 8

Forecast error must be measured before it can be used to:

A) help in planning
B) revise the forecast
C) both A and B
D) neither A nor B

Question 9

To guard against inherent error in forecasting:

A) make more accurate predictions
B) include safety stock
C) include "just in case" inventory
D) all of the above

Question 10

_________forecasting is most useful in forecasting the total demand for a firm's products or the demand for families of products.

A) Historical
B) Intrinsic
C) Qualitative
D) Extrinsic

Question 11

Demand over the past three months has been 120, 135 and 114 units. Use a three- month moving average to calculate the forecast for the fourth month.

Question 12

Demand over the past six months has been 156, 158, 295, 156, 141, and 274. Use a two- month average to forecast demand for the seventh month.

Question 13

Bias:

A) occurs when actual demand is consistently below the forecast demand
B) is a systematic error
C) occurs when actual demand is consistently above the forecast demand
D) all of the above

Question 14

Discuss the major characteristics or principles of forecasting.

Question 15

The forecast is 100 units a week. The actual demand for the past six weeks has been 105, 110, 103, 105, 107, and 115. If MAD is 7.5, calculate the sum of the forecast error and the tracking signal.

Question 16

Discuss the major classifications of forecasting methods.

Question 17

When attempting to forecast the demand for a new product,

A) market research might be used.
B) historical analogy might be used.
C) there is no history on which to base a forecast.
D) all of the above.

Question 18

_________is the difference between actual demand and forecast demand.

A) Tracking
B) Forecast error
C) Bias
D) Random variation

Question 19

What are the major activities of demand management?

Question 20

Moving averages are best used for:

A) forecasting products with stable demand
B) forecasting products where there is little seasonality
C) forecasting products where there is little trend
D) all of the above

Question 21

Housing starts and gasoline consumption are called economic indicators.

Question 22

Forecasts are never wrong.

Question 23

One simple way to forecast is to take the average demand for the last three or six periods and use that figure as the forecast for the next period.

Question 24

Artificial bumps in demand can be caused by sales promotions, price changes, changes in the weather, or a strike at a competitor's factory.

Question 25

The strategic business plan is not concerned with overall markets or the direction of the economy.

Question 26

Intrinsic forecasting techniques do not use historical data for forecasting.

Question 27

The shapes of the demand patterns for some products or services change over time where as others do not.

Question 28

In the long run, demand management is needed for items and is associated with master production scheduling.

Question 29

If historical data for demand are plotted against a time scale, they will show any shapes or consistent patterns that exist.

Question 30

Firms that make standard products do not need to have saleable goods immediately available.