# Quiz 18: Forecasting

Statistics

Q 1Q 1

Continual review and updating in light of new data is a forecasting technique called second-guessing.

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True False

False

Q 2Q 2

Cyclical influences on demand are often expressed graphically as a linear function that is either upward or downward sloping.

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True False

False

Q 3Q 3

Cyclical influences on demand may come from occurrences such as political elections, war, or economic conditions.

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True False

True

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True False

Q 5Q 5

Time series forecasting models make predictions about the future based on analysis of past data.

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True False

Q 6Q 6

In the weighted moving average forecasting model, the weights must add up to one times the number of data points.

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True False

Q 7Q 7

In a forecasting model using simple exponential smoothing, the data pattern should remain stationary.

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True False

Q 8Q 8

In a forecasting model using simple moving average, the shorter the time span used for calculating the moving average, the closer the average follows volatile trends.

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True False

Q 9Q 9

In the simple exponential smoothing forecasting model, you need at least 30 observations to set the smoothing constant alpha.

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True False

Q 10Q 10

Experience and trial and error are the simplest ways to choose weights for the weighted moving average forecasting model.

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True False

Q 11Q 11

Bayesian analysis is the simplest way to choose weights for the weighted moving average forecasting model.

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True False

Q 12Q 12

The weighted moving average forecasting model uses a weighting scheme to modify the effects of individual data points.

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True False

Q 13Q 13

A central premise of exponential smoothing is that more recent data are less indicative of the future than data from the distant past.

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True False

Q 14Q 14

The equation for exponential smoothing states that the new forecast is equal to the old forecast plus the error of the old forecast.

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True False

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True False

Q 16Q 16

In exponential smoothing, it is desirable to use a higher smoothing constant when forecasting demand for a product experiencing high growth.

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True False

Q 17Q 17

The value of the smoothing constant alpha in an exponential smoothing model is between 0 and 1.

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True False

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True False

Q 19Q 19

Exponential smoothing forecasts always lag behind the actual occurrence but can be corrected somewhat with a trend adjustment.

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True False

Q 20Q 20

Because the factors governing demand for products are very complex, all forecasts of demand contain error.

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True False

Q 21Q 21

Random errors can be defined as those that cannot be explained by the forecast model being used.

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True False

Q 22Q 22

There are no differences in strategic and tactical forecasting.A forecast is a mathematical projection, and its ultimate purpose
should make no difference to the analyst.

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True False

Q 23Q 23

Random errors in forecasting occur when an undetected secular trend is not included in a forecasting model.

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True False

Q 24Q 24

When forecast errors occur in a normally distributed pattern, the ratio of the mean absolute deviation to the standard deviation is 2 to 1, or 2 x MAD = 1 standard deviation.

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True False

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True False

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True False

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True False

Q 28Q 28

A tracking signal (TS) can be calculated using the arithmetic sum of forecast deviations divided by the MAD.

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True False

Q 29Q 29

A restriction in using linear regression is that it assumes that past data and future projections fall on or near a straight line.

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True False

Q 30Q 30

Regression is a functional relationship between two or more correlated variables, where one variable is used to predict another.

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True False

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True False

Q 32Q 32

The standard error of the estimate of a linear regression is not useful for judging the fit between the data and the regression line when doing forecasts.

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True False

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True False

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True False

Q 35Q 35

A good forecaster is one who develops special skills and experience at one forecasting technique and is capable of applying it to widely diverse situations.

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True False

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True False

Q 37Q 37

Qualitative forecasting techniques generally take advantage of the knowledge of experts and therefore do not require much judgment.

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True False

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True False

Q 39Q 39

Decomposition of a time series means identifying and separating the time series data into its components.

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True False

Q 40Q 40

A time series is defined in the text as chronologically ordered data that may contain one or more components of demand variation: trend, seasonal, cyclical, autocorrelation, and random.

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True False

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True False

Q 42Q 42

In decomposition of time series data, it is relatively easy to identify cycles and autocorrelation components.

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True False

Q 43Q 43

We usually associate the word "seasonal" with recurrent periods of repetitive activity that happen on other than an annual cycle.

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True False

Q 44Q 44

In time series data depicting demand, which of the following is not considered a component of demand variation?
A)Trend
B)Seasonal
C)Cyclical
D)Variance
E)Autocorrelation

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Multiple Choice

Q 45Q 45

Which of the following is not one of the basic types of forecasting?
A)Qualitative
B)Time series analysis
C)Causal relationships
D)Simulation
E)Force field analysis

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Multiple Choice

Q 46Q 46

In most cases, demand for products or services can be broken down into several components.Which of the following is not considered a component of demand?
A)Average demand for a period
B)A trend
C)Seasonal elements
D)Past data
E)Autocorrelation

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Multiple Choice

Q 47Q 47

In most cases, demand for products or services can be broken into several components.Which of the following is considered a component of demand?
A)Cyclical elements
B)Future demand
C)Past demand
D)Inconsistent demand
E)Level demand

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Multiple Choice

Q 48Q 48

In most cases, demand for products or services can be broken into several components.Which of the following is considered a component of demand?
A)Forecast error
B)Autocorrelation
C)Previous demand
D)Consistent demand
E)Repeat demand

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Multiple Choice

Q 49Q 49

Which of the following forecasting methodologies is considered a qualitative forecasting technique?
A)Simple moving average
B)Market research
C)Linear regression
D)Exponential smoothing
E)Multiple regression

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Multiple Choice

Q 50Q 50

Which of the following forecasting methodologies is considered a time series forecasting technique?
A)Simple moving average
B)Market research
C)Leading indicators
D)Historical analogy
E)Simulation

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Multiple Choice

Q 51Q 51

Which of the following forecasting methodologies is considered a time series forecasting technique?
A)Delphi method
B)Exponential averaging
C)Simple movement smoothing
D)Weighted moving average
E)Simulation

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Multiple Choice

Q 52Q 52

Which of the following forecasting methodologies is considered a causal forecasting technique?
A)Exponential smoothing
B)Weighted moving average
C)Linear regression
D)Historical analogy
E)Market research

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Multiple Choice

Q 53Q 53

Which of the following forecasting methods uses executive judgment as its primary component for forecasting?
A)Historical analogy
B)Time series analysis
C)Panel consensus
D)Market research
E)Linear regression

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Multiple Choice

Q 54Q 54

Which of the following forecasting methods is very dependent on selection of the right individuals who will judgmentally be used to actually generate the forecast?
A)Time series analysis
B)Simple moving average
C)Weighted moving average
D)Delphi method
E)Panel consensus

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Multiple Choice

Q 55Q 55

In business forecasting, what is usually considered a short-term time period?
A)Four weeks or less
B)More than three months
C)Six months or more
D)Less than three months
E)One year

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Multiple Choice

Q 56Q 56

In business forecasting, what is usually considered a medium-term time period?
A)Six weeks to one year
B)Three months to two years
C)One to five years
D)One to six months
E)Six months to six years

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Multiple Choice

Q 57Q 57

In business forecasting, what is usually considered a long-term time period?
A)Three months or longer
B)Six months or longer
C)One year or longer
D)Two years or longer
E)Ten years or longer

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Multiple Choice

Q 58Q 58

In general, which forecasting time frame compensates most effectively for random variation and short-term changes?
A)Short-term forecasts
B)Quick-time forecasts
C)Long-range forecasts
D)Medium-term forecasts
E)Rapid-change forecasts

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Multiple Choice

Q 59Q 59

In general, which forecasting time frame best identifies seasonal effects?
A)Short-term forecasts
B)Quick-time forecasts
C)Long-range forecasts
D)Medium-term forecasts
E)Rapid-change forecasts

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Multiple Choice

Q 60Q 60

In general, which forecasting time frame is best to detect general trends?
A)Short-term forecasts
B)Quick-time forecasts
C)Long-range forecasts
D)Medium-term forecasts
E)Rapid-change forecasts

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Multiple Choice

Q 61Q 61

Which of the following forecasting methods can be used for short-term forecasting?
A)Simple exponential smoothing
B)Delphi technique
C)Market research
D)Hoskins-Hamilton smoothing
E)Serial regression

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Multiple Choice

Q 62Q 62

Which of the following considerations is not a factor in deciding which forecasting model a firm should choose?
A)Time horizon to forecast
B)Product
C)Accuracy required
D)Data availability
E)Analyst availability

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Multiple Choice

Q 63Q 63

A company wants to forecast demand using the simple moving average.If the company uses four prior yearly sales values , which of the following is the simple moving average forecast for year 20142017?
A)100.5
B)140.0
C)142.5
D)145.5
E)155.0

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Multiple Choice

Q 64Q 64

A company wants to forecast demand using the simple moving average.If the company uses three prior yearly sales values , which of the following is the simple moving average forecast for year 20142017?
A)100.5
B)122.5
C)133.3
D)135.6
E)139.3

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Multiple Choice

Q 65Q 65

A company wants to forecast demand using the weighted moving average.If the company uses two prior yearly sales values , and we want to weight year 2012 2015 at 10 percent and year 2013 2016 at 90 percent, which of the following is the weighted moving average forecast for year 20142017?
A)120
B)128
C)133
D)138
E)142

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Multiple Choice

Q 66Q 66

A company wants to forecast demand using the weighted moving average.If the company uses three prior yearly sales values , and we want to weight year 2011 2014 at 30 percent, year 2012 2015 at 30 percent, and year 2013 2016 at 40 percent, which of the following is the weighted moving average forecast for year 20142017?
A)170
B)168
C)158
D)152
E)146

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Multiple Choice

Q 67Q 67

The exponential smoothing method requires which of the following data to forecast the future?
A)The most recent forecast for the past year
B)Precise actual demand for the past several yearsyear
C)The value of the smoothing constant delta
D)Overall industry demand data
E)Tracking valuesA, B and C

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Multiple Choice

Q 68Q 68

Given a prior forecast demand value of 230, a related actual demand value of 250, and a smoothing constant alpha of 0.1, what is the exponential smoothing forecast value for the following period?
A)230
B)232
C)238
D)248
E)250

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Multiple Choice

Q 69Q 69

If a firm produced a standard item with relatively stable demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be in which of the following ranges?
A)5 to 10 percent
B)20 to 50 percent
C)20 to 80 percent
D)60 to 120 percent
E)90 to 100 percent

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Multiple Choice

Q 70Q 70

If a firm produced a product that was experiencing growth in demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be which of the following?
A)Close to zero
B)A very low percentage, less than 10 percent
C)The more rapid the growth, the higher the percentage
D)The more rapid the growth, the lower the percentage
E)50 percent or more

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Multiple Choice

Q 71Q 71

Given a prior forecast demand value of 1,100, a related actual demand value of 1,000, and a smoothing constant alpha of 0.3, what is the exponential smoothing forecast value
A)1,000
B)1,030
C)1,070
D)1,130
E)970

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Multiple Choice

Q 72Q 72

A company wants to generate a forecast for unit demand for year 2014 2017 using exponential smoothing.The actual demand in year 2013 2016 was 120.The forecast demand in year 2013 2016 was 110.Using these data and a smoothing constant alpha of 0.1, which of the following is the resulting year 2014 2017 forecast value?
A)100
B)110
C)111
D)114
E)120

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Multiple Choice

Q 73Q 73

As a consultant, you have been asked to generate a unit demand forecast for a product for year 2014 2017 using exponential smoothing.The actual demand in year 2013 2016 was 750.The forecast demand in year 2013 2016 was 960.Using these data and a smoothing constant alpha of 0.3, which of the following is the resulting year 2014 2017 forecast value?
A)766
B)813
C)897
D)1,023
E)1,120

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Multiple Choice

Q 74Q 74

Which of the following is a possible source of bias error in forecasting?
A)Failing to include the right variables
B)Using the wrong forecasting method
C)Employing less sophisticated analysts than necessary
D)Using incorrect data
E)Using standard deviation rather than MAD

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Multiple Choice

Q 75Q 75

Which of the following is used to describe the degree of error?
A)Weighted moving average
B)Regression
C)Moving average
D)Forecast as a percent of actual
E)Mean absolute deviation

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Multiple Choice

Q 76Q 76

A company has actual unit demand for three consecutive years of 124, 126, and 135.The respective forecasts for the same three years are 120, 120, and 130.Which of the following is the resulting MAD value that can be computed from these data?
A)1
B)3
C)5
D)15
E)123

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Multiple Choice

Q 77Q 77

A company has actual unit demand for four consecutive years of 100, 105, 135, and 150.The respective forecasts were 120 for all four years.Which of the following is the resulting MAD value that can be computed from these data?
A)2.5
B)10
C)20
D)22.5
E)30

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Multiple Choice

Q 78Q 78

If you were selecting from a variety of forecasting models based on MAD, which of the following MAD values from the same data would reflect the most accurate model?
A)0.2
B)0.8
C)1.0
D)10.0
E)100.0

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Multiple Choice

Q 79Q 79

A company has calculated its running sum of forecast errors to be 500, and its mean absolute deviation is exactly 35.Which of the following is the company's tracking signal?
A)Cannot be calculated based on this information
B)About 14.3
C)More than 35
D)Exactly 35
E)About 0.07

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Multiple Choice

Q 80Q 80

A company has a MAD of 10.It wants to have a 99.7 percent control limit on its forecasting system.Its most recent tracking signal value is 3.1.What can the company conclude from this information?
A)The forecasting model is operating acceptably.
B)The forecasting model is out of control and needs to be corrected.
C)The MAD value is incorrect.
D)The upper control value is less than 20.
E)It is using an inappropriate forecasting methodology.

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Multiple Choice

Q 81Q 81

You are hired as a consultant to advise a small firm on forecasting methodology.Based on your research, you find the company has a MAD of 3.It wants to have a 99.7 percent control limits on its forecasting system.Its most recent tracking signal value is 15.What should be your report to the company?
A)The forecasting model is operating acceptably.
B)The forecasting model is out of control and needs to be corrected.
C)The MAD value is incorrect.
D)The upper control value is less than 20.
E)The company is using an inappropriate forecasting methodology.

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Multiple Choice

Q 82Q 82

Which of the following is the percentage of observations you would expect to see lying within a plus or minus 3 MAD range?
A)57.05 percent
B)88.95 percent
C)98.36 percent
D)99.85 percent
E)100 percent

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Multiple Choice

Q 83Q 83

Which of the following is the percentage of observations you would expect to see lying within a plus or minus 2 MAD range?
A)57.04 percent
B)89.04 percent
C)98.33 percent
D)99.86 percent
E)100.00 percent

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Multiple Choice

Q 84Q 84

If the intercept value of a linear regression model is 40, the slope value is 40, and the value of X is 40, which of the following is the resulting forecast value using this model?
A)120
B)1,600
C)1,640
D)2,200
E)64,000

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Multiple Choice

Q 85Q 85

A company hires you to develop a linear regression forecasting model.Based on the company's historical sales information, you determine the intercept value of the model to be 1,200.You also find the slope value is minus 50.If, after developing the model, you are given a value of X = 10, which of the following is the resulting forecast value using this model?
A)-1,800
B)700
C)1,230
D)1,150
E)12,000

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Multiple Choice

Q 86Q 86

Heavy sales of umbrellas during a rain storm is an example of which of the following?
A)A trend
B)A causal relationship
C)A statistical correlation
D)A coincidence
E)A fad

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Multiple Choice

Q 87Q 87

You are using an exponential smoothing model for forecasting.The running sum of the forecast error statistics (RSFE) are calculated each time a forecast is generated.You find the last RSFE to be 34.Originally, the forecasting model used was selected because of its relatively low MAD of 0.4.To determine when it is time to re-evaluate the usefulness of the exponential smoothing model, you compute tracking signals.Which of the following is the resulting tracking signal?
A)85
B)60
C)13.6
D)12.9
E)8

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Multiple Choice

Q 88Q 88

A company wants to forecast demand using the simple moving average.The company uses four positive prior yearly (2013, 2014, 2105 and 2016) sales values.All yearly sales figures are unique (no repetitions).Which of the following is most accurate about the moving average forecast for year 2017?
A)Has to be smaller than at least one of the four yearly sales figures.
B)Has to be larger than at least one of the four yearly sales figures.
C)Has to be between the smallest and largest yearly sales figures.
D)Has to greater than all four yearly sales figures.
E)A, B and C only

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Multiple Choice

Q 89Q 89

As a consultant, you have been asked to generate a unit demand forecast for a product for year 2017 using exponential smoothing.You have data for the past three years and the forecast and the actual are the same for the first period of your data (3 years ago).Which of the following is most accurate?
A)Forecast for year 2017 will be higher than the actual for 2016, if your α is close to 1.0
B)Forecast for 2017 will be between all the actual sales
C)Exponential smoothing is a type of weighted average forecasting method
D)B and C
E)None of the above

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Multiple Choice

Q 90Q 90

As a consultant, you have been thinking about choosing the "right" alpha (smoothing constant) for forecasting using exponential smoothing.Which of the following is most accurate about alpha?
A)If alpha is high, speed of reaction to changes in actually low.
B)If a firm produces standard product with relatively stable demand, alpha should be small.
C)Products experiencing growth should be assigned higher alpha value.
D)Alpha could be more than 1.0, and in this case (1-alpha) will become negative to make up for it.
E)B and C

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Multiple Choice