Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been increasing by 40% every period. How will your forecasts perform?
A) Forecasts will be increasing by 40.0% every period.
B) Forecasts will be higher than actual.
C) Forecasts will equal actual.
D) Forecasts will be decreasing.
E) Forecasts will be increasing by 10.0% every period.

Question

Quizplus · Accepted Answer

Forecasts will be increasing by 40.0% every period because the simple moving average method will not be able to capture the increasing trend in sales.

Suppose That You Are Using the Four-Period Simple Moving Average