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Problem 5-17 Data Collected On The Yearly Demand For 50-Pound Bags of Fertilizer at Wallace

The document provides yearly demand data for 50-pound bags of fertilizer over 11 years. It asks to forecast demand using a 3-year moving average and a weighted moving average that weights the most recent year as 2 and other years as 1. The weighted moving average method is better as it has a lower Mean Absolute Deviation of 2.313 compared to 2.542 for the 3-year moving average, meaning forecasts missed the actual value by less on average.

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Vanessa Camille Santos
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354 views4 pages

Problem 5-17 Data Collected On The Yearly Demand For 50-Pound Bags of Fertilizer at Wallace

The document provides yearly demand data for 50-pound bags of fertilizer over 11 years. It asks to forecast demand using a 3-year moving average and a weighted moving average that weights the most recent year as 2 and other years as 1. The weighted moving average method is better as it has a lower Mean Absolute Deviation of 2.313 compared to 2.542 for the 3-year moving average, meaning forecasts missed the actual value by less on average.

Uploaded by

Vanessa Camille Santos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Problem 5-17 Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace

Garden Supply are shown in the following table. Develop a 3-year moving average to forecast
sales. Then estimate demand again with a weighted moving average in which sales in the most
recent year are given a weight of 2 and sales in the other 2 years are each given a weight of 1.
Which method do you think is best?

DEMAND FOR FERTILIZER


YEAR
(1000S OF BAGS)
1 4
2 6
3 4
4 5
5 10
6 8
7 7
8 9
9 12
10 14
11 15

Answer:

In this case, the weighted moving average method is the better method as the Mean Absolute
Deviation (MAD) is lower and only 2.313 as compared to 2.542 for the three-year moving
average method. What it actually means is that each forecast missed the actual value by 2.313
units instead of 2.542 units. It can provide a better forecast as it can give a more accurate
projection. Although there might be one potential problem, the correct weight should be inputted
in the calculations because it might cause random fluctuations.

Please refer to the following tables for the calculation.

Table 1: 3-Year Moving Average Forecasting Results


Table 2: 3-Year Moving Average Details and Error Analysis

Table 3: 3-Year Moving Average Errors as a function of n

Table 4: 3-Year Moving Average Control (Tracking Signal)


3-Year Moving Average Graph

Table 5: Weighted Moving Average Forecasting Results

Table 6: Weighted Moving Average Details and Error Analysis


Table 7: Weighted Moving Average Control (Tracking Signal)

Weighted Moving Average Graph

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