Reference no: EM131789222

Kanyay Records Inc. sells music of various artists online. Monthly sales for the last six-month period were as follows:

Month:                  Actual Sales:

September          24,000

October               27,500

November           24,000

December           25,100

January               21,400

A) Calculate what the forecast sales volume for February using both forecast model #1 and forecast model #2

Forecast Model 1: A four month moving average

Forecast model 2: Exponential smoothing with a=0.4 and a sales forecast for November of 25,000

Formulas: errort = Demandt - Forecastt       and        (Exp. smoothing) Forecastt = Forecastt-1 + smoothing coefficient * (Demandt-1 – Forecastt-1)

B) For forecast model #1, if you used a six month moving average (instead of a 4 month moving average), would your forecast be more or less affected by outliers in demand?

C) Kanyay Records Inc. also sells music CDs at their Times Square store in New York City. For their music CDs, they have already calculated what the forecasts would have been using Forecast Model A and Forecast Model B. Monthly CD demand and the forecast results using Forecast Model A and Forecast Model B for the last four-month period were as follows:

Month         Demand       Forecast A       Forecast B

Sept           2,400            2,450                2,450

Oct             2,750            2,500               2,600

Nov            2,400            2,600                2,500

Dec            2,410            2,550               2,500

1. Calculate the MFE and MAD for both Forecast Model A and Forecast Model B

2. Which of the forecasting models would you reccomend for future use on the music CDs in the store. Explain why.