Reference no: EM133199454 , Length: Word count: 3 Pages
Assignment Task: South Shore Construction builds permanent docks and seawalls along the southern shore of Long Island, New York. The following data show quarterly sales revenues (in 000s) for the past 5 years.
| Quarter |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
| 1 |
20 |
37 |
75 |
92 |
176 |
| 2 |
100 |
136 |
155 |
202 |
282 |
| 3 |
175 |
245 |
326 |
384 |
445 |
| 4 |
13 |
26 |
48 |
82 |
181 |
Question 1: Plot this data with quarters from years 1-5 on the horizontal axis. What components do you see in this time series?
Question 2:
a. Suppose the company uses moving 3-quarterly moving averages to make forecasts. Make forecasts for Q4 Year 1 all the way through Q4 Year 5.
b. Suppose the company uses 3-quarterly weighted moving averages to make forecasts. What are the forecasts starting with Q4 Year 1 all the way through Q4 Year 5? Assume the company uses quarterly moving averages with weights 0.80, 0.15, and 0.05.
c. Using Mean Absolute Percent Error compare the accuracies of the two sets of forecast. Which method - moving average or weighted moving average, would you use?
d. Plot the forecasts from the better method on the graph in Question 1.
Question 3: Suppose the company uses exponential smoothing to make forecasts.
a. What are the forecasts for periods Q2 Year 1 through Q4 Year 5 assuming alpha = 0.4 and (ii) alpha = 0.8? In both cases assume that the forecast for Q1 Year 1 was 25 units.
b. Compare the accuracies of the two sets of forecasts in (a) using Mean Absolute Percent Error.
c. Plot the forecasts from the better method on the graph in Question 1.
Question 4: Now make adjustments for trend and seasonality.
a. Quantify the trend in the time series. What does the trend equation tell you?
b. Quantify the seasonality in the time series by calculating seasonality indexes. What do these indexes tell you?
c. Using the trend and the seasonality information from (a) and (b) make forecasts from Q1 Year 1 through Q4 Year 5.
d. Calculate the Mean Absolute Percent Error for this set of forecasts.
e. Plot the forecasts from (c) on the graph in Question 1. Your graph should now have the original data and 3 sets of forecasts plotted on it. Label the different plots appropriately.
Question 5: Using the method in Question 4, calculate forecasts for each of the 4 quarters of Year 6. These forecasts should be adjusted for both trend and seasonality.