Doug Moodie is the president of Garden Products Limited. Over the last 5 years, his vice president of marketing has been providing the sales forecast using his special forecasting technique. The actual sales for the past ten years and the forecasts from the vice president of marketing are given below.
Year Sales VP/Marketing Forecast 1 170,300 — 2 168,250 — 3 165,700 — 4 169,000 — 5 168,000 — 6 167,300 170,000 7 175,250 170,000 8 172,500 180,000 9 156,700 180,000 10 176,300 160,000
Doug wonders if perhaps a weighted moving average or an exponential smoothing approach to forecasting might be better than having the vice president of marketing prepare the forecast. Doug wants to evaluate a three-period weighted moving average with weights of 0.25 and 0.15 for the second most recent and third most recent periods and the remaining weight(s) consistent with how we have used this method this term. He also wants to evaluate the exponential smoothing with an = 0.35 and a starting forecast for period 5 of 169,000 units.
a) Which of the three methods (weighted moving average, exponential smoothing and VP/Marketing) provides the best forecasting method if you were to evaluate these methods based on their forecasting accuracy for Years 7 through 10. Use one of the evaluation methods we have discussed.
b) What would be the forecast for Year 11 using both the weighted moving average and the exponential smoothing methods?