Chapter 11 - Demand Management and Forecasting

Chapter 11
Demand Management and Forecasting
Learning Objectives for Chapter 11:
1. Understand the role of forecasting as a basis for supply chain
planning.
2. Compare the differences between independent and dependent
demand.
3. Identify the basic components of independent demand: average,
trend, seasonal, and random variation.
. !escribe the common "ualitative forecasting techni"ues such as the
!elphi method and Collaborative #orecasting.
$. %how how to ma&e a time series forecast using regression, moving
averages, and e'ponential smoothing.
(. Use decomposition to forecast when trend and seasonality is
present.
True / False uestions

1. Continual review and updating in light of new data is a forecasting technique called
second-guessing.
True False

2. Independent demand is the demand for a product or service caused ! the demand for other
products or services.
True False

11-1
Chapter 11 - Demand Management and Forecasting
". There is not much that a firm can do to influence independent demand.
True False

#. C!clical influences on demand are often e$pressed graphicall! as a linear function that is
either upward or downward sloping.
True False

%. C!clical influences on demand ma! come from occurrences such as political elections& war
or economic conditions.
True False

'. Trend lines are usuall! the last things considered when developing a forecast.
True False

(. Time series forecasting models ma)e predictions aout the future ased on anal!sis of past
data.
True False

11-2
Chapter 11 - Demand Management and Forecasting
*. In the weighted moving average forecasting model the weights must add up to one times
the numer of data points.
True False

+. In a forecasting model using simple e$ponential smoothing the data pattern should remain
stationar!.
True False

1,. In a forecasting model using simple moving average the shorter the time span used for
calculating the moving average& the closer the average follows volatile trends.
True False

11. In the simple e$ponential smoothing forecasting model !ou need at least 1,, oservations
to set the weight.
True False

12. -$perience and trial and error are the simplest wa!s to choose weights for the weighted
moving average forecasting model.
True False

1". The weighted moving average forecasting model uses a weighting scheme to modif! the
effects of individual data points. This is its ma.or advantage over the simple moving average
model.
True False

1#. / central premise of e$ponential smoothing is that more recent data is less indicative of
the future than data from the distant past.
True False

11-"
Chapter 11 - Demand Management and Forecasting
1%. The equation for e$ponential smoothing states that the new forecast is equal to the old
forecast plus the error of the old forecast.
True False

1'. -$ponential smoothing is alwa!s the most accurate of all forecasting models.
True False

1(. In e$ponential smoothing& it is desirale to use a higher smoothing constant when
forecasting demand for a product e$periencing high growth.
True False

1*. The e$ponential smoothing model permits non-linear forecast values.
True False

1+. The weighted moving average model does not wor) with non-linear forecast values.
True False

2,. The simple moving average model permits non-linear forecast values.
True False

21. The simple moving average model requires linear forecast values.
True False

22. The value of the smoothing constant alpha in an e$ponential smoothing model is etween
, and 1.
True False

11-#
Chapter 11 - Demand Management and Forecasting
2". 0imple e$ponential smoothing lags changes in demand.
True False

2#. -$ponential smoothing forecasts alwa!s lag ehind the actual occurrence ut can e
corrected somewhat with a trend ad.ustment.
True False

2%. 1ecause the factors governing demand for products are ver! comple$& all forecasts of
demand contain some error.
True False

2'. 2andom errors can e defined as those that cannot e e$plained ! the forecast model
eing used.
True False

2(. 2andom errors in forecasting occur when an undetected secular trend is not included in a
forecasting model.
True False

2*. 3hen forecast errors occur in a normall! distriuted pattern& the ratio of the mean
asolute deviation to the standard deviation is 2 to 1& or 2 M/D 4 1 standard deviation.
True False

2+. M/D statistics can e used to generate trac)ing signals.
True False

11-%
Chapter 11 - Demand Management and Forecasting
",. 20F- in forecasting stands for 5reliale safet! function error.5
True False

"1. 20F- in forecasting stands for 5running sum of forecast errors.5
True False

"2. / trac)ing signal 6T07 can e calculated using the arithmetic sum of forecast deviations
divided ! the M/D.
True False

"". / ma.or limitation of linear regression as a model for forecasting is that past data and
future pro.ections are assumed to fall on or near a straight line.
True False

"#. 2egression is a functional relationship etween two or more correlated variales& where
one variale is used to predict another.
True False

"%. 8inear regression is not useful for aggregate planning.
True False

"'. The standard error of the estimate of a linear regression is not useful for .udging the fit
etween the data and the regression line when doing forecasts.
True False

"(. Multiple regression anal!sis uses several regression models to generate a forecast.
True False

11-'
Chapter 11 - Demand Management and Forecasting
"*. For ever! forecasting prolem there is one est forecasting technique.
True False

"+. / good forecaster is one who develops special s)ills and e$perience at one forecasting
technique and is capale of appl!ing it to widel! diverse situations.
True False

#,. In causal relationship forecasting leading indicators are used to forecast occurrences.
True False

#1. 9ualitative forecasting techniques generall! ta)e advantage of the )nowledge of e$perts
and therefore do not require much .udgment.
True False

#2. Mar)et research is a quantitative method of forecasting.
True False

#". Decomposition of a time series means identif!ing and separating the time series data into
its components.
True False

##. / time series is defined in the te$t as chronologicall! ordered data that ma! contain one or
more components of demand variation: trend& seasonal& c!clical& autocorrelation& and
random.
True False

11-(
Chapter 11 - Demand Management and Forecasting
#%. It is difficult to identif! the trend in time series data.
True False

#'. In decomposition of time series data it is relativel! eas! identif! c!cles and
autocorrelation components.
True False

#(. 3e usuall! associate the word 5seasonal5 with recurrent periods of repetitive activit! that
happen on other than an annual c!cle.
True False


Multiple Choice uestions

#*. In time series data depicting demand which of the following is not considered a
component of demand variation;
/. Trend
1. 0easonal
C. C!clical
D. <ariance
-. /utocorrelation

#+. 3hich of the following is not one of the asic t!pes of forecasting;
/. 9ualitative
1. Time series anal!sis
C. Causal relationships
D. 0imulation
-. Force field anal!sis

11-*
Chapter 11 - Demand Management and Forecasting
%,. In most cases& demand for products or services can e ro)en into several components.
3hich of the following is not considered a component of demand;
/. /verage demand for a period
1. / trend
C. 0easonal elements
D. =ast demand
-. /utocorrelation

%1. In most cases& demand for products or services can e ro)en into several components.
3hich of the following is considered a component of demand;
/. C!clical elements
1. Future demand
C. =ast demand
D. Inconsistent demand
-. 8evel demand

%2. In most cases& demand for products or services can e ro)en into several components.
3hich of the following is considered a component of demand;
/. Forecast error
1. /utocorrelation
C. =revious demand
D. Consistent demand
-. 2epeat demand

%". 3hich of the following forecasting methodologies is considered a qualitative forecasting
technique;
/. 0imple moving average
1. Mar)et research
C. 8inear regression
D. -$ponential smoothing
-. Multiple regression

11-+
Chapter 11 - Demand Management and Forecasting
%#. 3hich of the following forecasting methodologies is considered a qualitative forecasting
technique;
/. Mar)et research
1. Causal relationship forecasting
C. 2egression anal!sis
D. -$ponential smoothing
-. 0imple moving average

%%. 3hich of the following forecasting methodologies is considered a time series forecasting
technique;
/. 0imple moving average
1. Mar)et research
C. 8eading indicators
D. >istorical analog!
-. 0imulation

%'. 3hich of the following forecasting methodologies is considered a time series forecasting
technique;
/. Delphi method
1. -$ponential averaging
C. 0imple movement smoothing
D. 3eighted moving average
-. 0imulation

%(. 3hich of the following forecasting methodologies is considered a causal forecasting
technique;
/. -$ponential smoothing
1. 3eighted moving average
C. 8inear regression
D. >istorical analog!
-. Mar)et research

11-1,
Chapter 11 - Demand Management and Forecasting
%*. 3hich of the following forecasting methods uses e$ecutive .udgment as its primar!
component for forecasting;
/. >istorical analog!
1. Time series anal!sis
C. =anel consensus
D. Mar)et research
-. 8inear regression

%+. 3hich of the following forecasting methods is ver! dependent on selection of the right
individuals who will .udgmentall! e used to actuall! generate the forecast;
/. Time series anal!sis
1. 0imple moving average
C. 3eighted moving average
D. Delphi method
-. =anel consensus

',. In usiness forecasting& what is usuall! considered a short-term time period;
/. Four wee)s or less
1. More than three months
C. 0i$ months or more
D. 8ess than three months
-. ?ne !ear

'1. In usiness forecasting& what is usuall! considered a medium-term time period;
/. 0i$ wee)s to one !ear
1. Three months to two !ears
C. ?ne to five !ears
D. ?ne to si$ months
-. 0i$ months to si$ !ears

11-11
Chapter 11 - Demand Management and Forecasting
'2. In usiness forecasting& what is usuall! considered a long-term time period;
/. Three months or longer
1. 0i$ months or longer
C. ?ne !ear or longer
D. Two !ears or longer
-. Ten !ears or longer

'". In general& which forecasting time frame compensates most effectivel! for random
variation and short term changes;
/. 0hort-term forecasts
1. 9uic)-time forecasts
C. 8ong range forecasts
D. Medium term forecasts
-. 2apid change forecasts

'#. In general& which forecasting time frame est identifies seasonal effects;
/. 0hort-term forecasts
1. 9uic)-time forecasts
C. 8ong range forecasts
D. Medium term forecasts
-. 2apid change forecasts

'%. In general& which forecasting time frame is est to detect general trends;
/. 0hort-term forecasts
1. 9uic)-time forecasts
C. 8ong range forecasts
D. Medium term forecasts
-. 2apid change forecasts

11-12
Chapter 11 - Demand Management and Forecasting
''. 3hich of the following forecasting methods can e used for short-term forecasting;
/. 0imple e$ponential smoothing
1. Delphi technique
C. Mar)et research
D. >os)ins->amilton smoothing
-. 0erial regression

'(. 3hich of the following considerations is not usuall! a factor in deciding which
forecasting model a firm should choose;
/. Time hori@on to forecast
1. =roduct
C. /ccurac! required
D. Data availailit!
-. /nal!st sophistication

'*. / compan! wants to forecast demand using the simple moving average. If the compan!
uses four prior !earl! sales values 6i.e.& !ear 2,,( 4 1,,& !ear 2,,* 4 12,& !ear 2,,+ 4 1#,&
and !ear 2,1, 4 21,7& which of the following is the simple moving average forecast for !ear
2,11;
/. 1,,.%
1. 1#,.,
C. 1#2.%
D. 1#%.%
-. 1%%.,

'+. / compan! wants to forecast demand using the simple moving average. If the compan!
uses three prior !earl! sales values 6i.e.& !ear 2,,* 4 1",& !ear 2,,+ 4 11,& and !ear 2,1,
41',7& which of the following is the simple moving average forecast for !ear 2,11;
/. 1,,.%
1. 122.%
C. 1""."
D. 1"%.'
-. 1"+."

11-1"
Chapter 11 - Demand Management and Forecasting
(,. / compan! wants to forecast demand using the weighted moving average. If the compan!
uses two prior !earl! sales values 6i.e.& !ear 2,,+ 4 11, and !ear 2,1, 4 1",7& and we want to
weight !ear 2,,+ at 1,A and !ear 2,1, at +,A& which of the following is the weighted
moving average forecast for !ear 2,11;
/. 12,
1. 12*
C. 1""
D. 1"*
-. 1#2

(1. / compan! wants to forecast demand using the weighted moving average. If the compan!
uses three prior !earl! sales values 6i.e.& !ear 2,,* 4 1',& !ear 2,,+ 4 1#, and !ear 2,1, 4
1(,7& and we want to weight !ear 2,,* at ",A& !ear 2,,+ at ",A and !ear 2,1, at #,A&
which of the following is the weighted moving average forecast for !ear 2,11;
/. 1(,
1. 1'*
C. 1%*
D. 1%2
-. 1#'

(2. 3hich of the following is the ma.or reason that e$ponential smoothing has ecome well
accepted as a forecasting technique;
/. /ccurac!
1. 0ophistication of anal!sis
C. =redicts turning points
D. -ase of use
-. /ilit! to Forecast lagging data trends

(". The e$ponential smoothing method requires which of the following data to forecast the
future;
/. The most recent forecast
1. =recise actual demand for the past several !ears
C. The value of the smoothing constant delta
D. ?verall industr! demand data
-. Trac)ing values

11-1#
Chapter 11 - Demand Management and Forecasting
(#. Biven a prior forecast demand value of 2",& a related actual demand value of 2%,& and a
smoothing constant alpha of ,.1& what is the e$ponential smoothing forecast value for the
following period;
/. 2",
1. 2"2
C. 2"*
D. 2#*
-. 2%,

(%. If a firm produced a standard item with relativel! stale demand& the smoothing constant
alpha used in an e$ponential smoothing forecasting model would tend to e in which of the
following ranges;
/. % A to 1, A
1. 2, A to %, A
C. 2, A to *, A
D. ', A to 12, A
-. +, A to 1,, A

('. If a firm produced a product that is e$periencing growth in demand& the smoothing
constant alpha used in an e$ponential smoothing forecasting model would tend to e which of
the following;
/. Close to @ero
1. / ver! low percentage& less than 1,A
C. The more rapid the growth& the higher the percentage
D. The more rapid the growth& the lower the percentage
-. %, A or more

((. Biven a prior forecast demand value of 1&1,,& a related actual demand value of 1&,,,& and
a smoothing constant alpha of ,."& what is the e$ponential smoothing forecast value;
/. 1&,,,
1. 1&,",
C. 1&,(,
D. 1&1",
-. +(,

11-1%
Chapter 11 - Demand Management and Forecasting
(*. / compan! wants to generate a forecast for unit demand for !ear 2,11 using e$ponential
smoothing. The actual demand in !ear 2,1, was 12,. The forecast demand in !ear 2,1, was
11,. Csing this data and a smoothing constant alpha of ,.1& which of the following is the
resulting !ear 2,11 forecast value;
/. 1,,
1. 11,
C. 111
D. 11#
-. 12,

(+. /s a consultant !ou have een as)ed to generate a unit demand forecast for a product for
!ear 2,11 using e$ponential smoothing. The actual demand in !ear 2,1, was (%,. The
forecast demand in !ear 2,1, was +',. Csing this data and a smoothing constant alpha of ,."&
which of the following is the resulting !ear 2,,* forecast value;
/. (''
1. *1"
C. *+(
D. 1&,2"
-. 1&12,

*,. 3hich of the following is a possile source of ias error in forecasting;
/. Failing to include the right variales
1. Csing the wrong forecasting method
C. -mplo!ing less sophisticated anal!sts than necessar!
D. Csing incorrect data
-. Csing standard deviation rather than M/D

*1. 3hich of the following is used to descrie the degree of error;
/. 3eighted moving average
1. 2egression
C. Moving average
D. Forecast as a percent of actual
-. Mean asolute deviation

11-1'
Chapter 11 - Demand Management and Forecasting
*2. / compan! has actual unit demand for three consecutive !ears of 12#& 12'& and 1"%. The
respective forecasts for the same three !ears are 12,& 12,& and 1",. 3hich of the following is
the resulting M/D value that can e computed from this data;
/. 1
1. "
C. %
D. 1%
-. 12"

*". / compan! has actual unit demand for four consecutive !ears of 1,,& 1,%& 1"%& and 1%,.
The respective forecasts were 12, for all four !ears. 3hich of the following is the resulting
M/D value that can e computed from this data;
/. 2.%
1. 1,
C. 2,
D. 22.%
-. ",

*#. If !ou were selecting a forecasting model ased on M/D& which of the following M/D
values reflects the most accurate model;
/. ,.2
1. ,.*
C. 1.,
D. 1,.,
-. 1,,.,

*%. / compan! has calculated its running sum of forecast errors to e %,, and its mean
asolute deviation is e$actl! "%. 3hich of the following is the compan!Ds trac)ing signal;
/. Cannot e calculated ased on this information
1. /out 1#."
C. More than "%
D. -$actl! "%
-. /out ,.,(

11-1(
Chapter 11 - Demand Management and Forecasting
*'. / compan! has a M/D of 1,. It wants to have a ++.( percent control limits on its
forecasting s!stem. Its most recent trac)ing signal value is "1. 3hat can the compan!
conclude from this information;
/. The forecasting model is operating acceptal!
1. The forecasting model is out of control and needs to e corrected
C. The M/D value is incorrect
D. The upper control value is less than 2,
-. It is using an inappropriate forecasting methodolog!

*(. Eou are hired as a consultant to advise a small firm on forecasting methodolog!. 1ased on
!our research !ou find the compan! has a M/D of ". It wants to have a ++.( percent control
limits on its forecasting s!stem. Its most recent trac)ing signal value is 1%. 3hat should e
!our report to the compan!;
/. The forecasting model is operating acceptal!
1. The forecasting model is out of control and needs to e corrected
C. The M/D value is incorrect
D. The upper control value is less than 2,
-. The compan! is using an inappropriate forecasting methodolog!

**. 3hich of the following is the portion of oservations !ou would e$pect to see l!ing within
a plus or minus " M/D range;
/. %(.,#* percent
1. **.+#' percent
C. +*.""# percent
D. ++.*%' percent
-. 1,, percent

*+. 3hich of the following is the portion of oservations !ou would e$pect to see l!ing within
a plus or minus 2 M/D range;
/. %(.,#*
1. **.+#'
C. +*.""#
D. ++.*%'
-. 1,,

11-1*
Chapter 11 - Demand Management and Forecasting
+,. If the intercept value of a linear regression model is #,& the slope value is #,& and the
value of F is #,& which of the following is the resulting forecast value using this model;
/. 12,
1. 1&',,
C. 1&'#,
D. 2&2,,
-. '#&,,,

+1. / compan! hires !ou to develop a linear regression forecasting model. 1ased on the
compan!Ds historical sales information& !ou determine the intercept value of the model to e
1&2,,. Eou also find the slope value is -%,. If after developing the model !ou are given a
value of F 4 1,& which of the following is the resulting forecast value using this model;
/. -"&*,,
1. (,,
C. 1&(,,
D. 1&,#,
-. 12&,,,

+2. >eav! sales of umrellas during a rain storm is an e$ample of which of the following;
/. / trend
1. / causal relationship
C. / statistical correlation
D. / coincidence
-. / fad

+". Eou are using an e$ponential smoothing model for forecasting. The running sum of the
forecast error statistics 620F-7 are calculated each time a forecast is generated. Eou find the
last 20F- to e "#. ?riginall! the forecasting model used was selected ecause itDs relativel!
low M/D of ,.#. To determine when it is time to re-evaluate the usefulness of the e$ponential
smoothing model !ou compute trac)ing signals. 3hich of the following is the resulting
trac)ing s!stem;
/. *%
1. ',
C. 1".'
D. 12.+
-. *

11-1+
Chapter 11 - Demand Management and Forecasting

Fill in the !lan" uestions

+#. Game the four asic t!pes of forecasting.
1. HHHHHHHHHHHHHHHHHHHHHI
2. HHHHHHHHHHHHHHHHHHHHHI
". HHHHHHHHHHHHHHHHHHHHHI
#. HHHHHHHHHHHHHHHHHHHHH.
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

+%. / compan! has calculated its running sum of forecast errors to e #,, and its mean
asolute deviation is e$actl! 2%. 3hat is the compan!Ds trac)ing signal;
HHHHHHHHHHHHHHHHHHHHH.
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

+'. / compan! has calculated its running sum of forecast errors to e 1&,,, and its trac)ing
signal is %,. 3hat is the compan!Ds mean asolute deviation; HHHHHHHHHHH
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

+(. / compan! wants to forecast demand using the simple moving average. If the compan!
uses three prior !earl! sales values 6i.e.& !ear 2,,* 4 1*%& !ear 2,,+ 4 21%& and !ear 2,1,
42",7& what is the simple moving average forecast for !ear 2,11; HHHHHHHHHHHH
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

+*. / compan! wants to forecast demand using the weighted moving average. If the compan!
uses two prior !earl! sales values 6i.e.& !ear 2,,+ 4 11&,,, and !ear 2,1, 4 1"&,,,7& and we
want to weight !ear 2,,+ at "%A and !ear 2,1, at '%A& what is the weighted moving average
forecast for Eear 2,11;
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

11-2,
Chapter 11 - Demand Management and Forecasting
++. /s a consultant !ou have een as)ed to generate a unit demand forecast for a product for
Eear 2,11 using e$ponential smoothing. /ctual demand in !ear 2,1, was +%, ut the forecast
for that !ear 1&,',. Csing this data and a smoothing constant alpha of ,.%& which of the
following is the resulting !ear 2,11 forecast value; HHHHHHHHHH
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

1,,. / compan! has had actual unit demand for four consecutive !ears of 1,,& 11,& 12%& and
1%,. The respective forecasts using e$ponential smoothing were 12, for each of those four
!ears. 3hat value of alpha& the smoothing constant& was the firm using; HHHHHHHHHHH
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

1,1. 3hat are the five steps of C=F2 6collaorative planning& forecasting and
replenishment;7
1. HHHHHHHHHHHHHHHHHHHHHI
2. HHHHHHHHHHHHHHHHHHHHHI
". HHHHHHHHHHHHHHHHHHHHHI
#. HHHHHHHHHHHHHHHHHHHHHI
%. HHHHHHHHHHHHHHHHHHHHH.
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

1,2. 3hen anal!@ing time series data& if demand data contains oth seasonal and trend effects
at the same time& what are the two wa!s that the! relate to each other discussed in the te$t;
17 HHHHHHHHHHHHHHHHHHHHHHHHHHH
27 HHHHHHHHHHHHHHHHHHHHHHHHHHH
HHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH


11-21
Chapter 11 - Demand Management and Forecasting
#ssa$ uestions

1,". 3hat does the te$t mean when it states that rather than to search for the perfect forecast
one should learn to live with inaccurate forecasts;




1,#. Distinguish etween 5dependent5 and 5independent5 demand.




1,%. Distinguish etween errors in statistics and errors in forecasting.




1,'. Descrie the collaorative planning& forecasting and replenishment 6C=F27 technique.




11-22
Chapter 11 - Demand Management and Forecasting
Chapter 11 Demand Management and Forecasting /nswer Je!


True / False uestions

1. Continual review and updating in light of new data is a forecasting technique called
second-guessing.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

2. Independent demand is the demand for a product or service caused ! the demand for other
products or services.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Deman" &anagement

". There is not much that a firm can do to influence independent demand.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Deman" &anagement

11-2"
Chapter 11 - Demand Management and Forecasting
#. C!clical influences on demand are often e$pressed graphicall! as a linear function that is
either upward or downward sloping.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

%. C!clical influences on demand ma! come from occurrences such as political elections& war
or economic conditions.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

'. Trend lines are usuall! the last things considered when developing a forecast.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

(. Time series forecasting models ma)e predictions aout the future ased on anal!sis of past
data.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-2#
Chapter 11 - Demand Management and Forecasting
*. In the weighted moving average forecasting model the weights must add up to one times
the numer of data points.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

+. In a forecasting model using simple e$ponential smoothing the data pattern should remain
stationar!.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1,. In a forecasting model using simple moving average the shorter the time span used for
calculating the moving average& the closer the average follows volatile trends.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11. In the simple e$ponential smoothing forecasting model !ou need at least 1,, oservations
to set the weight.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-2%
Chapter 11 - Demand Management and Forecasting
12. -$perience and trial and error are the simplest wa!s to choose weights for the weighted
moving average forecasting model.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1". The weighted moving average forecasting model uses a weighting scheme to modif! the
effects of individual data points. This is its ma.or advantage over the simple moving average
model.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1#. / central premise of e$ponential smoothing is that more recent data is less indicative of
the future than data from the distant past.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1%. The equation for e$ponential smoothing states that the new forecast is equal to the old
forecast plus the error of the old forecast.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-2'
Chapter 11 - Demand Management and Forecasting
1'. -$ponential smoothing is alwa!s the most accurate of all forecasting models.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1(. In e$ponential smoothing& it is desirale to use a higher smoothing constant when
forecasting demand for a product e$periencing high growth.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1*. The e$ponential smoothing model permits non-linear forecast values.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1+. The weighted moving average model does not wor) with non-linear forecast values.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-2(
Chapter 11 - Demand Management and Forecasting
2,. The simple moving average model permits non-linear forecast values.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

21. The simple moving average model requires linear forecast values.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

22. The value of the smoothing constant alpha in an e$ponential smoothing model is etween
, and 1.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

2". 0imple e$ponential smoothing lags changes in demand.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-2*
Chapter 11 - Demand Management and Forecasting
2#. -$ponential smoothing forecasts alwa!s lag ehind the actual occurrence ut can e
corrected somewhat with a trend ad.ustment.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

2%. 1ecause the factors governing demand for products are ver! comple$& all forecasts of
demand contain some error.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

2'. 2andom errors can e defined as those that cannot e e$plained ! the forecast model
eing used.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

2(. 2andom errors in forecasting occur when an undetected secular trend is not included in a
forecasting model.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

11-2+
Chapter 11 - Demand Management and Forecasting
2*. 3hen forecast errors occur in a normall! distriuted pattern& the ratio of the mean
asolute deviation to the standard deviation is 2 to 1& or 2 M/D 4 1 standard deviation.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

2+. M/D statistics can e used to generate trac)ing signals.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

",. 20F- in forecasting stands for 5reliale safet! function error.5
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

"1. 20F- in forecasting stands for 5running sum of forecast errors.5
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-",
Chapter 11 - Demand Management and Forecasting
"2. / trac)ing signal 6T07 can e calculated using the arithmetic sum of forecast deviations
divided ! the M/D.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

"". / ma.or limitation of linear regression as a model for forecasting is that past data and
future pro.ections are assumed to fall on or near a straight line.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

"#. 2egression is a functional relationship etween two or more correlated variales& where
one variale is used to predict another.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

"%. 8inear regression is not useful for aggregate planning.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-"1
Chapter 11 - Demand Management and Forecasting
"'. The standard error of the estimate of a linear regression is not useful for .udging the fit
etween the data and the regression line when doing forecasts.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

"(. Multiple regression anal!sis uses several regression models to generate a forecast.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

"*. For ever! forecasting prolem there is one est forecasting technique.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

"+. / good forecaster is one who develops special s)ills and e$perience at one forecasting
technique and is capale of appl!ing it to widel! diverse situations.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

11-"2
Chapter 11 - Demand Management and Forecasting
#,. In causal relationship forecasting leading indicators are used to forecast occurrences.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

#1. 9ualitative forecasting techniques generall! ta)e advantage of the )nowledge of e$perts
and therefore do not require much .udgment.
F%L&#

AACSB: Analytic
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Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

#2. Mar)et research is a quantitative method of forecasting.
F%L&#

AACSB: Analytic
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Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

#". Decomposition of a time series means identif!ing and separating the time series data into
its components.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-""
Chapter 11 - Demand Management and Forecasting
##. / time series is defined in the te$t as chronologicall! ordered data that ma! contain one or
more components of demand variation: trend& seasonal& c!clical& autocorrelation& and
random.
T'(#

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis

#%. It is difficult to identif! the trend in time series data.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis

#'. In decomposition of time series data it is relativel! eas! identif! c!cles and
autocorrelation components.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis

#(. 3e usuall! associate the word 5seasonal5 with recurrent periods of repetitive activit! that
happen on other than an annual c!cle.
F%L&#

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis


11-"#
Chapter 11 - Demand Management and Forecasting
Multiple Choice uestions

#*. In time series data depicting demand which of the following is not considered a
component of demand variation;
/. Trend
1. 0easonal
C. C!clical
D) <ariance
-. /utocorrelation

AACSB: Analytic
Difficulty: Easy
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis

#+. 3hich of the following is not one of the asic t!pes of forecasting;
/. 9ualitative
1. Time series anal!sis
C. Causal relationships
D. 0imulation
#) Force field anal!sis

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

%,. In most cases& demand for products or services can e ro)en into several components.
3hich of the following is not considered a component of demand;
/. /verage demand for a period
1. / trend
C. 0easonal elements
D) =ast demand
-. /utocorrelation

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

11-"%
Chapter 11 - Demand Management and Forecasting
%1. In most cases& demand for products or services can e ro)en into several components.
3hich of the following is considered a component of demand;
%) C!clical elements
1. Future demand
C. =ast demand
D. Inconsistent demand
-. 8evel demand

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

%2. In most cases& demand for products or services can e ro)en into several components.
3hich of the following is considered a component of demand;
/. Forecast error
!) /utocorrelation
C. =revious demand
D. Consistent demand
-. 2epeat demand

AACSB: Analytic
Difficulty: Easy
Learning Objective: *
Taxonomy: no!le"ge
To#ic: Deman" &anagement

%". 3hich of the following forecasting methodologies is considered a qualitative forecasting
technique;
/. 0imple moving average
!) Mar)et research
C. 8inear regression
D. -$ponential smoothing
-. Multiple regression

AACSB: Analytic
Difficulty: Easy
Learning Objective: -
Taxonomy: no!le"ge
To#ic: .ualitative Tec(ni/ues in 0orecasting

11-"'
Chapter 11 - Demand Management and Forecasting
%#. 3hich of the following forecasting methodologies is considered a qualitative forecasting
technique;
%) Mar)et research
1. Causal relationship forecasting
C. 2egression anal!sis
D. -$ponential smoothing
-. 0imple moving average

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: -
Taxonomy: no!le"ge
To#ic: .ualitative Tec(ni/ues in 0orecasting

%%. 3hich of the following forecasting methodologies is considered a time series forecasting
technique;
%) 0imple moving average
1. Mar)et research
C. 8eading indicators
D. >istorical analog!
-. 0imulation

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

%'. 3hich of the following forecasting methodologies is considered a time series forecasting
technique;
/. Delphi method
1. -$ponential averaging
C. 0imple movement smoothing
D) 3eighted moving average
-. 0imulation

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-"(
Chapter 11 - Demand Management and Forecasting
%(. 3hich of the following forecasting methodologies is considered a causal forecasting
technique;
/. -$ponential smoothing
1. 3eighted moving average
C) 8inear regression
D. >istorical analog!
-. Mar)et research

AACSB: Analytic
Difficulty: Easy
Learning Objective: -
Learning Objective: +
Taxonomy: 1n"erstan"ing
To#ic: .ualitative Tec(ni/ues in 0orecasting2 Time Series Analysis

%*. 3hich of the following forecasting methods uses e$ecutive .udgment as its primar!
component for forecasting;
/. >istorical analog!
1. Time series anal!sis
C) =anel consensus
D. Mar)et research
-. 8inear regression

AACSB: Analytic
Difficulty: Easy
Learning Objective: -
Taxonomy: no!le"ge
To#ic: .ualitative Tec(ni/ues in 0orecasting

%+. 3hich of the following forecasting methods is ver! dependent on selection of the right
individuals who will .udgmentall! e used to actuall! generate the forecast;
/. Time series anal!sis
1. 0imple moving average
C. 3eighted moving average
D) Delphi method
-. =anel consensus

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: -
Taxonomy: 1n"erstan"ing
To#ic: .ualitative Tec(ni/ues in 0orecasting

11-"*
Chapter 11 - Demand Management and Forecasting
',. In usiness forecasting& what is usuall! considered a short-term time period;
/. Four wee)s or less
1. More than three months
C. 0i$ months or more
D) 8ess than three months
-. ?ne !ear

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

'1. In usiness forecasting& what is usuall! considered a medium-term time period;
/. 0i$ wee)s to one !ear
!) Three months to two !ears
C. ?ne to five !ears
D. ?ne to si$ months
-. 0i$ months to si$ !ears

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

'2. In usiness forecasting& what is usuall! considered a long-term time period;
/. Three months or longer
1. 0i$ months or longer
C. ?ne !ear or longer
D) Two !ears or longer
-. Ten !ears or longer

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

11-"+
Chapter 11 - Demand Management and Forecasting
'". In general& which forecasting time frame compensates most effectivel! for random
variation and short term changes;
%) 0hort-term forecasts
1. 9uic)-time forecasts
C. 8ong range forecasts
D. Medium term forecasts
-. 2apid change forecasts

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: 1n"erstan"ing
To#ic: $al%&art's Data $are(ouse

'#. In general& which forecasting time frame est identifies seasonal effects;
/. 0hort-term forecasts
1. 9uic)-time forecasts
C. 8ong range forecasts
D) Medium term forecasts
-. 2apid change forecasts

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: 1n"erstan"ing
To#ic: $al%&art's Data $are(ouse

'%. In general& which forecasting time frame is est to detect general trends;
/. 0hort-term forecasts
1. 9uic)-time forecasts
C) 8ong range forecasts
D. Medium term forecasts
-. 2apid change forecasts

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

11-#,
Chapter 11 - Demand Management and Forecasting
''. 3hich of the following forecasting methods can e used for short-term forecasting;
%) 0imple e$ponential smoothing
1. Delphi technique
C. Mar)et research
D. >os)ins->amilton smoothing
-. 0erial regression

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: 1n"erstan"ing
To#ic: $al%&art's Data $are(ouse

'(. 3hich of the following considerations is not usuall! a factor in deciding which
forecasting model a firm should choose;
/. Time hori@on to forecast
!) =roduct
C. /ccurac! required
D. Data availailit!
-. /nal!st sophistication

AACSB: Analytic
Difficulty: Easy
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

11-#1
Chapter 11 - Demand Management and Forecasting
'*. / compan! wants to forecast demand using the simple moving average. If the compan!
uses four prior !earl! sales values 6i.e.& !ear 2,,( 4 1,,& !ear 2,,* 4 12,& !ear 2,,+ 4 1#,&
and !ear 2,1, 4 21,7& which of the following is the simple moving average forecast for !ear
2,11;
/. 1,,.%
1. 1#,.,
C) 1#2.%
D. 1#%.%
-. 1%%.,

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

'+. / compan! wants to forecast demand using the simple moving average. If the compan!
uses three prior !earl! sales values 6i.e.& !ear 2,,* 4 1",& !ear 2,,+ 4 11,& and !ear 2,1,
41',7& which of the following is the simple moving average forecast for !ear 2,11;
/. 1,,.%
1. 122.%
C) 1""."
D. 1"%.'
-. 1"+."

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-#2
Chapter 11 - Demand Management and Forecasting
(,. / compan! wants to forecast demand using the weighted moving average. If the compan!
uses two prior !earl! sales values 6i.e.& !ear 2,,+ 4 11, and !ear 2,1, 4 1",7& and we want to
weight !ear 2,,+ at 1,A and !ear 2,1, at +,A& which of the following is the weighted
moving average forecast for !ear 2,11;
/. 12,
!) 12*
C. 1""
D. 1"*
-. 1#2

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

(1. / compan! wants to forecast demand using the weighted moving average. If the compan!
uses three prior !earl! sales values 6i.e.& !ear 2,,* 4 1',& !ear 2,,+ 4 1#, and !ear 2,1, 4
1(,7& and we want to weight !ear 2,,* at ",A& !ear 2,,+ at ",A and !ear 2,1, at #,A&
which of the following is the weighted moving average forecast for !ear 2,11;
/. 1(,
1. 1'*
C) 1%*
D. 1%2
-. 1#'

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-#"
Chapter 11 - Demand Management and Forecasting
(2. 3hich of the following is the ma.or reason that e$ponential smoothing has ecome well
accepted as a forecasting technique;
%) /ccurac!
1. 0ophistication of anal!sis
C. =redicts turning points
D. -ase of use
-. /ilit! to Forecast lagging data trends

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: 1n"erstan"ing
To#ic: Time Series Analysis

(". The e$ponential smoothing method requires which of the following data to forecast the
future;
%) The most recent forecast
1. =recise actual demand for the past several !ears
C. The value of the smoothing constant delta
D. ?verall industr! demand data
-. Trac)ing values

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

11-##
Chapter 11 - Demand Management and Forecasting
(#. Biven a prior forecast demand value of 2",& a related actual demand value of 2%,& and a
smoothing constant alpha of ,.1& what is the e$ponential smoothing forecast value for the
following period;
/. 2",
!) 2"2
C. 2"*
D. 2#*
-. 2%,

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

(%. If a firm produced a standard item with relativel! stale demand& the smoothing constant
alpha used in an e$ponential smoothing forecasting model would tend to e in which of the
following ranges;
%) % A to 1, A
1. 2, A to %, A
C. 2, A to *, A
D. ', A to 12, A
-. +, A to 1,, A

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: 1n"erstan"ing
To#ic: Time Series Analysis

11-#%
Chapter 11 - Demand Management and Forecasting
('. If a firm produced a product that is e$periencing growth in demand& the smoothing
constant alpha used in an e$ponential smoothing forecasting model would tend to e which of
the following;
/. Close to @ero
1. / ver! low percentage& less than 1,A
C) The more rapid the growth& the higher the percentage
D. The more rapid the growth& the lower the percentage
-. %, A or more

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: 1n"erstan"ing
To#ic: Time Series Analysis

((. Biven a prior forecast demand value of 1&1,,& a related actual demand value of 1&,,,& and
a smoothing constant alpha of ,."& what is the e$ponential smoothing forecast value;
/. 1&,,,
!) 1&,",
C. 1&,(,
D. 1&1",
-. +(,

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-#'
Chapter 11 - Demand Management and Forecasting
(*. / compan! wants to generate a forecast for unit demand for !ear 2,11 using e$ponential
smoothing. The actual demand in !ear 2,1, was 12,. The forecast demand in !ear 2,1, was
11,. Csing this data and a smoothing constant alpha of ,.1& which of the following is the
resulting !ear 2,11 forecast value;
/. 1,,
1. 11,
C) 111
D. 11#
-. 12,

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

(+. /s a consultant !ou have een as)ed to generate a unit demand forecast for a product for
!ear 2,11 using e$ponential smoothing. The actual demand in !ear 2,1, was (%,. The
forecast demand in !ear 2,1, was +',. Csing this data and a smoothing constant alpha of ,."&
which of the following is the resulting !ear 2,,* forecast value;
/. (''
1. *1"
C) *+(
D. 1&,2"
-. 1&12,

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-#(
Chapter 11 - Demand Management and Forecasting
*,. 3hich of the following is a possile source of ias error in forecasting;
%) Failing to include the right variales
1. Csing the wrong forecasting method
C. -mplo!ing less sophisticated anal!sts than necessar!
D. Csing incorrect data
-. Csing standard deviation rather than M/D

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

*1. 3hich of the following is used to descrie the degree of error;
/. 3eighted moving average
1. 2egression
C. Moving average
D. Forecast as a percent of actual
#) Mean asolute deviation

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: 1n"erstan"ing
To#ic: Time Series Analysis

*2. / compan! has actual unit demand for three consecutive !ears of 12#& 12'& and 1"%. The
respective forecasts for the same three !ears are 12,& 12,& and 1",. 3hich of the following is
the resulting M/D value that can e computed from this data;
/. 1
1. "
C) %
D. 1%
-. 12"

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-#*
Chapter 11 - Demand Management and Forecasting
*". / compan! has actual unit demand for four consecutive !ears of 1,,& 1,%& 1"%& and 1%,.
The respective forecasts were 12, for all four !ears. 3hich of the following is the resulting
M/D value that can e computed from this data;
/. 2.%
1. 1,
C) 2,
D. 22.%
-. ",

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

*#. If !ou were selecting a forecasting model ased on M/D& which of the following M/D
values reflects the most accurate model;
%) ,.2
1. ,.*
C. 1.,
D. 1,.,
-. 1,,.,

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: 1n"erstan"ing
To#ic: Time Series Analysis

11-#+
Chapter 11 - Demand Management and Forecasting
*%. / compan! has calculated its running sum of forecast errors to e %,, and its mean
asolute deviation is e$actl! "%. 3hich of the following is the compan!Ds trac)ing signal;
/. Cannot e calculated ased on this information
!) /out 1#."
C. More than "%
D. -$actl! "%
-. /out ,.,(

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

*'. / compan! has a M/D of 1,. It wants to have a ++.( percent control limits on its
forecasting s!stem. Its most recent trac)ing signal value is "1. 3hat can the compan!
conclude from this information;
%) The forecasting model is operating acceptal!
1. The forecasting model is out of control and needs to e corrected
C. The M/D value is incorrect
D. The upper control value is less than 2,
-. It is using an inappropriate forecasting methodolog!

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Synt(esis
To#ic: Time Series Analysis

11-%,
Chapter 11 - Demand Management and Forecasting
*(. Eou are hired as a consultant to advise a small firm on forecasting methodolog!. 1ased on
!our research !ou find the compan! has a M/D of ". It wants to have a ++.( percent control
limits on its forecasting s!stem. Its most recent trac)ing signal value is 1%. 3hat should e
!our report to the compan!;
/. The forecasting model is operating acceptal!
!) The forecasting model is out of control and needs to e corrected
C. The M/D value is incorrect
D. The upper control value is less than 2,
-. The compan! is using an inappropriate forecasting methodolog!

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

**. 3hich of the following is the portion of oservations !ou would e$pect to see l!ing within
a plus or minus " M/D range;
/. %(.,#* percent
1. **.+#' percent
C) +*.""# percent
D. ++.*%' percent
-. 1,, percent

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-%1
Chapter 11 - Demand Management and Forecasting
*+. 3hich of the following is the portion of oservations !ou would e$pect to see l!ing within
a plus or minus 2 M/D range;
/. %(.,#*
!) **.+#'
C. +*.""#
D. ++.*%'
-. 1,,

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

+,. If the intercept value of a linear regression model is #,& the slope value is #,& and the
value of F is #,& which of the following is the resulting forecast value using this model;
/. 12,
1. 1&',,
C) 1&'#,
D. 2&2,,
-. '#&,,,

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-%2
Chapter 11 - Demand Management and Forecasting
+1. / compan! hires !ou to develop a linear regression forecasting model. 1ased on the
compan!Ds historical sales information& !ou determine the intercept value of the model to e
1&2,,. Eou also find the slope value is -%,. If after developing the model !ou are given a
value of F 4 1,& which of the following is the resulting forecast value using this model;
/. -"&*,,
!) (,,
C. 1&(,,
D. 1&,#,
-. 12&,,,

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

+2. >eav! sales of umrellas during a rain storm is an e$ample of which of the following;
/. / trend
!) / causal relationship
C. / statistical correlation
D. / coincidence
-. / fad

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: no!le"ge
To#ic: Deman" &anagement

11-%"
Chapter 11 - Demand Management and Forecasting
+". Eou are using an e$ponential smoothing model for forecasting. The running sum of the
forecast error statistics 620F-7 are calculated each time a forecast is generated. Eou find the
last 20F- to e "#. ?riginall! the forecasting model used was selected ecause itDs relativel!
low M/D of ,.#. To determine when it is time to re-evaluate the usefulness of the e$ponential
smoothing model !ou compute trac)ing signals. 3hich of the following is the resulting
trac)ing s!stem;
%) *%
1. ',
C. 1".'
D. 12.+
-. *

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis


Fill in the !lan" uestions

+#. Game the four asic t!pes of forecasting.
1. HHHHHHHHHHHHHHHHHHHHHI
2. HHHHHHHHHHHHHHHHHHHHHI
". HHHHHHHHHHHHHHHHHHHHHI
#. HHHHHHHHHHHHHHHHHHHHH.
*1)+ ualitative, *-)+ Time series anal$sis, *.)+ Causal, */)+ &imulation)

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

11-%#
Chapter 11 - Demand Management and Forecasting
+%. / compan! has calculated its running sum of forecast errors to e #,, and its mean
asolute deviation is e$actl! 2%. 3hat is the compan!Ds trac)ing signal;
HHHHHHHHHHHHHHHHHHHHH.
10

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

+'. / compan! has calculated its running sum of forecast errors to e 1&,,, and its trac)ing
signal is %,. 3hat is the compan!Ds mean asolute deviation; HHHHHHHHHHH
-1

AACSB: Analytic
Difficulty: Easy
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

+(. / compan! wants to forecast demand using the simple moving average. If the compan!
uses three prior !earl! sales values 6i.e.& !ear 2,,* 4 1*%& !ear 2,,+ 4 21%& and !ear 2,1,
42",7& what is the simple moving average forecast for !ear 2,11; HHHHHHHHHHHH
-11

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-%%
Chapter 11 - Demand Management and Forecasting
+*. / compan! wants to forecast demand using the weighted moving average. If the compan!
uses two prior !earl! sales values 6i.e.& !ear 2,,+ 4 11&,,, and !ear 2,1, 4 1"&,,,7& and we
want to weight !ear 2,,+ at "%A and !ear 2,1, at '%A& what is the weighted moving average
forecast for Eear 2,11;
1-2.11

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

++. /s a consultant !ou have een as)ed to generate a unit demand forecast for a product for
Eear 2,11 using e$ponential smoothing. /ctual demand in !ear 2,1, was +%, ut the forecast
for that !ear 1&,',. Csing this data and a smoothing constant alpha of ,.%& which of the
following is the resulting !ear 2,11 forecast value; HHHHHHHHHH
12113

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

1,,. / compan! has had actual unit demand for four consecutive !ears of 1,,& 11,& 12%& and
1%,. The respective forecasts using e$ponential smoothing were 12, for each of those four
!ears. 3hat value of alpha& the smoothing constant& was the firm using; HHHHHHHHHHH
1 *4ero+

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: +
Taxonomy: Analysis
To#ic: Time Series Analysis

11-%'
Chapter 11 - Demand Management and Forecasting
1,1. 3hat are the five steps of C=F2 6collaorative planning& forecasting and
replenishment;7
1. HHHHHHHHHHHHHHHHHHHHHI
2. HHHHHHHHHHHHHHHHHHHHHI
". HHHHHHHHHHHHHHHHHHHHHI
#. HHHHHHHHHHHHHHHHHHHHHI
%. HHHHHHHHHHHHHHHHHHHHH.
*1)+ Create a front5end partnership agreement, *-)+ 6oint business planning, *.)+
Development of demand forecasts, */)+ &haring forecasts, *3)+ 7nventor$ replenishment)

AACSB: Analytic
Difficulty: 3ar"
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

1,2. 3hen anal!@ing time series data& if demand data contains oth seasonal and trend effects
at the same time& what are the two wa!s that the! relate to each other discussed in the te$t;
17 HHHHHHHHHHHHHHHHHHHHHHHHHHH
27 HHHHHHHHHHHHHHHHHHHHHHHHHHH
1+ %dditive and -+ Multiplicative)

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: ,
Taxonomy: no!le"ge
To#ic: Time Series Analysis


11-%(
Chapter 11 - Demand Management and Forecasting
#ssa$ uestions

1,". 3hat does the te$t mean when it states that rather than to search for the perfect forecast
one should learn to live with inaccurate forecasts;
The te$t ma)es this statement on page ""( in the conte$t of 5perfect forecasts are virtuall!
impossile.5 /nd& further& anal!sts should not go to unreasonale lengths to improve the
precision of a forecast. 2ather& the anal!st should loo) at several methodologies for
forecasting the same phenomena and tr! to cull out the 5commonsense5 view from them. It is
far more important to continuall! review forecasts and learn to live with inaccurate forecasts
than it is to tr! to pin down a forecast with too much precision.

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: Synt(esis
To#ic: $al%&art's Data $are(ouse

1,#. Distinguish etween 5dependent5 and 5independent5 demand.
0tarting on page ",( the te$t distinguishes etween demand that is 5dependent5 upon 6or can
e derived from7 demand of some other product 6as in demand for an end-productDs
component7 and demand that is 5independent5 or that which is the result of incoming orders
from customers& etc.

AACSB: Analytic
Difficulty: Easy
Learning Objective: )
Taxonomy: 1n"erstan"ing
To#ic: Deman" &anagement

11-%*
Chapter 11 - Demand Management and Forecasting
1,%. Distinguish etween errors in statistics and errors in forecasting.
In statistics& the term for errors is 5residuals5 which means the deviation of oservations from
a standard such as a regression line. These residuals are used to measure the 5goodness of fit5
of a model to the data it represents. In forecasting& the term 5error5 is used to denote the
deviation that an actual value had from a forecast. These can e either 5ias errors5 6a
s!stematic mista)e such as using the wrong relationship etween variales7 or 5random
errors&5 deviations that simpl! can not e e$plained ! the model eing used.

AACSB: Analytic
Difficulty: 3ar"
Learning Objective: +
Taxonomy: no!le"ge
To#ic: Time Series Analysis

1,'. Descrie the collaorative planning& forecasting and replenishment 6C=F27 technique.
C=F2 is descried on pages ""%-"' of the te$t. It is a sharing of information etween trading
partners across multiple levels in a suppl! chain which allows the entire suppl! chain to
operate with lower levels of inventor! and increased responsiveness.

AACSB: Analytic
Difficulty: &e"ium
Learning Objective: 1
Taxonomy: no!le"ge
To#ic: $al%&art's Data $are(ouse

11-%+