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1. Consider the following selected regression output for predicting Y based on Age:
2. Below is the output report for a regression analysis that relates a company’s Sales to
Innovation Spending.
SUMMARY OUTPUT
Regression Statistics
Multiple R
R Square ?
Adjusted R 0.831
Square
Standard Error 2.50
Observations 14
ANOVA
df SS MS F Significance F
Regression 1 424.450 424.450 67.885 0.00001
Residual 12 75.030 6.253
Total 13
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2) Which of the following statements is correct?
3. Answer the following questions pertaining to the attached regression output below. The
regression was performed to predict the Sales based on the Income.
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.8808
R Square 0.7758
Adjusted R Square 0.7598
Standard Error 48.8155
Observations 16
ANOVA
df SS MS F Significance F
Regression 1 115424.56 115424.56 48.44 0.00
Residual 14 33361.38 2382.96
Total 15 148785.94
4. Consider the regression output to predict Sales ($ thousands) based on Ad Expenses, Bonus,
and Sales Force.
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SUMMARY OUTPUT
Regression Statistics
Multiple R 0.997263
R Square
Adjusted R Square 0.992712
Standard Error 16.97083
Observations 13
ANOVA
Significance
df SS MS F F
Regression 3 157212.9 545.8608 1.7E-10
Residual 9 2592.082 288.0091
Total 12 474230.8
1) Based on the above sales multiple regression model, write the regression equation.
2) Compute Regression SS.
3) Compute R square.
4) Predict Sales when Ad Expense is $ 15000, Bonus is $200, and there are 35 people in the
sales force.
5. For the following set of forecasts (17, 20, 25, 31, 39) and actual values (19, 24, 28, 32, 38),
calculate the MAD.
a. 2.2
b. 2.5
c. 2.8
d. 3.1
e. 3.4
6. Three forecasting models, all using the same data set, are being compared using their MAD
values. The MAD value for Model X is 25.6; Model Y is 20.4; Model Z is 15.2. Which
forecasting model is considered the best?
a. Model X
b. Model Y
c. Model Z
d. Additional information is needed.
e. The MAD cannot be used to determine which model is best.
7. Increasing the number of periods in a moving average does not necessarily increase the
accuracy of the forecast. (True/False)
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8. Forecast using the following methods: Naïve, 2-period MA (moving average),
3-period MA, and Exponential Smoothing with alpha = 0.35
Find BIAS, MAD, MAPE, and MSE for each forecasting method.
1) Naïve Method
Period Sales Forecast Error Abs Error % Error Squared Error
1 7 N/A
2 6
3 8
4 6
5 8
6
BIAS MAD MAPE MSE
4) Exponential smoothing
alpha = 0.35
Period Sales Forecast Error Abs Error % Error Squared Error
1 7 N/A
2 6
3 8
4 6
5 8
6
BIAS MAD MAPE MSE
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9. If actual sales for a time period are 2400 units and the seasonal index for this time period is
1.2, find the deseasonalized sales for this period.
a. 2880
b. 1021.2
c. 1080.3
d. 1108.8
e. 2000
10. The seasonal factors (also known as indices) for the first three quarters for the demand of
snow blowers are 2.5, 0.1, 0.1. What is the seasonal factor for quarter 4?
a. 3
b. 1.3
c. 1
d. -1.3
e. 3.1
11. The Sales trend has been modeled as: Sales = 3t + 100, where t = time in quarters, beginning
in Q1 2005. Seasonality for the four quarterly periods is given in the table below. Find the
seasonalized forecast for Q4 of 2007.
a. 136.00
b. 113.18
c. 126.95
d. 139.04
e. 144.02
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Solutions
1. c). The prediction equation is Ŷ = -1.1759 + 0.6120 * Age. By plugging Age = 20 into the
equation, the answer is Ŷ = -1.1759 + 0.6120 * 20 = 11.06.
2. 1) d). R Square = RSS/TSS. By using RSS = 424.450 and TSS = 424.450 + 75.030 = 499.48,
2) R Square = 424.450 / 499.48 = 0.8497.
3) d.
5. a.
Actual Forecast Error Abs Error
19 17 2 2
24 20 4 4
28 25 3 3
32 31 1 1
38 39 -1 1
7. True.
6
8.
= 6 - 7 = -1
Error = Yt − Ft
1) Naïve Method
Period Sales Forecast Error Abs Error % Error Error^2
1 7 N/A =1/6=0.1667
2 6 7 -1 1 16.67% 1
3 8 6 2 2 25.00% 4
Ft = Yt −1
4 6 8 -2 2 33.33% 4
5 8 6 2 2 25.00% 4
0.25 1.75 25.00% 3.25
BIAS MAD MAPE MSE
= Average of Errors
= (-1 + 2 + (-2) + 2) / 4
=1/4
2) 2-period moving average = 0.25
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9. e. 2400/1.2 = 2000.
11. e. S.I. for Q4 = 4 – (0.9522 + 1 + 0.9888) = 1.059. De-seasonalized forecast for Q4, 2007 is
found by plugging t = 12 in sales trend equation, sales = 3*12 + 100 = 136. Reseasonalized
forecast for the same quarter is = 136*S.I. for Q4 = 136*1.059 = 144.02.
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