Question

A company wants to forecast demand using the simple moving average. If the company uses five prior yearly sales values (i.e., year 2009 = 230, year 2010 = 250, and year 2011 =215, year 2012=240, year 2013=260), with the following weights (i.e., wt-1 =0.4, wt-2 =0.2, wt-3 =0.2, wt-4 =0.1, wt-5 =0.1), which of the following is the weighted moving average forecast for year 2014?

A. 155
B. 261
C. 243
D. 283
E. 213

Answer 1

Forecasted sales for 2014: $235.

Step-by-step explanation:

• If the company uses five prior yearly sales, to forecast year 2014, we should take into account the sales from 2009 to 2013 to forecast 2014 sales.
• If sales of previous years are year 2009 = 230, year 2010 = 250, and year 2011 =215, year 2012=240, year 2013=260, and;
• weights assigned to each previous year in order of appeareance are wt-1 =0.4, wt-2 =0.2, wt-3 =0.2, wt-4 =0.1, wt-5 =0.1, then 2014 forecasted sales are:

• 
  `230*{0.4}+250*{0.2}+215*{0.2}+240*{0.1}+260*{0.1}=235`