Table 108
a Manager Wants to Forecast the Monthly Demand
for

question 89

Multiple Choice

Table 10.8
A manager wants to forecast the monthly demand
for a machine the company produces.
$$\begin{array} { | c | c | } \hline \text { Month } & \begin{array} { c } \text { No. Machines } \\\text { Sold }\end{array} \\\hline 1 & 50 \\2 & 65 \\3 & 52 \\4 & 56 \\5 & 55 \\6 & 60 \\\hline\end{array}$$
-The management of a company specializing in securities analysis has been using two forecasting methods to follow a new stock issue.
Forecast Method
$$\begin{array} { | c | c | c | c | } \hline \text { Month } & \begin{array} { c } \text { Exponential } \\\text { Smoothing }\end{array} & \text { Judgmental } & \begin{array} { c } \text { Actual } \\\text { Price }\end{array} \\\hline 1 & 48 & 50 & 51 \\2 & 50 & 52 & 53 \\3 & 51 & 55 & 54 \\\hline\end{array}$$
Which one of the following statements is TRUE?

• A) Based on MAD, the exponential smoothing approach is more accurate.
• B) Based on CFE, the bias of the judgment forecasts is larger than the bias of the exponential smoothing forecasts.
• C) Based on MAD, the judgmental method is more accurate.
• D) Based on CFE, the bias of the exponential smoothing forecasts is steadily improving.

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Definitions:

Backward Integration

A type of vertical integration where a company expands its role to fulfill tasks formerly completed by businesses up the supply chain.

Horizontal Integration

A strategy where a company acquires or merges with other companies at the same level of the supply chain in the same or different industries, to increase market share or product offerings.

Purchasing Savings

Cost reductions achieved by negotiating lower prices or finding more efficient procurement methods.

Vertical Integration

A strategy where a company expands its operations into different stages of production, often including the supply chain, to control costs and improve efficiency.