Table 10.1 -Use the Information in Table 10.1.Your Boss Has Asked You

question 70

Multiple Choice

Table 10.1

-Use the information in Table 10.1.Your boss has asked you to find a good technique to forecast short-term demand for an important product.You have decided to test the following four techniques against the historical data already given: ∙ Three-month simple moving average
∙ Three-month weighted moving average,with weight of 0.6 for the most recent month,0.3 for the second-most-recent month,and 0.1 for the third-most-recent month
∙ Three-month weighted moving average,with weights of 0.5 for the most recent month,0.3 for the second-most-recent month,and 0.2 for the third-most-recent month
∙ Exponential smoothing (a = 0.3 and the forecast for March was 55)
Use each of the four techniques to forecast April through August,and then use the five months of forecasts to calculate MAD.Round all forecasts to the nearest whole number just before doing your MAD calculations.Which of the four techniques is best in terms of MAD?

• A)three-month simple moving average
• B)three-month weighted moving average (0.6,0.3,0.1)
• C)three-month weighted moving average (0.5,0.3,0.2)
• D)exponential smoothing (a = 0.3)

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Definitions:

Selling and Administrative Expense

Combined costs related to the selling of goods and the general administrative activities of a company, excluding production costs.

Direct Materials

Raw materials that are consumed in the production process and can be directly attributed to specific products.

Production Labor

The workforce involved in the manufacturing process, whose wages are considered a direct labor cost affecting the cost of goods sold.

Direct Cost

Expenses that can be directly linked to the production of specific goods or services.