1. Homework Solution Weighted Averages - Exponential Smoothing - Trend Cool-Man Air Conditioners Manual ManualComputer-Based TM MGMT E-5070 Part B

2. Cool-Man Air Conditioners REQUIREMENT: 1.What effect did the smoothing coefficient have on the forecast for Cool-Man air conditioners? 2.Which smoothing coefficient gives the most accurate forecast?

3. Cool-Man Air Conditioners YearActual Sales α = 0.30 Forecast Absolute Deviation 1450410.040.0 2495422.073.0 3518443.974.1 4563466.196.9 5584495.288.8 6?521.8- Total ( Σ )372.8

4. Cool-Man Air Conditioners YearActual Sales α = 0.60 Forecast Absolute Deviation 1450410.040.0 2495434.061.0 3518470.647.4 4563499.064.0 5584537.446.6 6?565.8- Total ( Σ )259.0

5. Cool-Man Air Conditioners YearActual Sales α = 0.90 Forecast Absolute Deviation 1450410.040.0 2495446.049.0 3518490.127.9 4563515.247.8 5584558.225.8 6?581.4- Total ( Σ )190.5

6. Cool-Man Air Conditioners MAD α = 0.30 = 372.8 / 5 = 74.56 MAD α = 0.60 = 259.0 / 5 = 51.80 MAD α = 0.90 = 190.5 / 5 = 38.10 Because it has the lowest MAD, the smoothing coefficient α = 0.90 gives the most accurate forecast.

7. WE SELECT THE “FORECASTING” MODULE

8. WE WANT TO DEVELOP A NEW PROGRAM FOR MOVING AVERAGES & EXPONENTIAL SMOOTHING, WE SELECT “TIME SERIES ANALYSIS”

9. THE DATA CREATION SCREEN - Insert the number of past years - We can label those months or years any way we want - We can also insert a title for the problem

10. “ The Data Table ” Appears We insert the annual sales We can also still change the periods titles, i.e. 1 st Year, 1 st Month, etc. “Naïve Method” is the default method

11. We first forecast via Exponential smoothing ( a = 0.30 )

12. The 6 th Year Forecast ( 521.8 units ) MAD Forecast Error ( 74.56 units )

15. We now forecast via Exponential smoothing ( a = 0.60 )

16. The 6 th Year Forecast ( 565.37 units ) The MAD Forecast Error ( 51.8 units )

19. We now forecast via Exponential Smoothing ( a = 0.90 )

20. The 6 th Year Forecast ( 581.4 units ) MAD Forecast Error ( 38.1 units )

23. To forecast via 3-Year Moving Average each period is weighted evenly, ( “1” )

24. The 6 th Year Forecast ( 555 units ) The MAD Forecast Error ( 67 units )

27. We now forecast via The Trend Projection Method

28. The 6 th Year Forecast ( 622.8 units ) Y = 421.2 + (33.6)(6) = 622.8 The Regression Line Y = 421.2 + 33.6X

31. Cool-Man Air Conditioners REQUIREMENT: 1.Would you use exponential smoothing with a smoothing coefficient of a = 0.30, a three (3) year moving average, or a trend to predict the sales of Cool-Man air conditioners?

32. Cool-Man Air Conditioners THREE YEAR MOVING AVERAGE Year Actual Sales Forecast Absolute Deviation 1450-- 2495-- 3518-- 4563487.775.3 5584525.358.7 6?555.0- Total ( Σ )134.0

33. Cool-Man Air Conditioners TIME SERIES FORECAST Year Actual Sales Forecast Absolute Deviation 1450454.84.8 2495488.46.6 3518522.04.0 4563555.67.4 5584589.25.2 6?622.8- Total ( Σ ) 28.0

34. Cool-Man Air Conditioners MethodMADCalculations Exponential Smoothing ( a =.30 ) 74.56 372.8 / 5 = 74.56 Three-Year Moving Average 67.0 134 / 2 = 67.0 Regression ( Trend Line ) 5.6 28 / 5 = 5.6 Regression ( trend line ) is the preferred method because of its low MAD ( mean absolute deviation )

40. Homework Solution Weighted Averages - Exponential Smoothing - Trend Cool-Man Air Conditioners Manual ManualComputer-Based TM Part B