Quantitative Management: Questions and Solutions

Practice Problems

1. Given that the MAD for the following forecast is 2.5, what is the actual

value in period 2?

Period Forecast Actual

1 100 95

2 110

3 120 123

4 130 130

(a) 120

(b) 98

(c) 108

(d) 115

(e) none of the above

Reason:

Or,

Or,

Or,

Or,

2. Assume that you have tried three different forecasting models. For the

first, the MAD = 2.5, for the second, the MSE = 10.5, and for the third, the

MAPE = 2.7. We can then say:

(a) the third method is the best.

(b) the second method is the best.

(c) methods one and three are preferable to method two.

(d) method two is least preferred.

(e) none of the above

Reason:

MAD is easiest to compute but weights errors linearly. MSE gives more weight to the larger errors thereby causing more problems whereas MAPE is used when the large errors are put into perspective.

3. Daily demand for newspapers for the last 10 days has been as follows: 12,

13, 16, 15, 12, 18, 14, 12, 13, 15. Forecast sales for the next day using a

two-day moving average.

(a) 14

(b) 13

(c) 15

(d) 28

(e) none of the above

Reason:

4. An exponential smoothing model having a large 

(a) is more responsive to recent demand changes.

(b) is less responsive to recent demand.

(c) places emphasis on the past demand data.

(d) is always the most effective weighting scheme.

(e) is not a time-series model.

Reason:

More α means more weight to the recent demand changes.

5. Enrollment in a particular class for the last four semesters has been 120, 126, 110, and 130. Develop a forecast of enrollment next semester using exponential smoothing with an alpha = 0.2. Assume that an initial forecast for the first semester was 120 (so the forecast and the actual were the same).

(a) 118.96

(b) 121.17

(c) 130

(d) 120

(e) none of the above

6. Which of the following is not a characteristic of trend projections?...