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Forecasting

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Submitted By xanna2007
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Forecasting
Tammy Powell
HSM/260
December 19, 2014
Adrianne Franklin

Exercise 9.3
Moving Averages
20X2-20X4 $18,250,000 / 3 = $6,083,333
Weighted Moving Averages

20X2 $5,500,000 1 $5,500,000
20X3 $6,000,000 2 $12,000,000
20X4 $6,750,000 3 $20,250,000
__ ___________ 6 $37,750,000
20X5 $37,750,000 /6 = $6,291,667

Exponential Smoothing
NF = LF + a (LD – LF)
NF = $6,300,000 + 0.95($6,750,000 - $6,300,000)
= $6,300,000 + 0.95(45,000)
= $6,300,000 + (42,750)
= $6,342,750

Exercise 9.3

Moving Averages
20X2-20X4 $41,750,000 / 3 = $13,916,667

Weighted Moving Averages
20X2 $14,250,000 1 $14,250,000
20X3 $14,000,000 2 $28,000,000
20X4 $13,500,000 3 $40,500,000
__ ___________ 6 $82,750,000
20X5 $82,750,000/6 = $13,791,667

Exponential Smoothing
NF = $13,000,000 + 0.95($13,500,000 - $13,000,000)
= $13,000,000 + 0.95(500,000)
= $13,000,000 + (475,000)
= $13,475,000

Moving averages are the easiest to do without a computer and is fast, but less accurate. Add the three most recent years, and divide by three. Weighted moving averages are simple, but require more time. The most recent year gets the highest weight. The oldest data is one and one multiplies the total. The next year is two, and two multiplies the total. The most current data weight is three, and multiplied by three. Finally, use the total of all years, and dived by the total weight for the weight moving average. The hardest to understand in exponential smoothing was the formulas and placement of the numbers.

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