Forecasting Components and Methods Quiz

Questions and Answers

Which of the following is NOT a component of forecasting?

Marketing strategies

What is the primary purpose of good forecasts according to the text?

Reducing overall personnel costs

Which time frame is described as short-range in the context of forecasting?

Daily demand or resource requirements

What does the term 'cycles' refer to in the context of forecasting?

Patterns that repeat at regular intervals Signup and view all the answers

What do meteorologists and sportscasters do?

Predicting weather and future events Signup and view all the answers

What is the purpose of using different forecasting methods according to the text?

To adapt to different time frames and patterns Signup and view all the answers

Which forecasting component refers to a long-term movement of the item being forecast?

Trend Signup and view all the answers

What type of movement in demand repeats itself over a lengthy time span?

Cycle Signup and view all the answers

Which method of forecasting uses historical data to predict future behavior?

Time Series Signup and view all the answers

What type of method uses judgment, expertise, and opinion to make forecasts?

Qualitative Methods Signup and view all the answers

Which forecasting method attempts to develop a mathematical relationship between the item being forecast and factors that cause it to behave the way it does?

Regression Methods Signup and view all the answers

What does moving average use from the recent past to develop forecasts?

Values Signup and view all the answers

When is moving average useful for forecasting?

When there is no trend or seasonal pattern Signup and view all the answers

What is the formula for moving average (MA)?

$MA = \frac{\sum_{i=1}^{n}D_i}{n}$ Signup and view all the answers

Which forecasting component involves an oscillating movement in demand that occurs periodically in the short run?

Seasonal pattern Signup and view all the answers

What do time series methods assume about future behavior based on historical data?

It will continue to occur in the future. Signup and view all the answers

Study Notes

Forecasting is the process of predicting future events or trends based on historical data and patterns.
Examples of forecasting include weather predictions, sports game outcomes, and business demand predictions.
Good forecasts can lead to cost savings, increased customer satisfaction, and better resource allocation.
Various forecasting methods exist depending on the time frame and existence of patterns.
Short-range forecasts (1-2 months) include daily demands and resource requirements; medium-range (2 months - 1-2 years) include additional resources for the upcoming year; long-range (more than 1-2 years) include new products and facilities.
Patterns include trend, random variations, cycles, and seasonal patterns.
Trend is a long-term movement of the item being forecast.
Random variations are movements that are not predictable and follow no pattern.
Cycles are movements that repeat themselves over a lengthy time span.
Seasonal patterns are oscillating movements in demand that occur periodically in the short run.
Time series methods use historical data to predict future behavior, assuming that past trends will continue.
Moving average is a time series method that uses values from the recent past to develop forecasts.
Moving averages are useful for forecasting relatively stable items that do not display any trend or seasonal pattern.
Regression methods attempt to develop a mathematical relationship between the item being forecast and factors that cause it to behave the way it does.
Qualitative methods use judgment, expertise, and opinion to make forecasts.
Time series methods make use of historical data collected over a long period of time and assume that past trends will continue.
Moving average uses values from the recent past to develop forecasts and is useful for forecasting relatively stable items.
Formula for moving average: (∑Di / n) where: n = number of periods in the moving average, D = data in period i.
Instant Paper Clip Supply Company wants to forecast orders for the month of November using moving average method.