Which of the following statements about time-series forecasting is true?

41) Which of the following statements about time-series forecasting is true?

A) It is based on the assumption that future demand will be the same as past demand.

B) It makes extensive use of the data collected in the qualitative approach.

C) The analysis of past demand helps predict future demand.

D) Because it accounts for trends, cycles, and seasonal patterns, it is more powerful than causal forecasting.

E) All of the above are true.

Answer:  C

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

42) Time-series data may exhibit which of the following behaviors?

A) trend

B) random variations

C) seasonality

D) cycles

E) They may exhibit all of the above.

Answer:  E

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

43) Gradual, long-term movement in time-series data is called

A) seasonal variation

B) cycles

C) trends

D) exponential variation

E) random variation

Answer:  C

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

44) Which of the following is not present in a time series?

A) seasonality

B) operational variations

C) trend

D) cycles

E) random variations

Answer:  B

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

45) The fundamental difference between cycles and seasonality is the

A) duration of the repeating patterns

B) magnitude of the variation

C) ability to attribute the pattern to a cause

D) all of the above

E) none of the above

Answer:  A

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-5

46) In time series, which of the following cannot be predicted?

A) large increases in demand

B) technological trends

C) seasonal fluctuations

D) random fluctuations

E) large decreases in demand

Answer:  D

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

47) What is the approximate forecast for May using a four-month moving average?

Nov.	Dec.	Jan.	Feb.	Mar.	April
39	36	40	42	48	46

A) 38

B) 42

C) 43

D) 44

E) 47

Answer:  D

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-3

48) Which time-series model below assumes that demand in the next period will be equal to the most recent period's demand?

A) naive approach

B) moving average approach

C) weighted moving average approach

D) exponential smoothing approach

E) none of the above

Answer:  A

Diff: 1

Topic:  Time-series forecasting

Objective:  LO4-3

49) John's House of Pancakes uses a weighted moving average method to forecast pancake sales.  It assigns a weight of 5 to the previous month's demand, 3 to demand two months ago, and 1 to demand three months ago.  If sales amounted to 1000 pancakes in May, 2200 pancakes in June, and 3000 pancakes in July, what should be the forecast for August?

A) 2400

B) 2511

C) 2067

D) 3767

E) 1622

Answer:  B

Diff: 2

Topic:  Time series forecasting

AACSB:  Analytic Skills

Objective:  LO4-3

50) A six-month moving average forecast is better than a three-month moving average forecast if demand

A) is rather stable

B) has been changing due to recent promotional efforts

C) follows a downward trend

D) follows a seasonal pattern that repeats itself twice a year

E) follows an upward trend

Answer:  A

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

51) Increasing the number of periods in a moving average will accomplish greater smoothing, but at the expense of

A) manager understanding

B) accuracy

C) stability

D) responsiveness to changes

E) All of the above are diminished when the number of periods increases.

Answer:  D

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

52) Which of the following statements comparing the weighted moving average technique and exponential smoothing is true?

A) Exponential smoothing is more easily used in combination with the Delphi method.

B) More emphasis can be placed on recent values using the weighted moving average.

C) Exponential smoothing is considerably more difficult to implement on a computer.

D) Exponential smoothing typically requires less record keeping of past data.

E) Exponential smoothing allows one to develop forecasts for multiple periods, whereas weighted moving averages does not.

Answer:  D

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

53) Which time-series model uses past forecasts and past demand data to generate a new forecast?

A) naive

B) moving average

C) weighted moving average

D) exponential smoothing

E) regression analysis

Answer:  D

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

54) Which is not a characteristic of exponential smoothing?

A) smoothes random variations in the data

B) easily altered weighting scheme

C) weights each historical value equally

D) has minimal data storage requirements

E) None of the above; they are all characteristics of exponential smoothing.

Answer:  C

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

55) Which of the following smoothing constants would make an exponential smoothing forecast equivalent to a naive forecast?

A) 0

B) 1 divided by the number of periods

C) 0.5

D) 1.0

E) cannot be determined

Answer:  D

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

56) Given an actual demand of 103, a previous forecast value of 99, and an alpha of .4, the exponential smoothing forecast for the next period would be

A) 94.6

B) 97.4

C) 100.6

D) 101.6

E) 103.0

Answer:  C

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-3

57) A forecast based on the previous forecast plus a percentage of the forecast error is a(n)

A) qualitative forecast

B) naive forecast

C) moving average forecast

D) weighted moving average forecast

E) exponentially smoothed forecast

Answer:  E

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

58) Given an actual demand of 61, a previous forecast of 58, and an  of .3, what would the forecast for the next period be using simple exponential smoothing?

A) 45.5

B) 57.1

C) 58.9

D) 61.0

E) 65.5

Answer:  C

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-3

59) Which of the following values of alpha would cause exponential smoothing to respond the most slowly to forecast errors?

A) 0.10

B) 0.20

C) 0.40

D) 0.80

E) cannot be determined

Answer:  A

Diff: 2

Topic:  Time-series forecasting

Objective:  LO4-3

60) A forecasting method has produced the following over the past five months. What is the mean absolute deviation?

Actual	Forecast	Error	|Error|
10	11	-1	1
8	10	-2	2
10	8	2	2
6	6	0	0
9	8	1	1

A) -0.2

B) -1.0

C) 0.0

D) 1.2

E) 8.6

Answer:  D

Diff: 2

Topic:  Time-series forecasting

AACSB:  Analytic Skills

Objective:  LO4-4