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Different Methods for Forecasting Sales

Monthly sales for National Mixer, Inc. for a seven-month period were as follows:

Month (T) - Sales (1000 UNITS)
Feb - 19
Mar - 18
Apr - 15
May - 20
Jun - 18
Jul - 22
Aug - 20

Forecast the sales volume for September using each of the following method:
a) 5-month moving average;
b) Weighted average, where the weights are - 0.60 (August), 0.30 (July), 0.10 (June)
c) Exponential smoothing with a smoothing constant equal to 0.20
d) Linear trend equation, Y = 16.86+0.5*T;

Solution Preview

a)
5-month moving average;
Using the 5-month moving average, the forecast for September
15+20+18+22+20/5 = 19 (in units of thousands)

b)
Weighted average, where the weights are - 0.60 (August), 0.30 (July), 0.10 (June)
Using weighted moving average, for the month of September, the forecast for September = .1*18 + .3*22 + .6*20 =20.4(in units of thousands)

c)
Exponential ...

Solution Summary

This question gives the sales for 7 months, and asks to forecast sales for the next month. You need to calculate moving average and weighted average, exponential smoothing and look at linear trend equation.

$2.19