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Forecasting Techniques: Moving Average and Exponential Smoothing

The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipated mileage to be driven next year. The miles driven during the past 5 years are as follows:
1 3,000
2 4,000
3 3,400
4 3,800
5 3,700

a) Forecast the mileage for next year (6th year) using a 2 year moving average.
b) Find the MAD based on the 2 year moving average. (Hint; You will have only 3 years of matched data).
c) Use a weighted 2 year moving average with weights of .4 and .6 forecast next year's mileage. (The weight of .6 is for most recent year.) What MAD results from using this approach to forecasting? (Hint; You will have only 3 years of matched data).
d) Complete the forecast for year 6 using exponential smoothing, an initial forecast for year 1 of 3,000 miles and α = .5

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Solution Summary

This solution depicts the steps to forecast the mileage by moving average and exponential smoothing techniques.