Sunrise Baking Company markets dough nuts through a chain of food stores. It has been experiencing overproduction and underproduction because of forecasting errors. The following data are its production in dozens of doughnuts for the past four weeks. Doughnuts are made for the following day; for example, Sunday's doughnut production is for Monday's sales, Monday's production is for Tuesday's sales, etc. The bakery is closed Saturday, so Friday's production must satisfy demand for both Saturday and Sunday
Production Day 4 Weeks Ago 3 Weeks Ago 2 Weeks Ago 1 Week Ago
Monday 2,200 2,400 2,300 2,400
Tuesday 2,000 2,100 2,200 2,200
Wednesday 2,300 2,400 2,300 2,500
Thursday 1,800 1,900 1,800 2,000
Friday 1,900 1,800 2,100 2,000
Sunday 2,800 2,700 3,000 2,900
Make a forecast for Monday's production of this week using the moving average, weighted moving average and exponential smoothing on the following basis:
a) For the moving average, use a two-period moving average
b) For the weighted moving average, using a weighted average of 0.70 for the most recent week and 0.30 for the second most recent week.
c) For exponential smoothing, using an σ = 0.20, and the forecast for Monday four weeks ago was 2,100.
d) From the results in a) through c), which method provides the better forecast for Monday of this week? Why? Your selection criteria must be based on one of the numerical evaluation methods we have learned this semester. Only saying "it is the easier method" is not acceptable.
e) Looking at the results of your analysis in c), how good do you think the method you selected here is? In other words, would you recommend using the method selected in d) Explain.
The solution provides detailed instructions and explanations in the Excel file.