dolution

The ABC Floral Shop sold the following number of geraniums during the last two weeks.

Day	Demand	Day	Demand
1	200	8	154
2	134	9	182
3	147	10	197
4	165	11	132
5	183	12	163
6	125	13	157
7	146	14	169

The ABC Floral Shop is considering fitting various forecasting models on the first seven days of demand and using the second seven days as a hold-out sample for comparing the prediction accuracy of the models. They have decided to use a = 0.25, but aren’t sure what starting value of forecast, F₁, to use.

(Round all answers to 1 decimal place.)

a. Try values of F₁ = 160, 170,180 to determine the best exponential model for the first seven days using the minimum total absolute deviation as the criterion.

F₁= 160

Day	Demand (t)	Forecast (t)	Absolute Error (t)
1	200	160.0
2	134
3	147
4	165
5	183
6	125
7	146
Total

F₁ = 170

Day	Demand(t)	Forecast (t)	Absolute Error (t)
1	200	170.0
2	134
3	147
4	165
5	183
6	125
7	146
Total

F₁ = 180

Day	Demand (t)	Forecast(t)	Absolute Error (t)
1	200	180.0
2	134
3	147
4	165
5	183
6	125
7	146
Total

Which of the above forecasts is the best?

multiple choice 1

• Using 160.0

• Using 170.0

• Using 180.0

b. Compare the best model from part a to a three-period moving average model on the second set of data.

Day	Demand (t)	Forecast (t)	Absolute Error (t)
8	154
9	182
10	197
11	132
12	163
13	157
14	169
Total

3-period moving average

Day	Demand (t)	Forecast (t)	Absolute Error (t)
8	154
9	182
10	197
11	132
12	163
13	157
14	169
Total

Which one has the smallest sum of absolute errors?

multiple choice 2

• 3-period moving average

• Exponential Smoothing