Chapter 5 Forecasting

1) A medium-term forecast typically covers
a two- to four-year time horizon.

2) Regression is always a superior
forecasting method to exponential smoothing, so regression should be used
whenever the appropriate software is available.

3) The three categories of forecasting
models are time series, quantitative, and qualitative.

4) TIME SERIES models attempt to predict
the future by using historical data.
5) TIME SERIES models rely on judgment in
an attempt to incorporate qualitative or subjective factors into the
forecasting model.

6) A moving average forecasting method is
a causal forecasting method.

7) An exponential forecasting method is a
TIME SERIES forecasting method.

8) A trend-projection forecasting method
is a causal forecasting method.

9) Qualitative models produce forecasts
that are a little better than simple guesses or coin tosses.

10) The most common quantitative causal
model is regression analysis.
11) Qualitative models attempt to
incorporate judgmental or subjective factors into the forecasting model.

12) A scatter diagram is useful to
determine if a relationship exists between two variables.

13) The Delphi method solicits input from
customers or potential customers regarding their future purchasing plans.

14) The naïve forecast for the next period
is the actual value observed in the current period.
15) Mean absolute deviation (MAD) is
simply the sum of forecast errors.

16) TIME SERIES models enable the
forecaster to include specific representations of various qualitative and
quantitative factors.

17) Four components of time series are
trend, moving average, exponential smoothing, and seasonality.

18) The fewer the periods over which one
takes a moving average, the more accurately the resulting forecast mirrors the
actual data of the most recent time periods.

19) In a weighted moving average, the
weights assigned must sum to 1.

20) A scatter diagram for a time series
may be plotted on a two-dimensional graph with the horizontal axis representing
the variable to be forecast (such as sales).

21) Scatter diagrams can be useful in spotting
trends or cycles in data over time.

22) Exponential smoothing cannot be used
for data with a trend.

23) In a second order exponential
smoothing, a low ? gives less weight to more recent trends.

24) An advantage of exponential smoothing
over a simple moving average is that exponential smoothing requires one to
retain less data.

25) When the smoothing constant ? = 0, the
exponential smoothing model is equivalent to the naïve forecasting model.

26) Multiple regression models use dummy
variables to adjust for seasonal variations in an additive TIME SERIES model.
27) Multiple regression can be used to
develop a multiplicative decomposition model.
28) A seasonal index must be between -1 and
+1.

29) A seasonal index of 1 means that the
season is average.

30) The process of isolating linear trend
and seasonal factors to develop a more accurate forecast is called regression.

31) When the smoothing constant ? = 1, the
exponential smoothing model is equivalent to the naïve forecasting model.

32) Multiple regression may be used to
forecast both trend and seasonal components present in a time series.

33) Adaptive smoothing is analogous to
exponential smoothing where the coefficients ? and ? are periodically
updated to improve the forecast.

34) Bias is the average error of a
forecast model.

35) Which of the following is not
classified as a qualitative forecasting model?
A) exponential smoothing
B) Delphi method
C) jury of executive opinion
D) sales force composite
E) consumer market survey

36) A judgmental forecasting technique
that uses decision makers, staff personnel, and respondent to determine a
forecast is called
A) exponential smoothing.
B) the Delphi method.
C) jury of executive opinion.
D) sales force composite.
E) consumer market survey.

37) Which of the following is considered a
causal method of forecasting?
A) exponential smoothing
B) moving average
C) Holt’s method
D) Delphi method
E) None of the above

38) A graphical plot with sales on the Y
axis and time on the X axis is a
A) scatter diagram.
B) trend projection.
C) radar chart.
D) line graph.
E) bar chart.

39) Which of the following statements
about scatter diagrams is true?
A) Time is always plotted on the y-axis.
B) It can depict the relationship among
three variables simultaneously.
C) It is helpful when forecasting with
qualitative data.
D) The variable to be forecasted is placed
on the y-axis.
E) It is not a good tool for understanding
TIME SERIES data.

40) Which of the following is a technique
used to determine forecasting accuracy?
A) exponential smoothing
B) moving average
C) regression
D) Delphi method
E) mean absolute percent error