CHAPTER 4

Question 1

The art and science of predicting future events.

Answer 1

Forecasting

Question 2

Planning indicators that are valuable in helping organizations prepare medium- to long-range forecasts.

Answer 2

Economic forecasts

Question 3

Long-term forecasts are concerned with the rates of technological progress.

Answer 3

Technological forecasts

Question 4

Projections of a company’s sales for each time period in the
planning horizon.

Answer 4

Demand forecasts

Question 5

The forecast is the only estimate of demand until actual demand becomes known. True or false?

Answer 5

True

Question 6

Forecasting follows seven basic steps:

Answer 6

(1) Determine the use of the forecast;
(2) Select the items to be forecasted;
(3) Determine the time horizon of the
forecast;
(4) Select the forecasting model(s);
(5) Gather the data needed to make
the forecast;
(6) Make the forecast;
(7) Validate and implement the results.

Question 7

Forecasts that employ mathematical modeling to forecast demand.

Answer 7

Quantitative forecasts

Question 8

Forecasts that incorporate such factors as the decision
maker’s intuition, emotions, personal experiences, and value system.

Answer 8

Qualitative forecast

Question 9

—Takes the opinion of a small group of high-level
managers and results in a group estimate of demand

Answer 9

Jury of executive opinion

Question 10

—Uses an interactive group process that allows experts to make
forecasts

Answer 10

Delphi method

Question 11

Based on salespersons’ estimates of expected sales.

Answer 11

Sales force composite

Question 12

Solicits input from customers or potential customers regarding
future purchasing plans

Answer 12

Market survey

Question 13

Uses a series of past data points to make a forecast.

Answer 13

Time series

Question 14

—Assumes that demand in the next period is equal to demand in
the most recent period.

Answer 14

Naive approach —

Question 15

Uses an average of the n most recent periods of data to forecast the next period

Answer 15

Moving average

Question 16

A weighted-moving-average forecasting technique in
which data points are weighted by an exponential function.

Answer 16

Exponential smoothing

Question 17

The weighting factor, a, used in an exponential smoothing forecast, a number between 0 and 1

Answer 17

Smoothing constant

Question 18

A measure of the overall forecast error for a
model.

Answer 18

Mean absolute deviation (MAD)

Question 19

The average of the squared differences between
the forecast and observed values.

Answer 19

Mean squared error (MSE

Question 20

The average of the absolute differences
between the forecast and actual values, expressed as a percentage of actual
values

Answer 20

Mean absolute percent error (MAPE)

Question 21

A time-series forecasting method that fits a trend line to a series
of historical data points and then projects the line into the future for forecasts.
Trend projection and regression analysis

Answer 21

Trend projection

Question 22

—Regular upward or downward movements in a time series
that tie to recurring events

Answer 22

Seasonal variations

Question 23

Patterns in the data that occur every several years

Answer 23

Cycles

Question 24

A straight-line mathematical model to describe the
functional relationships between independent and dependent variables.

Answer 24

Linear-regression analysis

Question 25

A measure of variability around the regression
line

Answer 25

Standard error of the estimate

Question 26

A measure of the strength of the relationship
between two variables

Answer 26

Coefficient of correlation

Question 27

A measure of the amount of variation in the
dependent variable about its mean that is explained by the regression equation.

Answer 27

Coefficient of determination

Question 28

An associative forecasting method with . 1 independent
variable.

Answer 28

Multiple regression

Question 29

Multiple regression forecast Formula

Answer 29

y = a + b1x1 + b2x2

Question 30

A measurement of how well the forecast is predicting actual
values.

Answer 30

Tracking signal

Question 31

A forecast that is consistently higher or lower than actual values of a time series

Answer 31

Bias

Question 32

An approach to exponential smoothing forecasting in
which the smoothing constant is automatically changed to keep errors to a
minimum.

Answer 32

Adaptive smoothing

Question 33

Forecasting that tries a variety of computer models and
selects the best one for a particular application.

Answer 33

Focus forecasting