The Park family would like to prepare next month’s family budget by forecasting its family expenses. One item of particular importance is the amount of money spent on food. The following data show the amount of money spent on food for the last 10 months. These data can also be found in the Excel file food expenditures.xlsx.

Month 1 2 3 4 5 6 7 8 9 10 Dollars 344 360 294 339 362 340 321 312 364 345

a. Forecast the family’s food expenditures next month using a three-period simple moving average.

b. Forecast the family’s food expenditures next month using a three-period weighted moving average with weights 0.7, 0.2, and 0.1.

c. Forecast the family’s food expenditures next month using exponential smoothing when a = 0.1.

d. Which forecast should you choose? Why?

AppendixLO1