QUESTION 3

A). What is a seasonal index? How is it calculated? (2 marks)

B). What is meant by the term deseasonalized demand (2 marks)

C). What is the mean absolute deviation (MAD)? Why is it useful in forecasting? (2 marks)

D) Calculate three forecasts using the following data. First, for periods 4 through 10, develop the exponentially smoothed forecasts using a forecast for period 3 (F3) of 45.0 and an alpha of 0.4. Second, calculate the three-period moving-average forecast for periods 4 through 10. Third, calculate the weighted moving average for periods 4 through 10, using weights of .70, .20, and .10, with 0.70 applied to the most recent data. Calculate the mean absolute deviation (MAD) and the cumulative sum of forecast error (CFE) for each forecasting procedure. Which forecasting procedure would you select? Why? (3 +4 + 5 +5 +2 marks)

Month	Demand
1	45
2	48
3	43
4	48
5	49
6	54
7	47
8	50
9	46
10	47