The case

The following data covers the monthly volume of sales of a product recorded over a time period of one year. The company wants to develop an appropriate simple forecasting model in order to predict their sales for the new year.

Period (t) Sales (Y_t)

Jan 214

Feb 218

Mar 216

Apr 224

May 226

Jun 234

Jul 246

Aug 252

Sep 248

Oct 250

Nov 255

Dec 258

Project requirements

a. Using smoothing constant values of your choice, formulate two forecasting models using the method of simple exponential smoothing and two forecasting models using the method of Holts exponential smoothing and use them to produce forecasts for the above time periods. All your calculations must be clearly shown.

b. Measure the accuracy of the predictions produced by your forecasting models using the mean absolute deviation (MAD) and the mean absolute percentage error (MAPE) tests. All your calculations must be clearly shown.

c. Clearly explain which forecasting model has produced the most accurate predictions and relate your findings to the particular characteristics of this time series.

Report

Produce a short typed report which should clearly explain your work and your findings. Your report should be properly structured and include an appropriate introduction (stating the aim of your work) and clear conclusions from your analysis. In case you use a software package for your calculations (e.g. Excel), it is very important that you clearly show your calculations (note: you do not need to do this for all time periods showing your calculations for the first two or three time periods of the series would be more than enough).