BA 339 – Chapter 3 Quiz Questions & Answers
1. In exponential smoothing, it is desirable to use a higher smoothing constant when forecasting
demand for a product experiencing high growth.
a. True
2. Decomposition of a time series means identifying and separating the time series data into its
components.
a. True
3. A restriction in using linear regression is that it assumes that past data and future projections fall
on or near a straight line.
a. True
4. A tracking signal (TS) can be calculated using the arithmetic sum of forecast deviations divided
by the MAD.
a. True
5. If a firm produced a product that was experiencing growth in demand, the smoothing constant
alpha (reaction rate to differences) used in an exponential smoothing forecasting model would
tend to be which of the following?
a. Close to zero
b. A very low percentage, less than 10%
c. The more rapid the growth, the higher the percentage
d. The more rapid the growth, the lower the percentage
e. 50% or more
6. MAD statistics can be used to generate tracking signals.
a. True
7. In most cases, demand for products or services can be broken into several components. Which
of the following is considered a component of demand?
a. Cyclical elements
b. Future elements
c. Future demand
d. Past demand
e. Inconsistent demand
f. Level demand
8. A company has calculated its running sum of forecast errors to be 500 and its mean absolute
deviation is exactly 35. Which of the following is the company’s tracking signal?
a. Cannot be calculated based on this information
b. About 14.3
c. More than 35
d. Exactly 35
e. About 0.07
9. Given a prior forecast demand value of 230, a related actual demand value of 250, and a
smoothing constant alpha of 0.1, what is the exponential smoothing forecast value for the
following period?
a. 230
b. 232
c. 238
d. 248
e. 250
10. A central premise of exponential smoothing is that more recent data is less indicative of the
future than data from the distant past.
a. False
11. Given a prior forecast demand value of 1,100, a related actual demand value of 1,000, and a
smoothing constant alpha of 0.3, what is the exponential smoothing forecast value?
a. 1,000
b. 1,030
c. 1,070
d. 1,130
e. 970
12. Which of the following forecasting methods is very dependent on selection of the right
individuals who will judgmentally be used to actually generate the forecast?
a. Time series analysis
b. Simple moving average
c. Weighted moving average
d. Delphi method
13. A company wants to generate a forecast for unit demand for year 2018 using exponential
smoothing. The actual demand in year 2017 was 120. The forecast demand in year 2017 was
110. Using this data and a smoothing constant alpha of 0.1, which of the following is the
resulting year 2018 forecast value?
a. 100
b. 110
c. 111
d. 114
e. 120
14. In general, which forecasting time frame is best to detect general trends?
a. Short-term forecasts
b. Quick-time forecasts
c. Long range forecasts
d. Medium term forecasts
15. In most cases, demand for products or services can be broken down into several components.
Which of the following is not considered a component of demand?
a. Average demand for a period
b. A trend
c. Seasonal elements
d. Past data
e. Autocorrelation
16. Which one of the following are among the major reasons that exponential smoothing has
become well accepted as a forecasting technique?
a. Accurate and easy to use
b. Sophistication of analysis
c. Predicts turning points
d. Captures patterns I
17. A company has actual unit demand for three consecutive years of 124, 126, and 135. The
respective forecasts for the same three years are 120, 120, and 130. Which of the following is
the resulting MAD value that can be computed from this data?
a. 1
b. 3
c. 5
d. 15
e. 123
18. In general, which forecasting time frame compensates most effectively for random variation and
short term changes?
a. Short-term forecasts
b. Quick-time forecasts
c. Long range forecasts
d. Medium term forecasts
e. Rapid change forecasts
19. In general, which forecasting time frame best identifies seasonal effects?
a. Short-term forecasts
b. Quick-time forecasts
c. Long range forecasts
d. Medium term forecasts
e. Rapid change forecasts
20. In business forecasting, what is usually considered a short-term time period?
a. Four weeks or less
b. More than three months
c. Six more or more
d. Less than three months
e. One year
