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5-14: Wallace Garden Supply Demand for Fertilizer

5-14: Wallace Garden Supply Demand for Fertilizer. Fertilizer is sold in 50 pound bags – data is given in units of 1,000s of bags over an 11 year period. Estimate demand on a 3-year moving average. Estimate demand on a weighted moving average. Determine which method is best.

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5-14: Wallace Garden Supply Demand for Fertilizer

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  1. 5-14: Wallace Garden SupplyDemand for Fertilizer • Fertilizer is sold in 50 pound bags – data is given in units of 1,000s of bags over an 11 year period. • Estimate demand on a 3-year moving average. • Estimate demand on a weighted moving average. • Determine which method is best. Jan White - BUS 340 - Problem 5-14

  2. A. Three-year moving average (4 + 6 + 4)/3 = 4.67 (6 + 4 + 5)/3 = 5.00 (4 + 5 + 10)/3 = 6.33 (5 + 10 + 8)/3 = 7.67 (10 + 8 + 7)/3 = 8.33 (8 + 7 + 9)/3 = 8.00 (7 + 9 + 12)/3 = 9.33 (9 + 12 + 14)/3 = 11.67 (12 + 14 + 15)/3 = 13.67 Mean Absolute Deviation (MAD) is 2.54 Jan White - BUS 340 - Problem 5-14

  3. B. Weighted Moving Averages In this model, sales for the most recent year are given a weight of 2, and sales in the two years prior to the last a weight of 1. Demand for each of the periods are multiplied by their respective weights, added, and then divided by three, as in the previous model. Jan White - BUS 340 - Problem 5-14

  4. Computation Model for Weighted Moving Averages • Data for years 6 (8 units), 7 (7 units), and 8 (9 units) are multiplied by 1, 1 and 2 respectively, then divided by 4 (sum of the weights) to arrive at the average. ((8 x 1) + (7 x 1) + (9 x 2))/4 = 8.25 units • This method provides a better forecast as it can give a more accurate projection. MAD is lower (2.31). Jan White - BUS 340 - Problem 5-14

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