Central States Electric Company estimates its demand on time (in millions of kilowatt hours 0 to be:
D = 77 + 0.43Q
where Q refers to the sequential quarter number and Q = 1 for winter 1984. In addition, the multiplicative seasonal factors are as follows:
1. In addition, the multiplicative seasonal factors are as follows:
Quarter Factor (Index)
Winter .8
Spring 1.1
summer 1.4
Fall .7
Forecast energy use for the four quarters of 2009 beginning with winter.
The Carbondale Hospital is considering the purchase of ambulance. The TheXarbondale Hospital is considering the purchase of ambulance. The decision will rest partly on the anticipated mileage" be driven next year. The miles driven during the past 5
years are as follows:
Year

Mileage

1

3000

2

4000

3

3400

4

3800

5

3700

a) Forecast the mileage for next year using a 2year moving average.
b) Find the MAD based on the 2year moving average forecast in part (a), (Hint: You will have only 3 years of matched data.)
c) Use a weighted 2year moving average with weights of .4 and .6 to forecast next year's mileage. (The weight of .6 is for the most recent year.) What MAD results from using this approach to forecasting? (Hint: You will have only 3 years of matched data.)
d) Compute the forecast for year 6 using exponential smoothing, an initial forecast for year 1 of 3,000 miles, and a = .5.
The number of transistors (in millions) made at a plant in Japan during the past 5 years as follows:
Year

Transistors 140

2

160

3

190

4

200

5

210

a) Forecast the number of transistors to be made next year, using linear regression.
b) Compute the mean squared error (MSE) when using linear regression.
c) Compute the mean absolute percent error (MAPE).
Meile Machine Shop, Inc.. has a 1year contract for the production of 200,000 gear housings for a new offroad vehicle. Owner Meile hopes the contract will be extended and the volume increased next year. Meile has developed costs for three alternatives. They are generalpurpose equipment (GPE), flexible manufacturing system (FMS), and expensive, but efficient, dedicated machine (DM). The cost data follow:

General Purpose Equipment (GPE)

Flexible Manufacturing System (FMS )

Dedicated Machine
(DM)

Annual contracted units

200,000

200,000

200,000

Annual fixed cost

$100,000

$200,000

$500,000

Per unit variable

$15.00

$14.00

$13.00

Which process is best for this contract?
*Problem 4.5: Replace (b) as written with "Find the MAD based on a twoyear moving average."