Calculate Moving Average

The table given below represents company sales; calculate 3 and 6 monthly moving averages, for data

Solution

These are calculated as given below:

April's forecast =  (Jan + Feb + Mar)/3 =  (1200 + 1280 + 1310)/3

May's forecast =  (Feb + Mar + Apr )/3  = (1280 + 1310 + 1270)/3

And so on...

Similarly for 6 monthly moving average

July forecast = (Jan + Feb + Mar + Apr + Jun)/6

= (1200 + 1280 + 1310 + 1270 + 1190 + 1290)/6

And so on...

Note:

While plotting moving average on graphs the points are plotted as the midpoint of the period of the average, for illustration in our example the forecast for April (1263) is plotted on mid Feb.