# Forecasting

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Forecasting
Cassandra Harris
HSM/260
5/3/2015 Cynthia Cucuzza
Forecasting
Exercise 9.1
The following data represent total personnel expenses for the Palmdale Human Service Agency for past four fiscal years:
20 X 1 = \$5,250,000
20 X 2 = \$5,500,000
20 X 3 = \$6,000,000
20 X 4 = \$6,750,000
Forecast personnel expenses for fiscal year 20X5 using moving averages weighted moving averages, exponential smoothing, and time series regression. For moving averages and weighted moving averages, use only the data for the past three fiscal years. For weighted moving averages, assign a value of 1 to the data for 20 X 2, a value of 2 to the data for 20 X 3, and a value of 3 to the data for 20 X 4. For exponential smoothing, assume that the last forecast for fiscal year 20 X 4 was \$6,300,000. You decide on the alpha to be used for exponential smoothing. For time series regression, use the data for all four fiscal years. Which forecast will you use? Why?

Fiscal Year Expenses
20 X 2 = \$5,500,000
20 X 3 = \$6,000,000
20 X 4 = \$6,750,000
20 X 5 = \$6,083,333
In order to get the moving average, I must add the last three years then divide by three, this will get me the forecasted expenses for fiscal year 20 X 5.
Weighted moving averages:
Fiscal Year Expenses Weight Score:
20 X 2 = \$5,500,000 1 \$5,500,000
20 X 3 = \$6,000,000 2 \$12,000,000
20 X 4 = \$6,750,000 3 \$20,250,000
20 X 5 = \$6,291,667

In order to get the weighted moving average for fiscal year 20 X 5, I must add the weight to the expenses to get a weighted rating. I then add the weighted score and divide by number of weights added all together, to get fiscal year costs for 20 X 5.

Exponential smoothing
Fiscal Year Expenses
20 X 2 = \$5,500,000
20 X 3 = \$6,000,000
20 X 4 = \$6,750,000
20 X 5 = \$6,210,000

The Exponential smoothing formula is: NF = LF + a (LD - LF)
This is used to calculate forecast.
NF = \$6,300,000 + .3 (\$6,000,000 - \$6,300,000)

How do financial trends affect forecasting? :

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