Forecasting

Satisfactory Essays
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?

Answer:
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? :

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Forecasting

    • 881 Words
    • 4 Pages

    Forecasting BUS446: Production Control (CFM1316A) Monday, April 29, 2013 Forecasting In the business world today, companies use forecasting methods to implement processes and strategies in order to meet organizational goals. Forecasting will allow a company to plan for possible outcomes, making adjustments to inventory levels and staff. Through forecasting, companies will attempt to keep operating costs at a manageable level without sacrificing production and quality.…

    • 881 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    Forecasting

    • 794 Words
    • 4 Pages

    Forecasting is the process of making statements about events whose actual outcomes (typically) have not yet been observed. A commonplace example might be estimation of some variable of interest at some specified future date. Prediction is a similar, but more general term. Both might refer to formal statistical methods employing time series, cross-sectional or longitudinal data, or alternatively to less formal judgemental methods. Usage can differ between areas of application: for example, in hydrology…

    • 794 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Forecasting

    • 1319 Words
    • 6 Pages

    Forecasting Business forecasting is the process of studying historical performance for the purpose of using the information gained to project future business conditions so that decisions can be made today that will assist in the achievement of certain goals. Forecasting involves taking historical date and using it to project future data with a mathematical model. Forecasts are extensively used to support business decisions and direct the work of operations managers. In this paper I will introduce…

    • 1319 Words
    • 6 Pages
    Better Essays
  • Satisfactory Essays

    Forecasting

    • 270 Words
    • 2 Pages

    Demand Forecasting Importance Demand forecasts form the basis of all supply chain planning. Forecast of future demand are essential for making accurate supply chain decisions and ensuring the company’s success. Examples of such decisions include how much of the product to make, how much to inventory, how much to replenish and how much to order. Ease of Forecasting Beverages are a push product. Forecasting is not easy in the beverage industry as there are possible serious fluctuations in demand…

    • 270 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Forecasting

    • 250 Words
    • 1 Page

    What is forecasting? What information is forecasted at your organization? Which forecasting methods are used at your organization? What information at your organization is not currently being forecasted that could be forecasted to increase productivity or decrease waste? Forecasting is the process of making statment's about future events whose actual outcomes have not yet been observed. Risk and uncertainty are central to forecasting and it is good practice to indicate the degree of uncertainty…

    • 250 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    Forecasting

    • 1337 Words
    • 6 Pages

    Businesses use forecasting to predict future, trends, patterns, and business with data to develop a forecast. This data is used to predict future sales. In forecasting we use testing and reasonableness to predict future events. Companies use this method to compare their sales with other companies. Forecasting has many benefits to include; what is the popular product customers are purchasing, and it enhances cash flow, and identifies patterns and trends inside a corporation. Using this method…

    • 1337 Words
    • 6 Pages
    Good Essays
  • Good Essays

    Forecasting

    • 986 Words
    • 4 Pages

    Forecasting Forecasting is a prediction of what will occur in the future. It is an uncertain process that is vital to survival in today’s international business environment. Rapid technological advances have given consumers greater product diversity as well as more information on which they make their product choices. Managers try to forecast with as much accuracy as possible, but that is becoming increasingly difficult in today’s fast-paced business world. Forecast Methods There are two…

    • 986 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    forecasting

    • 6310 Words
    • 86 Pages

    FORECASTING FORECASTING The Role of the Manager Planning Organizing Staffing Leading Controlling Future ? Data Information • Short-range • Medium-range • Long-range Features Common to All Forecasts Forecasting techniques generally assume that same underlying causal system that existed in the past will continue to exist in the future. Forecasts are rarely perfect. Forecasts for groups of items tend to be more accurate than forecasts for individual items. Forecast…

    • 6310 Words
    • 86 Pages
    Powerful Essays
  • Powerful Essays

    Forecasting

    • 1133 Words
    • 5 Pages

    Forecasting Why forecast? Features Common to all Forecasts • Conditions in the past will continue in the future • Rarely perfect • Forecasts for groups tend to be more accurate than forecasts for individuals • Forecast accuracy declines as time horizon increases Elements of a Good Forecast • Timely • Accurate • Reliable (should work consistently) • Forecast expressed in meaningful units • Communicated in writing • Simple to understand and use Steps in Forecasting Process…

    • 1133 Words
    • 5 Pages
    Powerful Essays
  • Satisfactory Essays

    Forecasting

    • 623 Words
    • 17 Pages

    FORECASTING Q1: Moving averages are often used to identify movements of stock prices. Weekly closing prices (in $ per share) for Toys Я Us for 22 September, 1997, through December 8, 1997, are as follows (Prudential Securities Inc); Month Sept 22 Sept 29 Oct 6 Oct 13 Oct 20 Oct 27 Nov 3 Nov 10 Nov 17 Nov 24 Dec 1 Dec 8 Fund Price 37.8750 35.6250 34.6875 33.5625 32.6250 34.0000 33.6250 35.0625 34.0625 34.1250 33.2500 32.0625 a. Use a 3-month simple moving average…

    • 623 Words
    • 17 Pages
    Satisfactory Essays