Chapter 7

Problem Summary
Prob. #

Concepts Covered

7.1

Graphing Time Series, Testing for Stationarity

Using Regression, Forecasting Using Simple and
Weighted Moving Averages, Evaluating
Forecasting Techniques Using MSE
Exponential Smoothing, Evaluating Forecasting
Techniques Using MSE
Using Regression to Forecast a Linear Trend
Model
Using Holt's Method to Forecast a Linear Trend
Model
Forecasting Using Classical Decomposition for a
Multiplicative Model
Graphing Time Series, Testing for Stationarity
Using Regression, Forecasting Using Simple
Moving Averages
Forecasting Using Exponential Smoothing
Forecasting Using Multiple Regression for an
Additive Model
Graphing Time Series, Testing for Stationarity
Using Regression, Forecasting Using Simple
Moving Averages and Exponential Smoothing
Determining the Optimal Smoothing Constant
Using Based on the MSE Criterion Using Solver,
Determining the Optimal Weightings for a
Weighted Moving Average Using Solver,
Selecting the Better Forecasting Technique
Forecasting Using Linear Regression
Forecasting Using Classical Decomposition for a
Multiplicative Model
Forecasting Using Multiple Regression for an
Additive Model
Forecasting Using Classical Decomposition for a
Multiplicative Model
Graphing Time Series, Testing for Stationarity
Using Regression, Forecasting Using
Exponential Smoothing, Making a Decision
Based on Forecast Results
Forecasting Using a Weighted Moving Average,
Making a Decision Based on Forecast Results
Forecasting Using Linear Regression
Graphing Time Series, Forecasting Using
Multiple Regression for an Additive Model
Graphing a Time Series, Using Regression to
Forecast a Linear Trend Model
Forecasting Using Holt's Method

7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9
7.10

7.11
7.12
7.13
7.14
7.15

7.16
7.17
7.18
7.19
7.20

7-1

Level of
Difficult
y
2

1
1
3
4
1
1
4
2
5

1
4
4
4
4

2
2
4
4
4

Notes

7.21

7.22
7.23
7.24

7.25
7.26
7.27
7.28
7.29
7.30
7.31
7.32
7.33

7.34

7.35
7.36
7.37

7.38
7.39

Graphing Time Series, Testing for Stationarity

Using Regression, Forecasting Using Simple
Moving Averages, Evaluating Forecasting
Techniques Using MSE
Forecasting Using Exponential Smoothing,
Evaluating Forecasting Methods in terms of
MSE, MAD, MAPE, and LAD
Determining the Optimal Exponential
Smoothing Constant Based on the MSE, MAD,
and MAPE Criteria Using Solver
Graphing Time Series, Testing for Stationarity
Using Regression, Forecasting Using
Exponential Smoothing, Determining the
Optimal Smoothing Constant Based on the
MSE Criterion Using Solver
Forecasting Using Moving Averages,
Evaluating Forecasting Techniques
Forecasting Using Exponential Smoothing
Forecasting Using Holt's Method and Linear
Regression, Evaluating Forecasting Techniques
in Terms of MAD
Forecasting Using Simple and Weighted
Moving Averages, Evaluating Forecasting
Techniques Using MAD
Forecasting Using Exponential Smoothing,
Evaluating Forecasting Techniques Using MSE
Forecasting Using Linear Regression and
Holts Method
Forecasting Using Exponential Smoothing,
Selecting the Better Smoothing Constant
Determining the Best Smoothing Constant
Using Solver
Forecasting Using a Weighted Moving
Average, Choosing Between a Weighted and
Simple Moving Average Based on the MAPE
Criterion
Forecasting Using Linear Regression and
Forecasting Using Multiple Regression for an
Additive Model, Determining Autocorrelation
and Testing for Significance
Forecasting Using Classical Decomposition for
a Multiplicative Model
Forecasting a Transformed Time Series Using
Exponential Smoothing
Forecasting Two Separate Time Series, One
Using Exponential Smoothing, the Other Using
Holts Method, Multiplying the Two Forecasts
Together
Forecasting Using Multiple Regression for an
Additive Model
Forecasting Using Classical Decomposition for
a Multiplicative Model

7-2

3
5
5

2
1
4
3
3
3
3
4
3

4
5
6

4
4

7.40
7.41
7.42
7.43

7.44
7.45

7.46

7.47
7.48

7.49
7.50

Using Regression to Determine if a Stationary

Model is Appropriate, Forecasting Using
Exponential Smoothing
Forecasting Using Holts Method
Forecasting Using Linear Regression,
Determining which Forecasting Technique is
Better Using the MAPE Criterion
Using Regression to Determine if a Stationary
Model is Appropriate, Forecasting Using the
Exponential Smoothing and Weighted Moving
Average Techniques
Forecasting Using Linear Regression and
Holts Method, Selecting the Better Technique
in Terms of the MSE Criterion
Determining the Appropriate Forecasting
Model Based on the MAD and MSE Criteria,
Forecasting Using Exponential Smoothing,
Linear Regression, and Holts Method
Collecting Data and Performing a Forecast
Using Exponential Smoothing with Solver
Determining the Best Smoothing Constant in
Terms of the MSE Criterion
Collecting Data and Performing a Forecast
Using Classical Decomposition for a
Multiplicative Model
Collecting Data and Performing a Forecast
Using Exponential Smoothing with Solver
Determining the Best Smoothing Constant in
Terms of the MAPE Criterion
Collecting Data and Performing a Forecast
Using Multiple Regression for an Additive
Model
Collecting Data and Performing a Forecast
Using Holts Method

7-3

3
2
3
4

4
6

5
5

5
5

Problem Solutions
7.1 See file Ch7.1.xls
a.

Yes, a stationary model seems appropriate

b.
Coefficient
s

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

Intercept

20.16667

1.373732

14.6802

4.3E-08

17.1058

23.22753

17.1058

23.22753

Period

-0.07692

0.186653

-0.41212

0.688949

-0.49281

0.338967

-0.49281

0.338967

From regression output, t = -.412 and p = .689. A stationary model seems appropriate
since the linear term, Period, is not significant.

7-4

7.1 c.

Forecast for January -- 19, for upcoming year 12*19 = 228

7-5

7.1 d.

Forecast for January -- 20.4

e. 4 month moving average. MAD is 1.72

7-6

7.2 See files Ch7.2a.xls and Ch7.2b.xls

a.

Forecast for January -- 18.86

7-7

7.2 b. See file Ch7.2b.xls

Forecast for January -- 20.28

c. = .6 gives the lower MSE

7-8

7.3 See file Ch7.3.xls

a.

b.
Coefficients

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

Intercept

406.6014

3.916368

103.8211

4.22E-31

398.4794

414.7235

398.4794

414.7235

Month

10.17522

0.274089

37.12382

2.44E-21

9.606792

10.74364

9.606792

10.74364

From regression output, t = 37.1238, p = 0

7-9

7.3 c.

From the above output we see that the forecast is as follows:

25 -- 660, 26 -- 671, 27 -- 681, 28 -- 692, 29 -- 702, 30 -- 712, 31 -- 722, 32 -- 732, 33 -742, 34 -- 753, 35 -- 763, 36 -- 773.

7-10

7.4 See file Ch7.4a.xls and Ch7.4b.xls

Forecast for upcoming 12 months:

Period 25 26 27 28 29 30 31 32 33 34 35 36
Forecast 665 675 685 695 706 716 726 736 746 756 766 776

7-11

7.4b See file Ch7.4b.xls

Forecast for upcoming 12 months:

Period 25 26 27 28 29 30 31 32 33 34 35 36
Forecast 659 665 671 676 682 688 693 699 705 710 716 722
c. = .5 and = .7
d. = .5 and = .7

7-12

7.5 See file Ch7.5.xls

Week 5: Su 318.89, M 371.72, Tu 353.72, W 397.54, Th 404.22, F 362.08, Sa 366.49,

Week 6: Su 326.62, M 380.70, Tu 362.24, W 407.08, Th 413.89, F 370.71, Sa 375.20.

7-13

7.6 See file Ch7.6.xls

a.
Sales
100
50

Sales

0
1

10

11 12

13 14

15

16

b.
Coefficients
Intercept
Week

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

67.175

3.120786

21.52503

3.96E-12

60.48157

73.86843

60.48157

73.86843

0.457353

0.322744

1.417077

0.178329

-0.23486

1.149571

-0.23486

1.149571

From the regression output, t = 1.4171, p = .1783 so a stationary model seems appropriate
since Week is not significant.

7-14

7.6 c.

Forecast for upcoming year = 52*71*100 = 369,200 bottles of shampoo.

7-15

7.7 See file Ch7.7.xls

Forecast for upcoming year = 52*70.6296*100 = 367,274 bottles of shampoo.

7-16

7.8 See file Ch7.8.xls

Quarter 1 -- Forecast = 5.71 - .0775*21 + 1.9275 = 6.01

Quarter 2 -- Forecast = 5.71 - .0775*22 + 6.0050 = 10.01
Quarter 3 -- Forecast = 5.71 - .0775*23 + 3.5625 = 7.49
Quarter 4 -- Forecast = 5.71 - .0775*24
= 3.85

7-17

7.9 See file Ch7.9.xls,

a.
Number of Sandwiches Sold Daily
200
180
160
140

Sales

120
100
80
60
40
20
0
1

10

11

12

13

14

15

16

17

18

19

20

Day

b.
Coefficients

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

Intercept

152.5421

7.57903

20.12686

8.64E-14

136.6191

168.4651

136.6191

168.4651

Period

-0.27068

0.632685

-0.42782

0.673855

-1.5999

1.058547

-1.5999

1.058547

From the regression output, t = -.428 and p = .674. Hence, one cannot conclude that
linear trend is present.

7-18

7.9 c. See file Ch7.3.xls

Forecast for upcoming week is 143.8*5 = 719

7-19

7.9 d. See file Ch7.9.xls

Forecast for upcoming week = 147.2*5 = 736.

7-20

7.10 See file Ch7.10.xls

The optimal smoothing constant is = .11.

7-21

7.10 b.

c. The weighted moving average gives lower values for the MSE and hence it would be
recommended.
7.11 See file Ch7.11.xls

7-22

The forecast is as follows:

year 6 -- 134,189, year 7 -- 139,288, year 8 -- 144,387

7-23

7.12 See file Ch7.12.xls

The forecast for the four quarters of the upcoming year is as follows;
Quarter 1 -- 5485
Quarter 2 -- 6524
Quarter 3 -- 6956
Quarter 4 -- 5194

7-24

7.13 See file Ch7.13.xls

The year 5 forecast is:

fall -- 118.1667 +4.9778*13 + 666.7060 = 850
spring -- 118.1667 +4.9778*14 + 595.7281 = 784
summer -- 118.1667 +4.9778*15
= 193

7-25

7.14 See Ch7.14.xls

Period

Month

Forecast

37

jan

455.20

38

feb

456.16

39

mar

365.16

40

apr

347.43

41

may

254.39

42

jun

226.24

43

jul

178.88

44

aug

189.56

45

sep

273.23

46

oct

316.73

47

nov

353.00

48

dec

387.26

7-26

7.15 See file Ch7.15.xls

a.
Cocoa Cost
0.5

0.48

Cost/Pound

0.46

0.44

0.42

0.4

0.38
1

10

11

12

13

14

15

16

17

18

19

20

Week

b.
Coefficients

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

Intercept

0.442632

0.007661

57.7744

6.83E-22

0.426536

0.458728

0.426536

0.458728

Period

0.001226

0.00064

1.916262

0.071351

-0.00012

0.002569

-0.00012

0.002569

From the regression analysis, since t = 1.916 and p = .071, a stationary model is
appropriate. That is, the linear component, Period, is not significant.

7-27

c. See file Ch7.15.xls

Forecast of firm's cocoa purchase cost over next six months = $.45585*140,000 =
$63,819
d. Yes, purchasing the futures is worthwhile.

7-28

7.16 See file Ch7.16.xls

As the forecast is now $.4480, the futures contract purchase is not recommended since it
would cost more than $.01 per pound over the firm's forecast cost. Forecast of the firms
purchase cost over the next six months = $0.448*140,000 = $62,720.

7-29

7.17 See file Ch7.17.xls

Letting time 1997 correspond to t =1 gives the following spreadsheet:

a. The year 2006 corresponds to year 10, hence the forecast for the book value is 8.12.
b. The year 2035 corresponds to year 39, hence the forecast book value is: -2.96. As
this value is negative, and firms do generally not survive with a negative book value,
something is amiss. The model may be inappropriate since 2035 if too far into the
future from the last observed time period. If the model is deemed appropriate, Kerf
will have to something different in the future if it wishes to remain solvent.

7-30

7.18 See file Ch7.18.xls

a.
Customer Arrivals Between 10 and 11 a.m.
55

N u m b e r o f C u sto m e rs

50

45

40

35

30
1

10

11
Day

b.

7-31

12

13

14

15

16

17

18

19

20

The following are the forecasts for week 5:

Monday -Tuesday -Wednesday -Thursday -Friday --

44.3 +.436*21 - 2.256

44.3 +.436*22 - 10.192
44.3 +.436*23 - 3.378
44.3 +.436*24 - 9.314
44.3 +.436*25

= 51
= 44
= 51
= 45
= 55

7.19 See file Ch7.19.xls

a.
Monthly Mileage
1600

1500

Miles Driven

1400

1300

1200

1100

1000
1

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

Month

b.
Coefficients
Intercept
Period

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

1165.475

35.94789

32.42123

4.56E-20

1090.923

1240.026

1090.923

1240.026

14.3287

2.515828

5.695419

9.96E-06

9.111182

19.54621

9.111182

19.54621

From the regression analysis we see that t = 5.695 and p = .0001.

7-32

7.19 c See file Ch7.19.xls

The forecast is as follows: Jan 1524, Feb 1538, Mar 1552, Apr 1567, May 1581, Jun
1595, Jul 1610, Aug 1624, Sep 1638, Oct 1653, Nov 1667, Dec 1681

7-33

7.20 See file Ch7.20.xls

Period
jan
feb
mar
apr may
jun
jul
aug
sep
oct
nov
dec
Forecast 1538 1525 1512 1498 1485 1472 1459 1446 1432 1419 1406 1393

7-34

7.21 See files Ch7.21a.xls and Ch7.21d.xls

a.
Weekly Usage of French Fries
18500

18000

17500

Pounds

17000

16500

16000

15500

15000

14500

14000
1

10

11

12

13

14

15

Week

b.
Coefficients

Standard
Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

Intercept

16452.38

527.348

31.19834

1.31E-13

15313.12

17591.65

15313.12

17591.65

Week

9.285714

58.00055

0.160097

0.875266

-116.017

134.5883

-116.017

134.5883

From the regression analysis we see that since t = .16 and p = .8753 a stationary model is
appropriate.

7-35

7.21 c. See file Ch7.21a.xls

c. The forecast for each week is 16,367

7-36

7.21d See file Ch7.21d.xls

d. The forecast for each week is 16,475

e. The 3-week moving average gives the lower MSE.

7-37

7.22 See files Ch7.22a.xls and Ch7.22b.xls

a.

a. The forecast is 16,509

7-38

7.22b See file Ch7.22b.xls

b. The forecast is 16,515

c. = .10, MSE is 964,750 versus 1034.893 for = .20
d.

= .10, MAD = 851.5475 versus 859.8929 for = .20

e. = .10, MAPE = 5.1496 versus 5.2089 for = .20

f.

= .10, LAD = 1890 versus 1980 for = .20

7-39

7.23 See files Ch7.23a.xls, Ch7.23b.xls, and Ch7.23c.xls

a.

a. = 0 minimizes MSE

7-40

7.23b See file Ch7,23b.xls

b. = 0 minimizes MAD

7-41

7.23 c. See file Ch7.23c.xls

c. = 0 minimizes MAPE

7-42

7.24 See files Ch7.24a.xls, Ch7.24d.xls

a.
Coupon Response Rate
6

5.8

5.6

Response Rate

5.4

5.2
5

4.8
4.6
4.4
4.2

4
1

10

Campaign

b.
Coefficients

Standard
Error

T Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper
95.0%

Intercept

4.94

0.308545

16.01063

2.32E-07

4.228494

5.651506

4.228494

5.651506

Campaign

0.02

0.049727

0.4022

0.698069

-0.09467

0.13467

-0.09467

0.13467

From regression analysis we see t = .402, p = .698, a stationary model is appropriate

since slope, Campaign, is not significant.

7-43

7.24 c. See file Ch7.24c.xls

c. The forecast response rate is 4.9%

7-44

7.24 d. See file Ch7.24d.xls

d. The optimal value for the smoothing constant in terms of minimizing the mean square
error is = .27.

7-45

7.25 See files Ch7.25a.xls, Ch7,25b.xls, Ch7.25c.xls, and Ch7.25d.xls

a.

a. With n = 1, forecast = 4.9%, MSE = .4922

7-46

7.25b See file Ch7.25b.xls

b. With n = 2, forecast = 4.8%, MSE = .2259

7-47

7.25 c. See file Ch7.25c.xls

c. With n = 3, forecast = 5.0%, MSE = .3338

7-48

7.25 d. See file Ch7.25d.xls

d. With n = 4, forecast = 5.05%, MSE =.2711

As a result of this analysis a two-period moving average forecast would be recommended
since it gives the lowest MSE of the models evaluated.

7-49

7.26 See file ch7.26.xls

a.

a. The forecast is 17.0972 which would be rounded to 17.

b. Exponential smoothing assumes that there is no long-term trend and no seasonal
factors.

7-50

7.27 See file Ch7.27.xls

a.

a. Using Holt's method gives the following forecast:

Week 13 -- 47.76757 = 48
Week 14 -- 50.1519 = 50
Week 15 -- 52.53624 = 53

7-51

7.27 b. Using linear regression gives

b. Using a regression approach the forecast is as follows:

Week 13 -- 47.970 = 48
Week 14 -- 50.37529 = 50
Week 15 -- 52.78089 = 53
c. Based on the MAD criterion, the regression approach is preferred.

7-52

7.28 See file Ch7.28.xls

a.

Using an eight-week simple moving average gives a forecast of 38.5 which would be
rounded to 39.

7-53

7.28a continued

Using the AV8 forecasting system gives a forecast of 38.4 which would be rounded to 38.
b. The eight week simple moving average gives an MAD value of 5.375 while the eight
week weighted moving average gives an MAD value of 5.25. Based on the MAD,
Nature's Health should switch to the weighted moving average for forecasting.

7-54

7.29 See files Ch7.29A.xls and Ch7.29B.xls

7-55

7.29 a. continued

a. Using a = .2, the MSE is 95.16206. Using = .7, the MSE is 120.2956. Hence, the
item should be classified as a Group A item.
b. The forecast for the upcoming weeks using = .2 is 37.04943 = 37.

7-56

7.30 See file Ch7.30.xls

a.

a. The forecast for total sales over the upcoming quarter is 6480.534*$1000 =
$6,480,534.

7-57

7.30 b.

b. The forecast for total sales over the upcoming quarter is 6332.364*$1000 =
$6,332,364.

7-58

7.31 See files Ch7.31a.xls and Ch7.31b.xls

a.

a. Forecast for week 53 is 473 cases

7-59

7.31b. See file Ch7.31b.xls

b. Forecast for week 53 is 461 cases.

c. Company should select the = .4 smoothing constant as it gives lower values for the
MSE, MAD, MAPE, and LAD measures.

7-60

7.32 See file Ch7.32.xls

The company should use a smoothing constant of = 1. The forecast in this case is 478
cases in week 53.

7-61

7.33 See file Ch7.33.xls

a.

a. The forecast for sales in week 53 is 479 cases.

7-62

7.33b.

b. No, the five-period simple moving average should be used as it has the lower MAPE.
This model will forecast 447 cases in week 53.

7-63

7.34 See file Ch7.34.xls

a.

a. The forecasts are as follows:

Next Year
Summer
Fall
Winter
Spring

122.81 + 3.99*17 - 36.77 = 154

122.81 + 3.99*18 - 1.76 = 193
122.81 + 3.99*19 + 52.74 = 251
122.81 + 3.99*20
= 203

Two Years from Now

Summer
122.81 + 3.99*21 - 36.77 = 170
Fall
122.81 + 3.99*22 - 1.76 = 209
Winter
122.81 + 3.99*23 + 52.74 = 267
Spring
122.81 + 3.99*24
= 219

7-64

7.34 b.

Next Year -- 801

Two Years from Now -- 864.9 = 865

7-65

7.34 c.

c. r4 = .500749. Since .500749 is greater than 2/16 = .5, we would conclude that there
is significant autocorrelation of lag 4. We could also verify this by doing an F test to
determine if a reduced model can be used.

7-66

7.35

Period
Forecast

See file Ch7.35.xls

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

6,573
11,201
10,816
9,850

7-67

7.36 See file Ch7.36.xls

Forecast of sales over the upcoming quarter is $803,329.

7-68

7.37 See Ch7.37.xls

7-69

7.37 continued

Customer demand forecast is 846.1738. Multiplying this value by the forecast for the
amount spent, $130.5277, gives a forecast for upcoming months revenue equal to
$110,449.

7-70

7.38 See file Ch7.38.xls

a.

Period
49
50
51
52
53
54
55
56
57
58
59
60

Forecast
2870.583
2857.583
2809.833
2700.833
2715.083
2826.333
2865.583
2897.583
2890.333
2911.333
2944.583
2951.333

b. MAD = 22.642

7-71

7.39 See file Ch7.39.xls

a.

a.
Period
Forecast

49
50
51
52
53
54
55
56
57
58
59
60
2877 2878 2818 2691 2700 2828 2865 2900 2891 2909 2956 2950

c. MAD = 16.152
c. In terms of MAD criterion, classical decomposition gives better results.

7-72

7.40 See file Ch7.40.xls

a.
Coefficients

Intercept
Period

Standard Error

t Stat

P-value

Lower 95% Upper 95%

Lower
95.0%

Upper 95.0%

3.6366842 0.02374201 153.18 1.7E-29

3.5868 3.68656 3.586804 3.686564
-0.0013985 0.00198194 -0.706 0.48946 -0.00556 0.00277 -0.00556 0.002765

The t statistic is -.706 and the p value is .489. Hence, it appears a stationary forecasting
model is reasonable since the linear term, Period, is not significant.
b.

d. $3.63

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7.41 See file Ch7.41.xls

The forecast for the stock price over the next ten days is as follows:
Day
61
62
63
64
65
66
67
68
69
70
Forecast 50.38 50.41 50.44 50.46 50.49 50.51 50.54 50.57 50.59 50.62

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7.42

See file Ch7.42.xls

a.

Day
Forecast

61
62
63
64
65
66
67
68
69
70
48.76 48.62 48.47 48.33 48.19 48.04 47.90 47.76 47.61 47.47

b. Linear regression performs better under the MAPE criterion.

7-75

7.43

See file Ch7.43.xls

a.

Intercept
Period

Coefficien Standard
t Stat
P-value
Lower
Upper
Lower
Upper
ts
Error
95%
95%
95.0%
95.0%
82.71579 18.00901 4.593022 0.000226 44.88023 120.5514 44.88023 120.5514
-1.07293 1.503363 -0.71369 0.484572 -4.23138 2.085519 -4.23138 2.085519

a. Since the t value is -.7137 and the p value is .485, a stationary model is appropriate for
the time series. That is, the linear term, Period, is not significant.
b. Sales are forecasted to be 113.7*10 = 1137 copies

7-76

7.43 c.

c. Sales are forecasted to be 103.6*10 = 1036 copies

7-77

7.44

See file Ch7.44.xls

a.

a. Sales are forecasted to be 554 copies

7-78

7.44 b.

b. Sales are forecasted to be 1997 copies

c. Holts method as it has the lower MSE value.

7-79

7.45 See file Ch7.45.xls

a.

a. The Regression Analysis on 1999 data indicates a stationary model is appropriate. For
= 0.3, MAD = 0.019 and for = 0.7, MAD = 0.015. Hence, = 0.7 is used and the
forecast of gasoline prices for all weeks 12, 13, and 14 would be $1.178 per gallon.

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7.45b.
b.

b. The Regression Analysis on 2000 data indicates that trend is present. Regression
yields MSE = 0.004 while Holts method yields MSE = 0.003. Hence, Holts method is
used and the forecast for the three weeks is as follows:
Week
Forecast

12
1.788

13
1.870

14
1.953

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