The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly

QUESTION:

The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipated mileage to be drive next year. The miles driven during the past 5 years are as follows:

Year _____________ Mileage

1 …………………………. 3,000

2. …………………………. 4,000

3. …………………………. 3,400

4. …………………………. 3,800

5. …………………………. 3,700

(a) Forecast the mileage for next year using a 2-year moving average.

(b) Find the MAD based on the 2-year moving average forecast in part (a).

(c) Use a weighted 2-year 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?

(d) Compute the forecast for year 6 using exponential smoothing, and initial forecast for year 1 of 3,000 miles, and α = .5.


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