# Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been decreasing by 10% every period. How will your forecasts perform?

Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been decreasing by 10% every period. How will your forecasts perform? Instruction: For questions 1-6, you need to choose the best answer from the options and explain why the option you choose is correct. Explanations such as “you can find the answers in the notes or textbook” is not acceptable. Please discuss your reasoning by using the space under each question. For questions 7-10, please show me the detailed calculations.

## 1. Suppose that you are using the four-period simple moving average method to forecast sales, and sales have been decreasing by 10% every period.  How will your forecasts perform?

a) Forecasts will be lower than actual.    b) Forecasts will be higher than actual.

c) Forecasts will equal actual.                 d) Forecasts will be increasing.

e) Forecasts will be decreasing by 2.5% every period.

2. In exponential smoothing, which of the following values for a would generate the most stable forecast?

a) 0.10         b) 0.25             c) 0.50             d) 0.75             e) 1.00

3. Last month TMJG Co. started producing a new product called Thingamajigs from its new plant. Sales were quite good for the first couple of weeks. Unfortunately, a technological innovation was then announced by a competitor. This innovation will almost completely eliminate the demand for Thingamajigs. As a result, TMJG has decided to shut down and dismantle the plant next week. The average cost per unit will be highest if the plant was _________________________.

a) a small facility  b) in the right location  c) a large facility  d) just-in-time   e) a medium facility

4. A production facility has a design capacity of 500 units a day and an effective capacity of 480 units.  Which of the following are potential “determinants” of its effective capacity, accounting for the gap between 500 and 480?

I.  The need for periodic maintenance of the equipment in the facility.

II.  The actual output of the facility.

III. Lunch breaks and coffee breaks taken during a typical day in the facility.

5. Garysburg Fire Rescue (GFR) is considering three different locations for a new fire station. Using factor rating, GFR has created the following table:

When rating these locations, GFR used a 5 point scale, with “1” being “poor” and “5” being “excellent”.

Which of the following statements are true and which are false?

I. The cost of the available land parcel is of the greatest importance in this analysis.

II. Location 2 has better “accessibility” than Location 3.

III. GFR considers the size of the available land parcel to be the least important factor.

6. The Industrial Steel Company is considering expansion by acquiring additional facilities.  They are considering two different furnaces built on two different sites.  The annual fixed cost at Furnace A is \$50,000, while at Furnace B it is \$100,000.  The average cost per steel beam produced is estimated to be \$10 for Furnace A and \$5 for Furnace B.  Please answer the next two questions, based on this information.

Which of the following statements are true?

I.  If Industrial Steel Company is expecting annual production at the furnace to be between 6,000 and 7,000 steel beams annually, the company should acquire Furnace A.

II. Industrial Steel Company should not acquire Furnace B under any conditions.

III. If Industrial Steel Company is expecting annual production at the furnace to be more than 10,000 steel beams annually, then the company should acquire Furnace B.

7. A firm must choose between remaining where it is, with current capacity, and building a new facility with 50% more capacity. The probability of high demand in the future is estimated to be 75%. The current facility would provide \$100,000 profit if there is high demand or \$50,000 profit if there is low demand. The replacement facility would provide \$160,000 profit if there is high demand but would only break even if there is low demand. What is the expected value for building a new facility? Please draw a decision tree diagram.

8. A location analysis has been narrowed down to two locations, A and B. The main factors in the decision will be supply of raw materials, which has a weight of 0.3, and labor cost, which has a weight of 0.7. The ratings for raw materials and labor are: for A, 3 and 4, respectively; for B, 5 and 3, respectively. Using the factor rating method, which location should be selected?

9. A manufacturing firm is choosing a new location based on six factors.  It considers all these factors to be equally important.  What weights should it assign each factor in a factor rating analysis?

10. A packaging firm needs to locate a distribution center to serve four new retail outlets.  Below is a table of the outlet locations:

Outlet                                 X Coordinate  Y Coordinate

Chicago                                          30                    120

Pittsburgh                                       90                    110

New York City                               127                  130

Atlanta                                            65                    40

The marketing department has developed the following estimates of monthly shipping amounts to each location:  200 tons to Chicago, 100 tons to Pittsburgh, 300 tons to New York City, and 100 tons to Atlanta.  Where should the distribution center be located?