Suppose a four-period weighted average is being used to forecast demand. Weights for the periods are as follows: w t-4 = 0.1, w t-3 = 0.2, w t-2 = 0.3 and w t1 = 0.4. Demand observed in the previous four periods was as follows: A t-4 = 380, A t-3 = 410, A t-2 = 390, A t-1 = 400. What will be the demand forecast for period t? a. 399

b. 402

c. 393

d. 403

e. 397

Option (e) is correct.

Explanation:

Given that,

Weights for the periods:

w_t-4 = 0.1,

w_t-3 = 0.2,

w_t-2 = 0.3

w_t-1 = 0.4

Demand observed in the previous four periods:

A_t-4 = 380

A_t-3 = 410

A_t-2 = 390

A_t-1 = 400

Demand forecast for period t:

= (w_t-4 * A_t-4) + (w_t-3 * A_t-3) + (w_t-2 * A_t-2) + (w_t-1 * A_t-1)

= (0.1 * 380) + (0.2 * 410) + (0.3 * 390) + (0.4 * 400)

= 397