Problem 4.5 The Carbondale Hospital is considering the purchase of a
new ambulance. The decision will rest partly on the anticipated mileage
to be driven 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). (Hint: You will have only 3 years of matched data.)
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? (Hint:
You will have only 3 years of matched data.)
d) Compute the forecast for year 6 using exponential smoothing, an initial forecast for year 1 of 3,000 miles, and a= .5.
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