Problem:

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

Required:

Question 1) Forecast the mileage for next year using a 2-year moving average.

Question 2) Find the MAD based on the 2-year moving average forecast in part (a) (Hint: You will have only 3 years of matched data.)

Question 3) 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 the approach to forecasting? (Hint: You will have only 3 years of matched data.)

Question 4) Compute the forecast for year 6 using exponential smoothing, an initial forecast for year 1 of 3,000 mile 1 of 3,000 miles, and a =5.

Solve the given numerical problem and illustrate step by step calculation.