MGT 320 Burger Lover Restaurant case study

Burger Lover Restaurant forecasts weekly sales of cheeseburgers. Based on historical
observations over the past five weeks, make a forecast for the next period using the
following methods: simple average, three-period moving average, and exponential
smoothing with α = 0.3, given a forecast of 328 cheeseburgers for the first week.
Week ……………… Cheeseburger Sales
1 ……………………………… 354
2 ……………………………… 345
3 ……………………………… 367
4 ……………………………… 322
5 ……………………………… 356




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If actual sales for week 6 turn out to be 368, compare the three forecasts using MAD.




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Which method performed best?




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SOLUTION rs e
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Period 6 Forecasts:
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Simple average: F6 = 348.8
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3-Period moving average: F6 = 348.33
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Exponential smoothing: Using the fifth period forecast of 328, F6 = 336.40

Looking at the error only in period 6,
MAD (simple average) = |368 – 348.8| = 19.2
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MAD (3-Period moving average) = |368 – 348.33| = 19.67
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MAD (exponential smoothing) = |368 – 336.40| = 31.60

The simple average provides the best historical fit using the MAD criterion.
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