1 / 33

# IENG 215

IENG 215. Estimating. Sales Budget. Desired Ending Inventory. Production Budget. Direct Material. Direct Labor. Factory Overhead. Cost of Good Sold Budget. Selling Expense. Admin Expense. Budgeted Income. Capital Budget. Budgeted Balance. Cash Budget. Sales Forecast.

## IENG 215

E N D

### Presentation Transcript

1. IENG 215 Estimating

2. Sales Budget Desired Ending Inventory Production Budget Direct Material Direct Labor Factory Overhead Cost of Good Sold Budget Selling Expense Admin Expense Budgeted Income Capital Budget Budgeted Balance Cash Budget

3. Sales Forecast

4. Sales Forecast

5. Moving Averages • FMA At-3 + At-2 + At-1 Ft = 3 • CMA At-1 + At + At+1 Ft = 3

6. Moving Averages

7. Moving Averages

8. Exponential Models • Forecast Exponential Smoothing • Short Term • Bias, forecast lags demand • Simple Exponential Smoothing • .2 < < .5 • Double Exponential Smoothing • Short Term Trends • Holt Winters • Trends with Seasonal adjustment 

9. Recursion Ft = At + (1-)Ft-1 Forecast Ft+= at = Ft Simple Exp. Smoothing Model At = a + t

10. Exponential Smoothing

11. Exponential Smoothing

12. Recursion Alternate Ft = At + (1-)Ft-1 Ft+1 = At + (1-)Ft Simple Exp. Smoothing

13. Forecast vs Centered (a=0.2)

14. Forecast vs Centered (a=1.0)

15. Effect of Weights

16. a = = + 0 . 0 F 0 . 0 A 1 . 0 F - 1 t t t = F - 1 t = F 1 a = = + 1 . 0 F 1 . 0 A 0 . 0 F - 1 t t t = A t Effect of Weights

17. Optimal a ?

18. Wrong, Wrong, Wrong • Tendency is to choose lowest RSE • Min {RSE} when a = 1.0 Fit Past History very well

19. Wrong, Wrong, Wrong • Tendency is to choose lowest RSE • Min {RSE} when a = 1.0 Fit Past History very well • Divide data into two sets {t=1:60}, {t=61:101}

20. Past Fit vs Prediction

21. Exponential Smoothing • Class Demo • Forecast Smoothing vs Exponential Smoothing; Excel tutorial

23. = a + - a F A ( 1 ) F where - 1 t t t = s length of seasonal cycle Seasonal Adjustment = a + - a F A ( 1 ) F - - t t s t s or

24. = a + - a F A ( 1 ) F where - 1 t t t = s length of seasonal cycle Seasonal Adjustment = a + - a F A ( 1 ) F - - t t s t s or