The moving average method is to be used for forecasting demand based on m periods of data. Two values of m are tried, $m_{1}$ and $m_{2}$ with $m_{1} > m_{2}$ , to get two different forecasts, denoted by F(t) and G(t), respectively.
(P) F(t) has less variability than G(t)
(Q) Forecast error of F (t) is less than that of G(t)
Which of the above statements are CORRECT?

Only P

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Both P and Q

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Neither P and Q

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Only Q

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Solution

The correct option is B Both P and Q
$m_{1}$ = moving average periods give forecast F(t)
$m_{2}$ = moving average periods give forecast G(t)
$m_{1} > m_{2}$
$∴$ F(t) is a stable forecast has less variability.
G(t) is a inflationary forecast and has high variability.

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The correct option is B Both P and Qm1 = moving average periods give forecast F(t) m2 = moving average periods give forecast G(t) m1>m2 ∴ F(t) is a stable forecast has less variability. G(t) is a inflationary forecast and has high variability.

The correct option is B Both P and Q
$m_{1}$ = moving average periods give forecast F(t)
$m_{2}$ = moving average periods give forecast G(t)
$m_{1} > m_{2}$
$∴$ F(t) is a stable forecast has less variability.
G(t) is a inflationary forecast and has high variability.