Suppose a three-period weighted average is being used to forecast demand. Weights for the periods are as follows:
wt-3 = 0.2, wt-2 = 0.3 and wt-1 = 0.5.
Demand observed in the previous three periods was as follows:
At-3 = 2,200, At-2 = 1,950, At-1 = 2,050.
What will be the demand forecast for period t?

A) 2,000 B) 2,095 C) 1,980 D) 2,050 E) 1,875

D

Explanation:

Demand forecasting is being able to predict the future demand of a firms product. We calculate this by multiplying the weights of each of the period by its demand observed in the previous period and adding them together

To calculate the demand forecast for period t in this question;

(wt-3 × At-3) + (wt-2 × At-2) + (wt-1 × At-1)

=(0.2 × 2200) + (0.3 × 1950) + (0.5 × 2050)

= 440 + 585 + 1025

= 2050.

Therefore the correct answer is D.

2050 is the demand forecast for period t.

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