Problem 4.9 Dell uses the CR5 chip in some of its laptop computers. The price

Problem 4.9

Dell uses the CR5 chip in some of its laptop computers. The prices for the chip during the past 12 months were as follows:

Month

Price Per Chip

Month

Price Per Chip

January

$1.80

July

1.80

February

1.67

August

1.83

March

1.70

September

1.70

April

1.85

October

1.65

May

1.90

November

1.70

June

1.87

December

1.75

a) Use a 2-month moving average on all the data and plot the averages and the prices.

b) Use a 3-month moving average and add the 3-month plot to the graph created in part (a).

c) Which is better (using the mean absolute deviation): the 2-month average or the 3-month average?

d) Compute the forecasts for each month using exponential smoothing with an initial forecast for January of $1.80. Use %u03B1 = .1
then %u03B1 = .3 and finally %u03B1 = .5. Using MAD which %u03B1 is the best?