CMA Intermediate · Operations Management and Strategic Management · Operations Planning
A Chennai auto-component firm recorded demand for the last three months as: April 400 units, May 440 units, June 480 units. Using a 3-month simple moving average, what is the forecast for July?
The July forecast is 440 units. A 3-month simple moving average adds the three months' demand (400 + 440 + 480 = 1,320) and divides by three. This gives equal weight to each month and does not project the upward trend.
- A480 units
- B460 units
- C440 unitsCorrect
- D520 units
Explanation
Simple moving average = (400 + 440 + 480)/3 = 1,320/3 = 440 units. Choosing 480 uses only the latest month (naive forecast). Choosing 520 extends the trend, which a moving average does not do. Choosing 460 is the average of May and June only, ignoring April.
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