This set of Production Planning and Control Multiple Choice Questions & Answers (MCQs) focuses on “Forecasting Fundamentals”.

1. A qualitative forecast _____

a) Predicts the quality of the new product

b) Predicts the direction, but not the magnitude, of change in a variable

c) Is a forecast that is classified on a numerical scale from 1 to 10

d) Is a forecast that is based on econometric methods

View Answer

Explanation: Qualitative forecasting is the forecasting which is done without the numerical analysis so the magnitude of the forecasting cannot be determined. Some experienced employees forecast the direction which is called qualitative forecasting.

2. Which of the following is not a qualitative forecasting technique?

a) Surveys of customer expenditure plans

b) Perspective of foreign advisory councils

c) Consumer intention polling

d) Time-series analysis

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Explanation: Time-series analysis is the observation of variable which changes in successive time period. The observation made can be either listed or plotted on graph.

3. What is the first step in time series analysis?

a) Perform preliminary regression calculations

b) Calculate a moving average

c) Plot the data on a graph

d) Identify relevant correlated variables

View Answer

Explanation: In a time-series analysis first all the data is plotted on a graph paper and then the analysis of the changing variable is made and results are obtained.

4. Forecasts are referred to as naïve if they _____

a) Are based only on past values of variables

b) Are short-term forecasts

c) Are long-term forecasts

d) Generally, result in incorrect forecasts

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Explanation: Naïve forecasting is made by the previous values obtained in a variable without changing them. Naïve forecasting is done to compare this forecasting with the forecasting with the better techniques.

5. Which of the following is not one of the four types of variation that is estimated in time-series analysis?

a) Predictable

b) Trend

c) Cyclical

d) Irregular

View Answer

Explanation: In a time-series analysis the observation and plotting of graph is done by the practical values obtained, so there is no possibility of predicting the data.

6. In time-series analysis, which source of variation can be estimated by ratio-to-trend method?

a) Cyclical

b) Trend

c) Seasonal

d) Irregular

View Answer

Explanation: By ratio-to-trend method seasonal variation can be carried out as it the ratio of the previous values to the current values in a time-series analysis.

7. How is the greatest smoothing effect obtained?

a) By a moving average based on a small number of periods

b) By exponential smoothing with a small weight value

c) The root-mean-square error

d) The barometric method

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Explanation: Smoothing effect is the modification of data points to reduce the individual points and increase the points which are lower than the adjacent points leading to the smoothing. In exponential smoothing recent observations are given relatively more weight in forecasting than the older observations.

8. What is used to measure root-mean-square?

a) Sample size

b) Moving average periods

c) Exponential smoothing

d) Forecasting accuracy

View Answer

Explanation: Root-mean-square is the difference between the predicted values and the observed values. So, this value can be used to find the forecasting accuracy i.e. how much work has been carried out successfully.

9. What is used to forecast using barometric method?

a) Seasonal variation

b) Secular trend

c) Cyclic variation

d) Irregular variation

View Answer

Explanation: Barometric method is used by meteorologists in weather forecasting. The weather conditions are forecasted on the basis of the movement of the mercury in the barometer. Based on this, economists use economic indicators as a barometer to forecast the overall trend in the business activities called as cyclic variation.

10. A single-equation econometric model of the demand for a product is a _____ equation in which the quantity demanded of the product is an _____ variable.

a) Structural, exogenous

b) Structural, endogenous

c) Definitional, exogenous

d) Definitional, endogenous

View Answer

Explanation: A structural equation is made for the econometric model of the demand in which the quantity demanded has an internal affect on the system which is called as endogenous variable.

11. Which kind of forecasting is trend projection?

a) Qualitative

b) Time-series

c) Barometric

d) Econometric

View Answer

Explanation: Trend, cyclic, irregular and seasonal is the four types of time-series forecasting. In trend projection a large amount of reliable data is required for forecasting demand.

12. Turning Points in the level of economic activity can be forecast by using _____

a) Time-series analysis

b) Exponential smoothing

c) Barometric methods

d) Moving average

View Answer

Explanation: Barometric method is the forecasting method which is done by observing another time series and estimating the current time series. Barometric method can be used to forecast the turning point in the level of economic activity as it will be compared with the previous or another similar activity and so the forecast will be easy to do.

**Sanfoundry Global Education & Learning Series – Production Planning and Control.**

To practice all areas of Production Planning and Control, __ here is complete set of Multiple Choice Questions and Answers__.