4. Zeus Computer Chips Inc. used to have major contracts to produce the Centrino-type chips. The market has been declining during the past three years because of the dual-core chips, which

it cannot produce, so Zeus has the unpleasant task of forecasting next year. The task is unpleasant because the firm has not been able to find replacement chips for its product lines. Here is demand over the past 12 quarters: 2007 I II III IV 4,800 3,500 4,300 3,000 2008 I Year Sales (in 1,000 units) 3,500 2,700 3,500 II III IV 2,400 2009 I II III IV 8. Talbot Publishing Company's production planning manager has provided the following historical sales data for its leading textbook on forecasting: 3,200 2,100 2,700 1,700 4 5 6 21 18 20 7 17 The firm is considering using a basic exponential smoothing model with Alpha= 0.2 to forecast this item's sales. a. Use the sales average of 20,000 units through year 3 as the forecast for period 4. Prepare forecasts for years 5 through 7 as of the end of year 4. b. Calculate the average error and MAD value for the three forecasts using the actual sales data provided. Estimate the standard deviation of the forecast errors using the calculated MAD. c. Redo the forecasts and MAD calculations, updating the forecasts for years 6 and 7 at the end of years 5 and 6, respectively. What do you observe?