Concept:
Moving Average Method:
The moving average method uses the average of the most recent 'n' data values in the time series as the forecast for the next period.
\({F_{t + 1}} = \frac{{{D_t} \;+ \;{D_{t - 1}} \;+ \ldots\; +\; {D_{t - n + 1}}}}{n}\)
Here, the 'n' past most recent observations are equally weighted.
For the given case when 'n = 4' so the forecast of the sales, using the 4-month moving average method, for the month of February,
\(⇒ {F_{Feb}} = \frac{{{D_{Jan}} \;+ \;{D_{Dec}} \;+\;{D_{Nov}} \;+\; {D_{Oct}}}}{4}{{\;\;\;\;\;}} \ldots \left( 1 \right)\)
Calculation:
n = 4,
Using equation (1),
\(⇒ {F_{Feb}} =\frac{280+250+190+240}{4}=240\)
⇒The forecast of the sales, for the month of February, is 240 units.
