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A/F Ratio for Demand Forecast: A firm is considering the use of the A/F method in the upcoming season to forecast their demand and to choose order quantities. They collected data from last years products in the category - See the table. Based on these data, they plan to fit a Normal distribution to each of the current products. The mean of the Normal will equal their forecast and the standard deviation will equal 28% of their forecast. What is likely to be a problem with their approach to the A/F method? Choose the best answer.

Group of answer choices

They shouldnt use the Normal distribution to model demand and should instead use the empirical demand distribution.

There must be something wrong with their data because the average A/F ratio is rarely equal to 1 (in which case it is unbiased).

They did not sort their A/F ratios from least to greatest.

Their order quantities are likely to be too low because they didnt keep track of actual demand.

They need more data because at least 20 observations are needed to implement this method

They need to have more than one forecast per product because they need to estimate standard deviations

Actual Sales/ Forecast Product Forecast A B 800 2000 1.25 0.49 D 1800 1900 Order quantity Actual Sales 1000 1000 1500 989 2000 1800 2200 2200 2400 1978 2600 2600 5000 4000 12000 6500 16500 16500 ] E F G H 2000 2200 5000 9000 1.00 1.16 0.99 1.18 0.80 0.72 1.38 - 12000 Average of Actual/Forecast = Std deviation of Actual/Forecast = 1.00 0.28

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