What does a simple moving average calculate?

A simple moving average calculates the average of a specified number of the most recent time periods. This method smooths out fluctuations in data over time by creating an average from a sliding window of data points. For example, if one were to calculate a simple moving average of demand for the last three months, the most recent data from those three months would be summed and then divided by three. This is particularly useful in identifying trends and patterns in data without being overly influenced by outliers or extreme values from earlier periods.

The other options do not accurately describe what a simple moving average does. Calculating the total demand divided by total seasons refers to a different method that does not involve the sliding window characteristic of a simple moving average. The mode of past demand data entails identifying the most frequently occurring value, which contrasts with the averaging concept. Lastly, calculating the variance of demand over time involves a statistical measure of the data spread rather than an average of recent observations.