Question

Using the data set below, what would be the forecast for period 5 using the exponential smoothing method? Assume the forecast for period 4 is 14000. Use a smoothing constant of α = 0.4 (Choose the closest answer.)
Period
Actual Demand
1 10000
2 12400
3 13250
4 14750
5 15220
6 18500

a. 12660
b. 13190
c. 14300
d. 15220

Answer 1

Answer:

The answer is C: 14300

Note: The actual answer is 14296, and the closest to that was option C.

Explanation:

Formula to calculate forecast using Exponential smoothing:

•    $F_{t} = F_{t-1} + \alpha ( A_{t-1} - F_{t-1} )$

Where,

• $F_{t}$ = New Forecast
• $F_{t-1}$ = Previous period's forecast.
• $\alpha$ = Smoothing Constant
• $A_{t-1}$ = Previous period's Actual Demand.

1. Calculating the forecast for period 5:

Data:

• $F_{5} = ?$
• $F_{t-1} = 14000$
• $\alpha = 0.4$
• $A_{t-1} = 14750$

Putting values in the formula:

$F_{5} =$ $14000 + 0.4(14750-14000)$

$F_{5} = 14000 + 0.4 (740)$

$F_{5} = 14000 + 296$

$F_{5} = 14296$