Question

Suppose that demand in period 1 was 7 units and the demand in period 2 was 9 units. Assume that the forecast for period 1 was for 5 units. If the firm uses exponential smoothing with an alpha value of .20, what should be the forecast for period 3? (Round answers to two decimal places.)

Answer 1

Answer:

Step-by-step explanation:

Forecast for period 1 is 5

Demand For Period 1 is 7

Demand for Period  2 is 9  

Forecast  can be given by

$F_{t+1}=F_t+\alpha (D_t-F_t)$

where

$F_{t+1}=Future Forecast$

$F_t=Present\ Period\ Forecast$

$D_t=Present\ Period\ Demand$

$\alpha =smoothing\ constant$  

$F_{t+1}=5+0.2(7-5)$

$F_{t+1}=5.4$

Forecast for Period 3

$F_{t+2}=F_{t+1}+\alpha (D_{t+1}-F_{t+1})$

$F_{t+2}=5.4+0.2\cdot (9-5.4)$

$F_{t+2}=6.12$