Question

The owner of Darkest Tans Unlimited in a local mall is forecasting the demand for November the one new tanning booth based on the following historical data: Month Number of Tanners May: 250 June: 270 July: 190 Aug: 200 Sep: 220 Oct: 210 What is this month's forecast using exponential smoothing with alpha = 2, if August's forecast was 145?

Answer 1

Answer:

The forecast for November is 235 if August's forecast was 145.

Step-by-step explanation:

The formula for calculating forecast using exponential smoothing is:

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

Where Ft = New month forecast

           Ft-1 = Previous month forecast

           At-1 = Previous month actual value

            α = smoothing constant

We are given F₈ = 145 (forecast for August), A₈ = 200 (Actual Value for August), α = 2, and we need to compute the forecast for November. So, We will first calculate the forecast for September then October and then November, step-by-step.

So, forecast for September is:

F₉ = F₈ + α (A₈ - F₈)

    = 145 + 2*(200-145)

    = 145 + 2*55

F₉ = 255

Then, forecast for October is:

F₁₀ = F₉ + α (A₉ - F₉)

     = 255 + 2*(220-255)

     = 255 + 2*(-35)

F₁₀ = 185

The forecast for November is:

F₁₁ = F₁₀ + α (A₁₀ - F₁₀)

    = 185 + 2*(210 - 185)

F₁₁ = 235