Question

Not all the items in your office supply store are evenly distributed as far as demand is concerned, so you decide to forecast demand to help plan your stock. Past data for legal-sized yellow tablets for the month of August are
A)Using a three-week moving average, what would you forecast the next week to be? (Round your answer to the nearest whole number.)
B)Using exponential smoothing with ? = 0.20, if the exponential forecast for week 3 was estimated as the average of the first two weeks [(315 + 415)/2 = 365], what would you forecast week 5 to be? (Round your answer to the nearest whole number.)
Week 1 315
Week 2 415
Week 3 615
Week 4 715

Answer 1

Answer: A. 582 ; B. 475

Explanation:

A. Three week moving average

three moving average requires us to take the last three weeks forecast in     calculating the forecast for following week,  to calculate week 5 forecast we will start from week 2 to week 4.

  Week 2 = 415

 Week 3 = 615

 Week 4 = 715

Three week moving average = (WEEK 2 + Week 3 + Week 4)/N

Three week moving average = (415 + 615 + 715)/3  

Three week moving average =  1745/3 = 581.6667 = 582

using three week moving average the forecast for week 5 is 582

B.Exponential smoothing

Exponential smoothing forecast for week 3 is 365, to calculate the forecast of week 5 we need to find a forecast for week 4 first using exponential  smoothing

S = smoothing Factor = 0.2

D = most recent forecast (week 3) = 615

F = most recent forecast under exponential smoothing = 365

Forecast(week 4) = (D × S) + (F × (1 - S))

Forecast(week 4) = (615 × 0.20) + (365 × (1 - 0.20))

Forecast(week 4) = 123 + 292 = 415

The forecast for week 4 using exponential smoothing is 415

Week 5 forecast calculation

S = smoothing Factor = 0.2

D = most recent forecast (week 4) = 715

F = most recent forecast under exponential smoothing = 415

Forecast(week 5) = (D × S) + (F × (1 - S))

Forecast(week 5) = (715 × 0.20) + (415 - (1 - 0.20))

Forecast(week 5) = 143 + 332= 475

forecast for week 5 is 475