Question

If a firm produced a standard item with relatively stable demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be in which of the following ranges?

​a. 20 to 80 percentb. 60 to 120 percent
c. 5 to 10 percentd. ​20 to 50 percent

Answer 1

c. 5 to 10 percent

Step-by-step explanation:

The smoothing constant alpha is a variable that forms a part of time series analysis. The basis of this time series analysis is known as the exponential smoothing.

Note that the exponential smoothing has its input in the form of smoothing factor used for calculations. It puts in place a weightage menthod to calculate demand.

the firm is engaged in the production of standard item with a stable demand, This can be estimated at 5 to 10 percent as the stable demand would result in the firm having standarised processes and forecasts in place as per the expected production capacity the differences will be minimal.