Question

A moving average forecast for a 7-day period produces a forecast of $220,000 for day 8. The actual day 7 cash flow is $210,000. If the smoothing constant is 0.40, what is the exponential smoothing forecast for day 8? (Rounded to the nearest whole dollar)

Answer 1

Using the exponential smoothing forecast formula with a smoothing constant of 0.40, the forecast for day 8 is calculated to be $216,000, based on the actual cash flow of $210,000 for day 7 and the previous forecast of $220,000.

Step-by-step explanation:

The subject of this question involves using an exponential smoothing forecast method to predict the forecast for day 8. The given details include a smoothing constant of 0.40, a moving average forecast of $220,000 for day 8, and the actual cash flow for day 7 which is $210,000. The formula for the exponential smoothing forecast is:

New Forecast = (Smoothing Constant * Actual) + ((1 - Smoothing Constant) * Previous Forecast)

Applying the formula:

New Forecast = (0.40 * $210,000) + ((1 - 0.40) * $220,000)
= $84,000 + $132,000
= $216,000

So, the exponential smoothing forecast for day 8, rounded to the nearest whole dollar, is $216,000.