Question

Using the data in the table, use the exponential smoothing method with alpha=0.5 and a February forecast of 500 to forecast

sales for May

Month Demand
January 480
February 520
March 535
April 550
May 590
June 630
​

Answer 1

Explanation:

The formula to calculate the forecast could be determine by using the exponential smoothing method :

`Ft = F(t-1) + \alpha [A(t-1) - F(t-1)]`

Where ,Ft is the Forecast for period t

F(t-1) is the Forecast for the period previous to t

A(t-1) is the Actual demand for the period previous to t

`\alpha` = Smoothing constant

To get the forecast for may and june the above formula with
`\alpha =0.5` and april forecast of 500 will be used

For march

`=500+0.5(520-500)\\\\=500+0.5*20\\\\=500+10\\\\=510`

For April

`=510+0.5(535-510)\\\\=510+0.5*25\\\\=510+12.5\\\\=522.5`

For May

`=522.5+0.5(550-5225)\\\\=522.5+0.5*27.5\\\\=522.5+13.75\\\\=536.25`

So forecast for May = 536.25