Question

A check-processing center uses exponential smoothing to forecast the number of incoming checks each month. The number of checks received in June was 40 million, while the forecast was 42 million. A smoothing constant of .2 is used. a) What is the forecast for July

Answer 1

41.6 million

Step-by-step explanation:

Given:

Number of checks in June = 40,000,000

Forecast in June = 42,000,000

Smoothing constant = 0.2

Required:

Find the forecast for July

To find July's forecast, use the formula:

July's forecast = (Number of checks in June * Smoothing constant) + (Forecast demand in June * (1 - Smoothing constant))

Substitute figures:

(40,000,000 * 0.2) + (42,000,000 * (1 - 0.2))

= (8,000,000) + (42,000,000 * 0.8)

= (8,000,000 + 33,600,000)

= 41,600,000

Forcast in July is 41.6 million