Question

A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 46 percent of capacity; actual usage was 56 percent of capacity. A smoothing constant of .05 is used.

a. Prepare a forecast for September. (Round your final answer to 2 decimal places.) Forecast for September percent of capacity
b. Assuming actual September usage of 64 percent, prepare a forecast for October usage. (Round your answer to 2 decimal places.) Forecast for October percent of capacity

Answer 1

a. Forecast (t) = ∝Actual (t-1) +b (1 - ∝) * Forecast (t-1)

= 0.05 * 56 +(1 - 0.05) * 46

= 2.8 + 0.95*46

= 2.8 + 43.7

= 46.5

Forecast for September is 46.5%

b. Forecast(t) = ∝Actual (t-1) + (1-∝)*Forecast(t-1)

= 0.05 * 64 + (1-0.05) * 46.5

= 3.2 + (0.95)*46.5

= 3.2 + 44.175

= 47.375

= 47.40

Forecast for October is 47.40%