Example on Page 165 on Exponential Smoothing New Forecast = Last period’s foreca
ID: 3219367 • Letter: E
Question
Example on Page 165 on Exponential Smoothing
New Forecast = Last period’s forecast + a (Last period’s actual demand – Last Period’s forecast)
F t + 1 = Ft + a (Yt – Ft)
F t + 1 = New forecast or time period t + 1
Ft = Previous forecast for time period t
a = Smoothing constant for 0 < a < 1
Yt = Previous period’s actual demand
a) In January, a Demand of 142 of a certain car model was predicted by a dealer.
Actual February demand was 153 autos. Using a constant of a = .20, let us forecast the March demand.
New Forecast for March demand
= Ft + a (Yt – Ft)
Ft = ____________________________________________________________________
a = .20
Yt = Previous month sales = ________________________________________________
F t + 1 = _________________________________________________________________
b) Suppose that the actual demand for the cars in March was 136. What is the forecast for the demand in April, using the exponential model with a constant of a = .20?
= Ft + a (Yt – Ft)
Ft = ____________________________________________________________________
a = .20
Yt = Previous month sales = ________________________________________________
F t + 1 = _________________________________________________________________
Explanation / Answer
a) In January, a Demand of 142 of a certain car model was predicted by a dealer.
Actual February demand was 153 autos. Using a constant of a = .20, let us forecast the March demand.
New Forecast for March demand
= Ft + a (Yt – Ft)
Ft = 142 units
a = .20
Yt = Previous month sales = 153
F t + 1 = 142 + 0.2 * (153 - 142 ) = 144.2
(b) Suppose that the actual demand for the cars in March was 136. What is the forecast for the demand in April, using the exponential model with a constant of a = .20?
= Ft + a (Yt – Ft)
Ft = 144.2
a = .20
Yt = Previous month sales =136
F t + 1 = 144.2 + 0.2 * (136 - 144.2 ) = 142.56
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