PA 15-5 My App is a small but growing start-up that sees... My App is a small bu

Question

PA 15-5 My App is a small but growing start-up that sees... My App is a small but growing start-up that sees demand for several of its apps increasing quickly. The table below shows the last six months of downloads. Use a forecast for the first month of 220,000, an initial trend forecast of 40,000, and smoothing parameters of 0.25 for both demand smoothing and trend smoothing Month (t) Monthly Application Downloads Forecast for Next Month Trend 220,000.0040,000.00 235,000 290,000 336,000 390,000 435,000 498,000 4 Round your answer to 2 decimal places.) Complete the table above, filling in the "Forecast for next month" and "Trend" columns, using double exponential smoothing a. (Round your answer to 2 decimal places) b. Month 7s forecast is

Explanation / Answer

a) For Double Exponential Smoothing, we need to calculate the forecast, level and trend for each month.

Forecast for Month 2 = Level of month 1 + Trend of Month 1 =

(For month 1 , take an arbitrary level so that level + trend = forecast)

Forecast error is the difference between demand and forecast for that month

Forecast error for the month = Actual Demand for the month - Forecast calculated

Level for a month uses the demand smoothing parameter to extrapolate the value for all the coming 6 months

Level for Month 2= Forecast for Month 1 + Demand smoothing parameter * Forecast error for month 1

Change in level = Level for month 2 - level for month 1

Trend for month 2 = Trend for month 1 + Trend smoothing parameter *(change in level for month 1 - trend of month 1)

So for example we will take month 2 calculation:

Forecast of month 1 = 220000

Demand of month 1= 235000

Forecast error = Demand - Forecast = 235000-220000 = 15000

Level = Forecast of month 1 + demand smoothing parameter * forecast error = 220000+ 0.25*15000 = 223750

change in level for month 2 = level of month 2 - level of month 1 = 223750-180000= 43750

Trend for month 2 = Trend for month 1 + trend smoothing parameter * (change in level - trend of month 1) = 40000 + 0.25*(43750-40000) = 40938

Forecast for month 2 = Level for month 2 + Trend for month 2 = 223750 + 40938 = 264,688.

So using these forumale for double exponential smoothing, it can be copied for the rest of teh months to complete the table as below

b) For the month 7 forecast we will use the same formula from the previous table and use the values of month 6

Level for month 7 = Forecast of month 6 + demand smoothing parameter * forecast error = 467140+ 0.25*30860 = 474855.05

Change in level in month 6 = 54546

Trend for month 7 = Trend for month 6 + trend smoothing parameter * (change in level - trend of month 6) = 46831+ 0.25*(54546-46831) = 48759.36

Forecast for month 7 = Level for month 7 + Trend for month 7 = 474855.05 + 48759.36 = 523614.41

Month (t) Monthly application download Forecast for next month Forecast error Level Change in level Trend Demand smoothing parameter 0.25 180000 40000 Trend smoothing parameter 0.25 1 235000 220000 15000 223750 43750 40938 2 290000 264688 25313 271016 47266 42520 3 336000 313535 22465 319151 48136 43924 4 390000 363075 26925 369806 50655 45606 5 435000 415413 19587 420309 50503 46831 6 498000 467140 30860 474855 54546 48759

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.