The manager at a convenience store wants to forecast sales for an item THIS WEEK
ID: 361300 • Letter: T
Question
The manager at a convenience store wants to forecast sales for an item THIS WEEK based on the following historical data:
WEEK
ACTUAL SALES
(Number of units sold)
Six weeks ago
140
Five weeks ago
280
Four weeks ago
420
Three weeks ago
560
Two weeks ago
700
One week ago
840
THIS WEEK
NOT KNOWN
Determine the sales forecast for THIS WEEK using exponential smoothing method with smoothing constant, = 0.3 and the sales forecast for three weeks ago = 550 units.
Select one:
a. 667.97 units
b. 666.97 units
c. 669.97 units
d. 665.97 units
e. 668.97 units
WEEK
ACTUAL SALES
(Number of units sold)
Six weeks ago
140
Five weeks ago
280
Four weeks ago
420
Three weeks ago
560
Two weeks ago
700
One week ago
840
THIS WEEK
NOT KNOWN
Explanation / Answer
Formula for Forecast under exponential smoothing :
Ft = alpha x At-1 + ( 1 – alpha) x Ft-1
Ft = Forecast for period t
Ft-1 = Forecast for period t-1
Alpha = Smoothing constant = 0.3
Therefore,
Ft = 0.3 x At-1 + 0.7x Ft-1
Given is:
Forecast for “Three weeks ago” = 550 units
Accordingly forecaast for subsequent weeks and upto this week is given as per above formula “
Period
Actual sales
Forecast
3 weeks ago
560
550
2 weeks ago
700
553
1 week ago
840
597.1
This week
669.97
Period
Actual sales
Forecast
3 weeks ago
560
550
2 weeks ago
700
553
1 week ago
840
597.1
This week
669.97
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