A local fertilizer supply company that provides fertilizer to the local farmers

Question

A local fertilizer supply company that provides fertilizer to the local farmers uses exponential smoothing to forecast the amount (quantity) of fertilizer demand each month. The actual amount of fertilizer demand in June was 40 million pounds, while the forecast was 42 million pounds. A smoothing constant of 0.20 is used. a using exponential smoothing and given the forecast or the month of July = million pounds round your response to one decir a place b)If the actual demand of fertilizer is 45 million pounds in the month of July, then using exponential smoothing and given , the forecast for the month of August million pounds (round your response to one decimal place).

Explanation / Answer

Exponential Forecast Ft+1 = Forecast Demandt + smoothing constant*(Actual Demandt – Forecast Demandt)

a) Forecast for july = 42 + .20(40-42) = 41.6 million pounds

b) Actual demand of july = 45 million pounds

Forecast for August = 41.6 + .20(45 - 41.6)

= 42.28 million pounds

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