Question

If the actual demand of a product is 62, a previous year's forecast is 57, and the value of smoothing constant is 0.3, what would be the forecast for the current year using exponential smoothing method of forecasting?
1. 58.5
2. 60
3. 62.5
4. 65 

Answer 1

Correct Answer - Option 1 : 58.5

Concept:

For exponential smoothing method,

\(F_t = F_{t-1} + α (D_{t-1} – F_{t-1})\)

where F_t-1 = previous year's forecast, Ft  = current year's forecast, Dt-1 = previous year's demand, α = smoothing constant

Calculation:

Given:

F_t-1 =  57, Dt-1 = 62, α = 0.3

\(F_t = F_{t-1} + α (D_{t-1} – F_{t-1})\)

\(\Rightarrow F_{t}= 57+ 0.3\times (62 – 57)\)

F t  = 58.5.