Question

For a product, the forecast and the actual sales for December 2008 were 25 and 20 respectively. If the exponential smoothing constant (α) is taken as 0.2, the forecast sales for January 2009 would be.
1. 21
2. 23
3. 24
4. 27

Answer 1

Correct Answer - Option 3 : 24

Concept:

By the exponential smoothing method:

\({F_t} = {F_{t - 1}} + α \left[ {{D_{t - 1}} - {F_{t - 1}}} \right]\)

where F_t = forecast for the period t, F_t-1 = Forecasted demand for the last period, D_t-1 = Demand for the last period, α = exponential smoothing constant

Calculation:  

Given:

F_t-1 = 25, D_t-1 = 20, α = 0.2

∴ By using the formula by exponential smoothing factor, we have

\({F_t} = {F_{t - 1}} + α \left[ {{D_{t - 1}} - {F_{t - 1}}} \right]\)

F_{jan (2009)} = F_Dec + α (D_Dec - F_Dec)

Fjan (2009) = 25 + 0.2(20 - 25)

Fjan (2009) = 25 - 1 = 24