Question

A company wants to generate a forecast for unit demand for year 2017 using exponential smoothing. The actual demand in year 2016 was 90. The forecast demand in year 2016 was 120. Using this data and a smoothing constant alpha of 0.2, which of the following is the resulting year 2017 forecast value?

110
114
120
111
100

Answer 1

114

Step-by-step explanation:

For computing the forecast value for the resulting year, we have to apply the formula which is shown below:

= Actual demand × alpha + forecast demand × ( 1- alpha)

= 90 × 0.2 + 120 × (1 - 0.2)

= 18 + 96

= 114

To compute the forecast value we have to deduct the alpha from the forecast demand and multiply the alpha with the actual demand