Question

When using exponential​ smoothing, the smoothing constant
A. indicates the accuracy of the previous forecast.
B. can be determined using MAD.
C. is typically between .75 and .95 for most business applications.
D. should be chosen to maximize positive bias.

Answer 1

Answer:

C.

Explanation:

When using exponential​ smoothing, the smoothing constant

C. can be determined using MAD.

MAD is mean absolute deviation for forecast shows that the deviation of forecasted demand from the actual demand.

Forecast MAD is used in three contexts.

1.As a basis for calculating allowable margin of error

2. To periodically recalculate alpha values when using forecast methods based on adaptive exponential smoothing.

3. When calculating the standard deviation for forecast error when setting the dimensions for safety stock.