Question

Actual demand for a product for the past three months was Three months ago 400 units Two months ago 350 units Last month 325 units


a. Using a simple three-month moving average, make a forecast for this month. (Round your answer to the nearest whole number.) Forecast for this month units


b. If 300 units were actually demanded this month, what would your forecast be for next month? Forecast for the next month units


c. Using simple exponential smoothing, what would your forecast be for this month if the exponentially smoothed forecast for three months ago was 450 units and the smoothing constant was 0.20? (Round your answer to the nearest whole number.) Need help with exponential smoothing

Answer 1

Answer: A. forecast is 358,  B. forecast is 325,  C.forecast is 420

Explanation:

A. Simple three Moving Average

  N1  = 400

  N2  = 350

  N3 = 325

  total Periods N =3

Simple Moving Average = (N1 + N2 + N3)/ N

Simple Moving Average = (400 + 350 +325)/ 3

Simple Moving Average = 1075/3 = 358.333 = 358 (rounded off)  

using a simple moving average we can forecast the demand to be 358  

B Simple three Moving Average

  N1  = 350

  N2  = 325

  N3  = 300

  total Periods N = 3

Simple Moving Average = (N1 + N2 + N3)/N

Simple Moving Average = (350 +325 +300)/3

Simple Moving Average = 975/3 = 325

using a simple moving average we can forecast the demand to be 325 this month

 

C. Exponential Smoothing

 when using Exponential smoothing method to forecast demand, to calculate the demand forecast Exponential smoothing method

 we take the most recent period's demand and multiply it by the smoothing factor and add most recent period's forecast multiplied by (1 - smoothing fact).

let D = most recent periods demand actual demand = 300

   S = Smoothing factor = 0.20

   F = most recent period's forecast = 450

 

  Demand Forecast = (D × S) + (F × (1-S)

  Demand Forecast = (300 × 0.2) + (450 × (1 - 0.20)

  Demand Forecast = (300 × 0.2) + (450 × 0.80)

  Demand Forecast = 60 + 360 = 420

  using exponential smoothing the demand forecast is 420