Question Storrs Cycles has just started selling the new Cyclone mountain bike, w

Question

Question Storrs Cycles has just started selling the new Cyclone mountain bike, with monthly sales as shown in the table. Month Jan Feb Mar Apr Sales 407 376 410 365 a) Based on the given monthly sales data, it can be said that there is not a strong linear trend in sales over time. b) First, co-owner Bob Day wants to forecast by exponential smoothing by initially setting February's forecast equal to January's sales with a 0.20. Using t forecasting method, Bob's forecast for the month of May is (round your response to two decimal places) Sales 407 376 410 365 Month Forecast Jan Feb Mar Apr 407.00 400 80 402.64 May399 08

Explanation / Answer

Formula for Exponential smoothing as follows :

Ft = alpha x At-1   + ( 1 – alpha) x Ft-1

Where ,

Ft = Forecast for period t

Ft-1 = Forecast for period t-1

Alpha = Exponential smoothing constant = 0.2

Therefore ,

Ft = 0.2x At-1 + 0.8 x Ft-1

Using above formula , all relevant periods as follows :

Month

Sales

Forecast

Jan

407

Feb

376

407

Mar

410

400.80

April

365

402.64

May

395.11

BOB’S FORECAST FOR MONTH OF MAY IS = 395.11

Month

Sales

Forecast

Jan

407

Feb

376

407

Mar

410

400.80

April

365

402.64

May

395.11

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