The manager at a convenience store wants to forecast sales for an item THIS WEEK
ID: 361303 • Letter: T
Question
The manager at a convenience store wants to forecast sales for an item THIS WEEK based on the following historical data: WEEK ACTUAL SALES (Number of units sold)
Six weeks ago 150
Five weeks ago 300
Four weeks ago 450
Three weeks ago 600
Two weeks ago 750
One week ago 900
THIS WEEK NOT KNOWN
Determine the sales forecast for THIS WEEK using exponential smoothing method with smoothing constant, = 0.3 and the sales forecast for two weeks ago = 740 units. Select one:
a. 793.1 units
b. 794.1 units
c. 792.1 units
d. 790.1 units
e. 791.1 units
Explanation / Answer
Formula for Forecast under exponential smoothing :
Ft = alpha x At-1 + ( 1 – alpha) x Ft-1
Ft = Forecast for period t
Ft-1 = Forecast for period t-1
Alpha = Smoothing constant = 0.3
Therefore,
Ft = 0.3 x At-1 + 0.7x Ft-1
Given is:
Forecast for “Three weeks ago” = 550 units
Accordingly forecaast for subsequent weeks and upto this week is given as per above formula “
Period
Actual sales
Forecast
2 weeks ago
750
740
1 week ago
900
743
This week
790.1
SALES FORECAST FOR THIS WEEK : d) 790.1
Period
Actual sales
Forecast
2 weeks ago
750
740
1 week ago
900
743
This week
790.1
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