A large Portland manufacturer wants to forecast demand for a piece of pollution-

ID: 410371 • Letter: A

Question

A large Portland manufacturer wants to forecast demand for a piece of pollution-control equipment. A review of past sales (At) as shown below, indicates that an increasing trend is present. Smoothing constants are assigned the values of = 0.20 and -04 The firm assumes the initial forecast for month 1 (F1) was 9 00 units and the trend over that period T1 was 2 00 units Using trend-adjusted exponential smoothing. Forecasts (Ft). Trend (T). and Forecasts Including Trend (FIT) for months 1 through 4 have already been developed and are provided below. Continue with the process and determine Ft, Tt, and FIT for months 5 and 6 (round your responses to two decimal places) Month Actual Demand Forecast Trend (Tt) 2.00 1.92 2.34 2.97 Forecast Including Trend (FIT) 11.00 12.72 16.12 20.67 (4 (AL 10.0 18.0 24.0 19.0 24.0 22.0 31.0 27.0 36.0 9.00 10.80 13.78 17.70 10

Explanation / Answer

Given an alpha=0.2, beta=0.4,

Week

Actual Demand

FtTt

17.70

2.97

20.67

20.336

2.84

23.18

23.34

2.904

26.244

=0.2

=0.4

Ft=FtTt-1 + (At-1 - FtTt-1)

Tt= Tt-1+ ((Ft- FtTt-1)

For period 5:- Ft=FtTt-1 + (At-1 - FtTt-1)=20.67+0.2(19 -20.67) =20.336

Tt= Tt-1+ ((Ft- FtTt-1) =2.97+0.4(20.336-20.67) =2.84

For period 6:- Ft=FtTt-1 + (At-1 - FtTt-1)=23.18 +0.2(24 -23.18) =23.34

Tt= Tt-1+ ((Ft- FtTt-1) =2.84+0.4(23.34-23.18) =2.904