Lenovo uses the ZX-81 chip in some of its laptop computers. The prices for the c

Question

Lenovo uses the ZX-81 chip in some of its laptop computers. The prices for the chip during the last 12 months were as follows Month Month January February March Price Per Chip 1.85 $1.61 1.60 $1.85 $1.90 $1.95 August September October November December Price Per Chip $1.80 $1.83 $1.60 $1.57 $1.62 $1.75 ril May June This exercise contains only part d. With = 0.1 and the initial forecast for October of $1.81, using exponential smoothing, the forecast for periods 11 and 12 is (round your responses to two decimal places) Month Oct Nov Dec Forecast $1.81

Explanation / Answer

Formula for Exponential smoothing as follows :

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

Ft = Forecast for period t

Ft-1 = Forecast for period t-1

alpha = Exponntial smoothig factor = 0.1

Therefore,

Ft = 0.1x At-1+ 0.9x Ft-1

Given , Actual price for October = $1.57 and Forecast = $1.81,

Forecast for November = 0.1 x 1.57 + 0.9 x 1.81 = 0.157 + 1.629 = $1.786 ( $ 1.79 rounded to 2 decimal places)

Similarly ,

forecast for December

= 0.1 * 1.62 + 0.9 x 1.79 = 0.162 + 1.611 = $1.773 ( $1.77 rounded to 2 decimal places)

FORECAST FOR NOV = $1.79

FORECAST FOR DECEMBER = $1.77

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