Not all the items in your office supply store are evenly distributed as far as d
ID: 418993 • Letter: N
Question
Not all the items in your office supply store are evenly distributed as far as demand is concerned, so you decide to forecast demand to help plan your stock. Past data for legal-sized yellow tablets for the month of August are
Week 1
220
Week 2
320
Week 3
520
Week 4
620
a. Using a three-week moving average, what would you forecast the next week to be? (Round your answer to the nearest whole number.)
b. Using exponential smoothing with ? = 0.20, if the exponential forecast for week 3 was estimated as the average of the first two weeks [(220 + 320)/2 = 270], what would you forecast week 5 to be? (Round your answer to the nearest whole number.)
Week 1
220
Week 2
320
Week 3
520
Week 4
620
Explanation / Answer
Answer to question a :
Forecast for next week ( week 5 ) using 3 week moving average
= ( demand for week 2 + Demand for week 3 + demand for week 4 ) / 3
= ( 320 + 520 + 620 ) / 3
= 486.666 ( 487 rounded to nearest whole number )
FORECAST FOR NEXT WEEK = 487
Answer to question b :
Following is the formula for exponential smoothing forecast :
Ft = alpha x Dt-1 + ( 1 – alpha) x Ft-1= 0.2 x Dt-1 + 0.8 x Ft-1
Where,
Ft, Ft-1 = Forecasts for period t and t-1 respectively
Dt-1 = Demand for period t-1
Alpha = Exponential smoothing constant = 0.2
Accordingly please refer below table for forecast for week 5 :
Week
Demand
Forecast
3
520
270
4
620
0.2 x 520 + 0.8 x 270 = 104 + 216 = 320
5
0.2 x 620 + 0.8 x 320 = 124 + 256 = 380
FORECAST FOR WEEK 5 = 380
FORECAST FOR NEXT WEEK = 487
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