A manufacturer of printed circuit boards uses exponential smoothing with trend t

Question

A manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. At the end of December, the company wishes to forecast sales for January. The estimate of trend through November has been 200 additional boards sold per month. Average sales have been around 1000 units per month. The demand for December was 1100 units. The company uses = 0.20 and = 0.10. Make a forecast including trend for the month of January. (Round answers to 0 decimal places, e.g. 5,275.)

The level of the series is _______ units.

The trend is _______ units.

The forecast including trend is _______ units.

Explanation / Answer

Following formulas are used for calculation :

St-1= Average Sales for the month

Tt-1=Additional trend

St is level of trend

Tt is Trend

1. Smooth the level of series :

S(December)=alpha*At+(1-alpha)(St-1+Tt-1)

=0.20*1100+(1-0.2)*(1000+200) = 1180

2. Smooth the trend for December

Beta*(St-St-1)+(1-Beta)*t-1

=0.10*(1180-1000)+(1-0.10)*200

=198

Forcaste including trend for January is :

St+Tt=1180+198

=1378 units

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