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The sales data of a product for 5 years are

Year

2014

2015

2016

2017

2018

Sales (units)

280

268

259

270

287


Assume the forecast for the year 2014 as 260 units. Using an exponential smoothing method with smoothing constant α = 0.5, the sales forecast (units) for the year 2019, is ______

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Best answer

Concept:

Exponential Smoothing Method:

  • In exponential smoothing method of forecast, the forecast for the next period is equal to
    Ft = α Dt - 1 + (1 - α) Ft - 1 = Ft - 1 + α(Dt - 1 - Ft - 1)

Where, Dt-1 = latest figure sale or latest demand, Ft-1 = old forecast and α = smoothing constant

Calculation:

Given:

The sales of the particular years are given and the forecast for the year 2014, F2014 = 260 units.

∴ The forecast  for the year 2015,

F2015 = F2014 + α(D2014 - F2014

⇒ 260 + 0.5(280 - 260) = 270 units.

∴ The forecast  for the year 2016,

F2016 = F2015 + α(D2015 - F2015

⇒ 270 + 0.5(268 - 270) = 269 units.

∴ The forecast  for the year 2017,

F2017 = F2016 + α(D2016 - F2016

⇒ 269 + 0.5(259 - 269) = 264 units.

∴ The forecast  for the year 2018,

F2018 = F2017 + α(D2017 - F2017

⇒ 264 + 0.5(270 - 264) = 267 units.

∴ The forecast  for the year 2019,

F2019 = F2018 + α(D2018 - F2018

⇒ 267 + 0.5(287 - 267) = 277 units.

∴ The sales forecast for the year 2019, is 277 units.

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