Question

The demand for a two-wheeler was 900 units and 1030 units in April 2015 and May 2015, respectively. The forecast for the month of April 2015 was 850 units. Considering a smoothing constant of 0.6, the forecast for the month of June 2015 is
1. 850 units
2. 927 units
3. 965 units
4. 970 units

Answer 1

Correct Answer - Option 4 : 970 units

Concept:

When smoothing constant is given use the following formula to calculate the forecast.

F_t = α D_t-1 + (1 - α) F_t-1

Calculation:

Given:

	Demand	Forecasts
April	900	850
May	1030	880 (calculated below)
June

 

Calculation:

To find the forecast for the month of June using exponential smoothening.

We know that

F_t = α D_t-1 + (1 - α) F_t-1

Where f_t is the forecast of current period, F_t-1 is the forecast of previous period, D_t-1 is the Demand for previous period.

So, for calculation of forecast for June, we need to calculate forecast of May.

F_May = α D_A + (1 - α) F_A

F_May = (0.6) (900) + (1 – 0.6) 850 = 880,

F_June = (0.6) D_May + (1 – 0.6) F_May

F_June = (0.6) (1030) + (0.4) (880)

∴ F_June = 970