Suppose that the demand in period 1 was 7 units and the demand in period 2 was 9 units. Assume that the forecast for period 1 was for 5 units. If the firm uses exponential smoothing with an alpha value of .20, what should be the forecast for period 3

6.12units

Explanation:

Calculation to determine what should be the forecast for period 3

First step is to calculate the Forecast for period 2 using this formula

Forecast for period 2 = Alpha * Actual demand for period 1 + (1-alpha) * Forecast for period 1

Let plug in the

Forecast for period 2= 0.2 * 7+ (1-0.2)* 5

Forecast for period 2= 5.4 units

Now let determine the Forecast for period 3

Using this formula

Forecast for period 3 = Alpha* Actual demand for period 2 + (1- alpha) * Forecast for period 2

Let plug in the formula

Forecast for period 3= 0.2 * 9 + (1-0.2)* 5.4

Forecast for period 3=6.12units

Therefore what should be the forecast for period 3 is 6.12 units

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