Question

Use this information for the next four Questions

A firm is experimenting with its approach to forecasting. They are using exponential smoothing, but trying different smoothing parameters. When forecasting demand for even numbered weeks, they use a smoothing parameter of .35. For odd numbered weeks, they use .25. For week 3, the forecasted sales were 125 units. Based on this information, calculate the forecast for week 5.

Week	3	4	5	6
Sales	120	110	125	145

The forecast is _________________.

Group of answer choices

None of the other choices

125

113

120

140

Question 11

The forecast for week 7 will be less than the forecast for week 4

Group of answer choices

True

False

Question 12

The forecast error for week 5 had a higher magnitude (Absolute Percentage Error - APE) than the error for week 6.

Group of answer choices

False

True

Question 13

What is the % difference in APEs for weeks 4 and 6?

Group of answer choices

2% difference

20% difference

4% difference

8% difference

Answer 1

Working Table is as under:

n	At	Ft		|At-Ft|/At
Week	Sales	Forecast	Smoothing constant (α)	Absolute % Error
3	120	125	0.25	4.17%
4	110	123	0.35	12.05%
5	125	120	0.25	4.05%
6	145	122	0.35	16.06%
7		128	0.25

Answer:

n is Week

At is Sales of previous period

Ft is Forecast Sales of previous period

F(t+1) Forecast of current period

α is Smoothing Constant

Smoothing Forecast Formula is as under:

F(t+1) = Ft + α*(At - Ft)

Forecast for Week 5 = 123 + 0.25*(110-123) = 120

Answer 11: FALSE

Forecast for Week 7 = 122 + 0.25*(145-122) = 128

Forecast for Week 4 = 125 + 0.35*(120-125) = 123

Answer 12: FALSE

Absolute % Error = (|At-Ft|/At)*100

Absolute % Error of Week 5 = ((ABS(125-120))/125)*100 = 4%

Absolute % Error of Week 6 = ((ABS(145-122))/145)*100 = 16%

Answer 13: 4%

Absolute % Error of Week 4 = ((ABS(110-123))/110)*100 = 12%

Absolute % Error of Week 6 = ((ABS(145-122))/145)*100 = 16%

% difference in APEs for weeks 4 and 6 = 16-12 = 4%

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