Question

1. The following table contains the demand from the last 5 months.

Month	Actual Demand
1	25
2	30
3	33
4	35
5	38

1. Calculate the single exponential smoothing forecast for these data using an α of 0.3 and an initial forecast (F₁) of 28. Report the forecast for Month 6 in AnswerSheet. Show your work in worksheet “Show your work for Q1.” (2 pts.)

2. Calculate the exponential smoothing with trend forecast for these data using an α of 0.25, a β of 0.60, an initial trend forecast (T₁) of 1, and an initial exponentially smoothed forecast (F₁) of 28. Report the forecast including trend (FIT) for Month 6 in AnswerSheet. Show your work in worksheet “Show your work for Q1.” (2 pts.)

3. Calculate the mean absolute deviation (MAD) for each forecast. Which forecasting method performs better in this problem (pick from the list)? Show your work in worksheet “Show your work for Q1.” (3 pts.)

Answer 1

(a)

Alpha	0.3
Data			Forecasts and Error Analysis
Period	Demand		Forecast	Error	Absolute	Squared	Abs Pct Err
Period 1	25		25	0	0	0	00.00%
Period 2	30		25	5	5	25	16.67%
Period 3	33		26.5	6.5	6.5	42.25	19.70%
Period 4	35		28.45	6.55	6.55	42.9025	18.71%
Period 5	38		30.415	7.585	7.585	57.5322	0.199605263
			Total	25.635	25.635	167.685	75.04%
			Average	5.127	5.127	33.537	15.01%
				Bias	MAD	MSE	MAPE
					SE	7.4763
Next period	32.6905

(b)

Alpha	0.25
Beta	0.6
Data			Forecasts and Error Analysis
Period	Demand		Smoothed Forecast, Ft	Smoothed Trend, Tt	Forecast Including Trend, FITt	Error	Absolute	Squared	Abs Pct Err
Period 1	25		25		25	0	0	0	00.00%
Period 2	30		25	0	25	5	5	25	16.67%
Period 3	33		26.25			6.75	6.75	45.5625	20.45%
Period 4	35		27.9375			7.0625	7.0625	49.8789	20.18%
Period 5	38		29.7031			8.29688	8.29688	68.8381	0.21834
			Total			27.1094	27.1094	189.28	79.13%
			Average			5.4219	5.4219	37.856	15.83%
						Bias	MAD	MSE	MAPE
							SE	7.9431

(c) Part (a) forecast is better because it has lower MAD.