Question

In: Operations Management

The accounting department needs to forecast the profit for a subsidiary. The data for several months...

The accounting department needs to forecast the profit for a subsidiary. The data for several months is supplied below. Be careful since the data is listed beginning with the most recent. The forecasting method to be used here is exponential smoothing with trend accounting for seasonality given a smoothing constant (alpha) of 0.69, a trend smoothing constant (delta) of 0.3, a previous trend amount, seasonally adjusted, of 65, and a previous seasonal forecast of 582. Please round your forecast to the nearest whole number.

Jul 2020: 544	Jun 2020: 274	May 2020: -1684	Apr 2020: 1439	Mar 2020: 970	Feb 2020: -1689
Jan 2020: 340	Dec 2019: 253	Nov 2019: 1631	Oct 2019: 257	Sep 2019: -660	Aug 2019: 582
Jul 2019: 2258	Jun 2019: 945	May 2019: 2580	Apr 2019: 704	Mar 2019: -1884	Feb 2019: 1902
Jan 2019: 1477	Dec 2018: 2141	Nov 2018: -778	Oct 2018: 1609	Sep 2018: -1625	Aug 2018: 1187
Jul 2018: 2959	Jun 2018: -653	May 2018: -16	Apr 2018: 2132	Mar 2018: -979

Expert Solution

Answer:

_{Formula’s
used}:

F_t+1 = α*D_t + (1-α)*F_t

T_t+1 = δ*(F_t+1-F_t) + (1-δ)*(T_t)

AF_t+1 = F_t+1 + T_t+1

Where,

F_t+1 = Unadjusted Forecast for current period

D_t= Sales for previous period

F_t= Forecast for previous period

T_t+1 = Trend factor for current period

T_t = Trend factor for previous period

AF_t+1 = Adjusted forecast for current period

Final forecast required is shown as “Adjusted Forecast in the last column of below table:

	α =	0.69
	δ =	0.3

Month (t)	Profit (Dt)	Seasonal Forecast (Ft)	Trend factor (Tt)	Adjusted Forecast (AF)
				AF = Ft+Tt
Mar-18	979	582	65	647
Apr-18	2132	855.930	127.679	984
May-18	-16	1736.418	353.522	2090
Jun-18	-653	527.250	-115.285	412
Jul-18	2959	-287.123	-325.011	-612
Aug-18	1187	1952.702	444.440	2397
Sep-18	-1625	1424.368	152.608	1577
Oct-18	1609	-679.696	-524.394	-1204
Nov-18	-778	899.504	106.684	1006
Dec-18	2141	-257.974	-272.565	-531
Jan-19	1477	1397.318	305.792	1703
Feb-19	1902	1452.299	230.549	1683
Mar-19	-1884	1762.593	254.473	2017
Apr-19	704	-753.556	-576.714	-1330
May-19	2580	252.158	-101.986	150
Jun-19	945	1858.369	410.473	2269
Jul-19	2258	1228.144	98.264	1326
Aug-19	582	1938.745	281.965	2221
Sep-19	-660	1002.591	-83.471	919
Oct-19	257	-144.597	-402.586	-547
Nov-19	1631	132.505	-198.680	-66
Dec-19	253	1166.467	171.113	1338
Jan-20	340	536.175	-69.309	467
Feb-20	-1689	400.814	-89.125	312
Mar-20	970	-1041.158	-494.979	-1536
Apr-20	1439	346.541	69.824	416
May-20	-1684	1100.338	275.016	1375
Jun-20	274	-820.855	-383.847	-1205
Jul-20	544	-65.405	-42.058	-107

Excel working is shown below:

keosha answered 1 year ago

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