Question

Your manager is trying to determine what forecasting method to use. Based on the following historical data, calculate the following forecast and specify what procedure you would utilize.

month	actual demand
1	62
2	65
3	67
4	68
5	71
6	73
7	76
8	78
9	78
10	80
11	84
12	85

1. Calculate the exponential smoothing with trend component forecast for periods 2–12 using an initial trend forecast (T₁) of 1.8, an initial exponential smoothing forecast (F₁) of 60, an α of 0.30, and a δ of 0.30. (Round your answers to 3 decimal places.)

2. Calculate the mean absolute deviation (MAD) for the forecast. (Round your answers to 3 decimal places.)

Answer 1

Question: Your manager is trying to determine what forecasting method to use. Based on the following historical data, calculate the following forecast and specify what procedure you would utilize.

Answer:

Over all calculation:

Excel formulas:

Formulas:

Exponential Smoothing is given by:

Ft+1 = x Dt + (1 - ) x (Ft + Tt)

Trend is given by

Tt+1 = x (Ft+1 - Ft) + (1 - ) x Tt

Trend adjusted exponential smoothing (FIT) is given by:

FIT = Ft+1 + Tt+1

Mean Absolute Deviation MAD is given by:

MAD = |Error| / n

Here: |Error| = |Actual Demand - FIT|