Question

In forecasting by exponential smoothing, if a is a smoothing constant, then:

• A. $$New Forecast =\alpha (latest sales figure) + (1 - \alpha) (old forecast)$$
• B. $$New Forecast = \alpha (latest sales figure) - (1 - \alpha) (old forecast)$$
• C. $$New forecast = \alpha (latest sales figure) + (1 + \alpha) (old forecast)$$
• D. $$New Forecast = \alpha (latest sales figure) - (1 + \alpha) (old forecast)$$

Answer 1

Answer:

$$New Forecast =\alpha (latest sales figure) + (1 - \alpha) (old forecast)$$

In exponential smoothing method of forecast, the forecast for the next period is equal to $F_t = \alpha D_{t-1} + (1-\alpha) F_{t- 1}$,where, $D_{t-1}$ = latest figure sale or latest demand, $F_{t-1}$ = old forecast.