Simple exponential smoothing is being used to forecast demand. The previous forecast of 66 turned out to be four units less than actual demand. The next forecast is 66.6, implying a smoothing constant, alpha, equal to:
A)0.01.
B)0.10.
C)0.15.
D)0.20.
E)0.60.

Question

Quizplus · Accepted Answer

The smoothing constant, alpha, is calculated as the difference between the actual demand and the previous forecast, divided by the actual demand. In this case, the difference is 4 and the actual demand is 70 (66 + 4), so alpha = 4/70 = 0.15.

Simple Exponential Smoothing Is Being Used to Forecast Demand