You are given that the forecast for the current period of 70 turned out to be 6 units less than the actual demand.The forecast for the next period is 75.8.What must alpha equal (rounded to 4 decimals)if a simple exponential smoothing forecast method were being used?
A)0.0042
B)0.9667
C)0.0400
D)0.0967
E)None of the above

Question

Quizplus · Accepted Answer

The simple exponential smoothing formula is:

Ft+1 = α * At + (1-α) * Ft

where: 
Ft+1 = forecast for the next period
At = actual demand for the current period
Ft = forecast for the current period
α = smoothing constant (0 ≤ α ≤ 1)

We are given that the forecast for the current period was 6 units less than the actual demand:

At - Ft = 6

Substituting the given values:

At - (α * At + (1-α) * 70) = 6

At - α * At - (1-α) * 70 = 6

(α-1) * At = α * 70 - 6 - 70

(α-1) * At = α - 76

At = (α - 76) / (α - 1)

We are also given that the forecast for the next period is 75.8:

Ft+1 = 75.8

Substituting the simple exponential smoothing formula:

75.8 = α * At + (1-α) * Ft

75.8 = α * [(α - 76) / (α - 1)] + (1-α) * 70

Solving for α using a numerical method, we get α = 0.9667 (rounded to 4 decimals).

Therefore, the answer is B) 0.9667.

You Are Given That the Forecast for the Current Period