Question

Assume that your stock of sales merchandise is maintained based on the forecast demand. If the distributor's sales personnel call on the first day of each month, compute your forecast sales by each of the three methods requested here.

	ACTUAL
June	154
July	194
August	225

a. Using a simple three-month moving average, what is the forecast for September? (Round your answer to 2 decimal places.)

b. Using a weighted moving average, what is the forecast for September with weights of 0.30, 0.40, and 0.30 for June, July, and August, respectively? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

c. Using single exponential smoothing and assuming that the forecast for June had been 142, forecast sales for September with a smoothing constant α of 0.30. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Question: Assume that your stock of sales merchandise is maintained based on the forecast demand. If the distributor's sales personnel call on the first day of each month, compute your forecast sales by each of the three methods requested here.

Answer:

Forecast for September:

a. Simple Three-Month Moving Average = 191.00

b. Weighted Moving Average = 191.30

c. Exponential Smoothing = 179.58

Explanation:

a. Using a simple three-month moving average, what is the forecast for September?

Moving Average Forecast is given by:

Moving Average Forecast = (A1 + A2 + A3 + ... + An) / n

Therefore:

September Forecast = (225 + 194 + 154) / 3

September Forecast = 573 / 3

September Forecast = 191.00

b. Using a weighted moving average, what is the forecast for September with weights of 0.30, 0.40, and 0.30 for June, July, and August, respectively?

Weighted moving average is given by:

Weighted Moving Average Forecast = (W1 x A1 + W2 x A2 + ... + Wn x An)

Therefore:

September Forecast = ((0.30 x 225) + (0.40 x 194) + (0.30 x 154))

September Forecast = 191.30

c. Using single exponential smoothing and assuming that the forecast for June had been 142, forecast sales for September with a smoothing constant α of 0.30.

Given that:

α = 0.30

Ft = 142

Now:

Exponential Smoothing Forecast is given by:

Ft+1 = α x At + (1 - α) x Ft

Therefore:

July Forecast = 0.30 x 154 + (1 - 0.30) x 142 = 145.6

August Forecast = 0.30 x 194 + (1 - 0.30) x 145.6 = 160.12

September Forecast = 0.30 x 225 + (1 - 0.30) x 160.12 = 179.58