Question

The sales of a product during the last four years were 860, 880, 870 and 890 units. The forecast for the fourth year was 876 units. If the forecast for the fifth year, using simple exponential smoothing, is equal to the forecast using a three period moving average the value of the exponential smoothing constant $\left(\alpha \right)$ is

• A. 1/7
• B. 2/7
• C. 2/5
• D. 1/5

Answer 1

The correct option is B 2/7

$\text{By three period moving average method,}$

d	f
860
880
870
890	876

Forecast of fifth year,

$f_5=\frac{880+870+890}{3}=880\text{units}$

By exponential smoothing method

$f_5=f_4+\alpha (d_4-f_4)$

$880=876+\alpha (890-876)$

$14\alpha =4$

$\alpha =\frac{4}{14}=\frac{2}{7}$