Given a prior forecast demand value of 1,000, a related actual demand value of 1100, and a smoothing constant alpha of 0.2, what is the exponential smoothing forecast value?
Question
Given a prior forecast demand value of 1,000, a related actual demand value of 1100, and a smoothing constant alpha of 0.2, what is the exponential smoothing forecast value?
Solution
The exponential smoothing forecast value can be calculated using the formula:
Forecast = Previous Forecast + α * (Actual Demand - Previous Forecast)
where α is the smoothing constant.
Step 1: Substitute the given values into the formula.
Forecast = 1000 + 0.2 * (1100 - 1000)
Step 2: Calculate the value inside the parentheses.
Forecast = 1000 + 0.2 * 100
Step 3: Multiply 0.2 by 100.
Forecast = 1000 + 20
Step 4: Add 1000 and 20.
Forecast = 1020
So, the exponential smoothing forecast value is 1020.
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