I'm the manager at the marina, after your wonderful job of calculating demand for gasoline, now has decided that she will put you to the task of forecasting demand for Wave Runners. You sell a substantial number, partially due to replacing models of owners who have run into objects floating in the Missouri River. Your task, should you accept it and continue to be employed at the marina, is to use trend-adjusted exponential smoothing to calculate a FIT (look on page 327 for what a FIT is).
My boss, while she took a statistics class, just picked up this term in a wild search on the Internet to find a better solution to some of her forecasting of sales. Because of this, you will have to explain a few terms and concepts to her in your memo. Terms you will need to explain include alpha, beta, FIT, Ft, and At. Some of the other things you will need to explain to your boss include what would happen if alpha were equal to 1 and 0.
Your data for this problem:
You will need to forecast for week 7. You are given by your boss the following alpha of .3 and beta of 0.5. Your initial trend value is 1, and your initial forecast is 19. Copy into your memo all the data and calculations. One thing to remember is that although the calculation may show a partial number, you cannot sell ½ a Wave Runner, so round up your estimate.
Please see the attached file.
Exponential smoothing continually revises an estimate in the light of more recent experience. This method is based on averaging (smoothing) past value of a series in a decreasing manner. The observations are weighted with more weight being given to ...
This solution defines and uses exponential smoothing to forecast the sale for week 7 by using the variables of FIT, Ft, At, period, beta and alpha. All steps are shown in an Excel file and answer is summarized in Word document .