Cards R Us would also like to explore a more sophisticated forecasting method. They want you to consider exponential smoothing.

a. Using simple exponential smoothing, compute three different sets of forecasts for the sales of Cards R Us t-shirts for weeks 2 to 18, corresponding to values of 0.3, 0.6 and 0.8. Assume the forecast for Week 1 is equal to the actual sales in Week 1.

b. Identify which value of produces the most responsive forecast? What is the implication of this finding?

c. Calculate the MAD and Mean Absolute Percentage Error (MAPE) using the forecast errors from weeks 2-17 for each of these three sets of forecasts. Which value seems to be most appropriate and explain why.

SHOW YOUR WORK

Cards R' Us sells Uofl merchandise in Louisville. Having Cards gear in stock to sell to visitors is crucial, so the shop keeps inventory on hand and replenishes weekly. One such item are t-shirts. In order to have the appropriate inventory on hand, it is important to forecast weekly sales and determine the inventory levels accordingly at the beginning of each week. Your help is needed to evaluate alternative forecasting methods. The following table contains the sales for t-shirts for the previous 17 weeks. Week Sales Week Sales 1 250 10 466 2 264 11 523 3 312 12 510 4 325 13 549 562 5 395 14 6 410 15 590 7 421 16 612 8 415 17 645 9 435 18