Question: Problem 1 A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 88% of capacity:

Problem 1 A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 88% of capacity: actual usage was 89.6% of capacity. A smoothing constant of 1 is used. a. Prepare a forecast for September. 22 b. Assuming actual September usage of 92%, prepare a forecast for October usage. The concept used to solve the problem - Exponential Smoothing Definition: Each new forecast is based on the previous forecast plus a percentage of the difference between that forecast and the actual value of the series at that point. Formula: F-F11 + a(At-1 - Ft.1) F= Forecast A= Actual F = Forecast for periodt t is always equal to 2 F - Forecast for the previous period (i.e., period t-1) The a=Smoothing constant (percentage) A-1= Actual demand or sales for the previous period Excel Example: Smoothing Constanta 0.1 Actual 89.6% Month August September October Forecast 88% a. b. September forecast=August forecast+a *(Actual August demand-August forecast) September forecast = 22

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