Question 2 (20 marks)

STPL is considering acquiring Pie Smiles, a small chain bakery that specialise in making gourmet pies. A sales manager from Pie Smiles has provided the following actual sales:

Year	Sales ($)
1	9,000
2	9,900
3	10,360
4	11,260
5	11,680
6	?

The sales manager from Pie Smiles has suggested that sales would be $8,200 in year 1.

Required:

1. Using exponential smoothing with a weight of =0.3, develop forecasts for years 2 through to 6 . (3 marks)
2. Using smoothing constants of 0.6 and 0.9, develop forecasts for the sales of pies. (3 marks)
3. What effect did the smoothing constant have on the forecast for the sale of pies? (3 marks)
4. Use a 3-year moving average forecasting model to forecast the sales of pies. (3 marks)
5. Using the trend projection model, develop a forecasting model for the sales of pies. (3 marks)
6. Which is the preferred method to predict the sales of pies: exponential smoothing with a smoothing constant of 0.3, a 3-year moving average or a trend line? In your response justify why you made that choice. (5 marks)