Question

Problem 5:  Below is 4 weeks of sales data for a restaurant that is open 5 days a week (Tuesday-Saturday).   a. Develop an Exponential Smoothing forecast.  Use an alpha of .85 and assume the initial forecast for January is 975 b. Calculate the MAD for this forecast.
	Actual
Day	Demand
Tuesday	975
Wednesday	1225
Thursday	1445
Friday	1750
Saturday	2160
Tuesday	1500
Wednesday	750
Thursday	895
Friday	1500
Saturday	1445
Tuesday	1025
Wednesday	650
Thursday	850
Friday	980
Saturday	1500
Tuesday	750
Wednesday	650
Thursday	985
Friday	1200
Saturday	1460

Answer 1

Question: Below is 4 weeks of sales data for a restaurant that is open 5 days a week (Tuesday-Saturday).
a. Develop an Exponential Smoothing forecast. Use an alpha of .85 and assume the initial forecast for January is 975
b. Calculate the MAD for this forecast.

Answer:

Calculating through Excel:

Given that:

Alpha () = 0.85

Initial Forecast = 975

Excel Formulas Used:

Formulas:

Exponential Smoothing is given by:

Ft+1 = x Dt + (1 - ) x Ft

Dt = Actual Demand

Ft = Forecast

Example: Wednesday Forecast = 0.85 x 975 + (1 - 0.85) x 975 = 975

Mean Absolute Deviation (MAD) is given by:

MAD = |Abs. Error| / n

Here:

|Abs. Error| = |Demand - Forecast|