Question

Consider the following actual demand for a soft drink at a local Burger King restaurant.

What is the demand forecast for Friday using simple exponential smoothing method with alpha=0.2 and assume Tuesday’s forecast follows Naïve forecast? Please round to the nearest whole number if necessary.

DAY- ---DEMAND

Monday ---88

Tuesday ---73

Wednesday ---78

Thursday--- 65

Friday ----?

Select one:

a. 75

b. 80

c. 82

d. 72

e. 68

Answer 1

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Answer: B (80)

Rationale:

Given that Tuesday's forecast follows a naive approach.

Therefore, Forecast for Tuesday = Demand of Monday

Therefore, Forecast for Tuesday = 88

Given exponential smoothing (a) = 0.2

Forecast using exponential smoothing is given by formula:

F(t+1) = (a × Demand(t)) + (1 - a) × Forecast(t)

Day	Demand	Forecast
Tuesday	73	88
Wednesday	78	(73×0.2) + (0.8×88) = 85
Thursday	65	(78×0.2) + (0.8×85) = 83.6
Friday		(65×0.2) + (0.8×83.6) = 79.88

Forecast for Friday = 79.88

Forecast for Friday = 80 (rounded off to nearest whole number)

Forecast for Friday = 80