A dry cleaner uses exponential smoothing to forecast equipme

A dry cleaner uses exponential smoothing to forecast equipment usage at its main plant. August usage was forecasted to be 70 percent of capacity; actual usage was 74 percent of capacity. A smoothing constant of .4 is used.

A. prepare a forecast for Septemeber (round your final answer to 2 decimal places.)

Forecast for September _______ percent of capacity

B. Assuming actual September usage of 78 percent, prepare a forecast for October usage. (Round your answer to 2 decimal places.)

Forecast for October ______ percent of capacity.

Solution

Let the capacity be 100

August forecast = 70% of 100 = 70

actual usage for August = 74

alpha (smoothing constant) = 0.4

forecast for september = actuals *alpha +(1-alpha)* forecast

74*0.4+(1-0.4)*70

= 29.6+42 = 71.6

B. Actual september usage = 78

forecast for october = actuals *alpha +(1-alpha)* forecast

= 78*0.4+(1-0.4)*71.6

=31.2+42.96 = 74.16