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Question
NARRBEGIN: SA_92_94Suppose that simple exponential smoothing with
is used to forecast monthly Pepsi sales at a small grocery store. After March's demand is observed, the forecasted demand for April is 5000 cans of Pepsi.NARREND
(A) Suppose that actual demands during April and May are as follows: May, 5500 cans; June 4500 cans. After observing May's demand, what is the forecast for June's demand?
(B) Based on the data from (A), the demands during April and May average (5500+4500)/2 = 5000 cans per month. This is the same as the forecast for monthly sales before we observed the April and May data. Yet after we observed the April and May demands for Pepsi, our forecast for June demand has decreased from what it was at the end of March. Why?
Answer
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NARRBEGIN: SA_79_80
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