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CMA Final · Strategic Cost Management · Business Forecasting Models - Time Series and Regression Analysis

Using exponential smoothing with alpha = 0.3, a Kolkata manufacturer forecast sales of 200 units for March. Actual March sales were 240 units. What is the forecast for April?

The April forecast is 212 units. Exponential smoothing adds alpha times the forecast error to the previous forecast: 200 plus 0.3 times 40. Using 0.7 as the weight on the error would wrongly give 228.

  1. A212 unitsCorrect
  2. B228 units
  3. C240 units
  4. D188 units

Explanation

New forecast = old forecast + alpha x (actual - old forecast) = 200 + 0.3 x 40 = 212. The 228 figure uses alpha = 0.7 on the error, which swaps the weights. 188 results from subtracting the adjustment.

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