CMA Final · Strategic Cost Management · Business Forecasting Models - Time Series and Regression Analysis
Using simple exponential smoothing with α = 0.4, a Kochi firm forecast sales of 500 units for May and actual sales were 600. What is the June forecast?
The June forecast is 500 + 0.4(600 − 500) = 540 units, as exponential smoothing adjusts the old forecast by α times the forecast error.
- A540Correct
- B560
- C550
- D580
Explanation
New forecast = old forecast + α(actual − old forecast) = 500 + 0.4 x 100 = 540. Using 0.6 as the weight gives 560, which is wrong.
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