How is the Year 3 forecast calculated from the Year 2 values?

Conditions

• The smoothing constant $\alpha$ is 0.4.
• The actual demand for Year 2 ($A_2$) is 365.
• The forecast for Year 2 ($F_2$) is 310.

Reasoning, step by step

1. Identify the Year 2 actual demand, $A_2 = 365$.
2. Identify the Year 2 forecast, $F_2 = 310$.
3. Substitute these values into the formula: $F_3 = 0.4(365) + 0.6(310)$.
4. Compute the products: $146 + 186 = 332$.
5. Record 332 as the forecast for Year 3.

Example

The instructor states the next calculation uses previous demand 365 and previous forecast 310. The handwritten expression reads $0.4(365)+0.6(310)$, and the calculator shows the result is 332, which is written in the Forecast Demand column for Year 3.

Common misconceptions

• Using the Year 1 actual demand instead of the Year 2 actual demand for the Year 3 calculation.
• Forgetting to use the newly calculated Year 2 forecast as the input for the Year 3 calculation.

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Explore next

• Why is the Year 4 forecast written as 357 instead of 357.2?
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