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GATE 2020 ME (ME2) – Question 43

Production Planning and Control · Forecasting models · 2 marks · Multiple choice

Monthly forecasts for months 1, 2 and 3 are 32.00, 31.80 and 31.82 respectively; actual sales are 30.00, 32.00 and 30.00. Forecasts use exponential smoothing. Find the smoothing coefficient.

  1. 0.10
  2. 0.40
  3. 0.50
  4. 1.00

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Correct answer: (A) 0.10

Explanation

Exponential smoothing updates the next forecast by a fraction of the current forecast error: F2=F1+alpha(A1-F1). Substitution gives 31.80=32+alpha(30-32), so alpha=0.20/2=0.10. Check the next period: 31.80+0.10(32-31.80)=31.82, exactly the supplied third forecast. Thus **alpha=0.10, A**. The third actual sale is not needed until computing the fourth forecast.