What is this week's forecast using trend adjusted (double) smoothing with alpha = 0.5 and beta = 0.1, if the forecast for last week was 65, the forecast for two weeks ago was 75, and the trend estimate for last week's forecast was -5?
A)49.3
B)50.6
C)51.3
D)65.4
E)78.7

Question

Quizplus · Accepted Answer

Using the trend adjusted (double) smoothing method, the forecast for this week is given by:

Forecast = Double smoothed forecast + Double smoothed trend estimate

Double smoothed forecast = alpha*(Last week's actual value) + (1-alpha)*(Last week's forecast + Last week's trend estimate)
                   = 0.5*(65) + 0.5*(65-5)
                   = 52.5

Double smoothed trend estimate = beta*(Double smoothed forecast - Last week's forecast) + (1-beta)*Last week's trend estimate
                              = 0.1*(52.5-65) + 0.9*(-5)
                              = -2.65

Forecast for this week = Double smoothed forecast + Double smoothed trend estimate
                       = 52.5 - 2.65
                       = 49.3
                       
Therefore, the answer is C (51.3 is not a possible answer as it deviates from the computed value).

What Is This Week's Forecast Using Trend Adjusted (Double) Smoothing