Forecast Calculation using Exponential Smoothing

What is the forecast for July at Green Water Park?

The forecast for July using exponential smoothing with an alpha of 0.8 is 1.8 million.

Understanding Exponential Smoothing Forecast Calculation

Green Water Park uses exponential smoothing to forecast its monthly visits. In this case, the forecast for June was 1 million customers, but the actual number of customers turned out to be 2 million. The forecaster decided to use an alpha (smoothing factor) of 0.8.

To calculate the forecast for July using exponential smoothing, we need to use the formula:

Forecast for July = Forecast for June + alpha * (Actual for June - Forecast for June)

Given:

  • Forecast for June = 1 million
  • Actual for June = 2 million
  • Alpha (smoothing factor) = 0.8

Let's calculate the forecast for July:

Forecast for July = 1 million + 0.8 * (2 million - 1 million)

= 1 million + 0.8 * 1 million

= 1 million + 0.8 million

= 1.8 million

Therefore, the forecast for July using exponential smoothing with an alpha of 0.8 is 1.8 million.

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