Suppose that Jane's company uses exponential smoothing to make forecasts. Further suppose that last period's demand forecast was for 500 units and last period's actual demand was 480 units. In addition, yesterday Jane found out that this period's actual demand will be for 550 units. Jane's company uses an a value of .20. Today, Jane's boss asked her to prepare a forecast for this period. What should that forecast be?
a) 504
b) 496
c) 510
d) 484
e) 550
Answer: c) 510
Solution: .2(550) + (1-.2)500 = 110 + .8(500) = 110 + 400 = 510