**(See student companion site for Excel template.)**

• **Problem 1**

Given the following data, calculate forecasts for months 4, 5, 6, and 7 using a three-month moving average and an exponential smoothing forecast with an alpha of 0.3. Assume a forecast of 61 for month 3:

• ** Before You Begin**:

To use a three-period moving average, remember that you always have to compute the average of the latest three observations. As new data become available, drop off the oldest data. For the exponential smoothing part of this problem, before you begin make sure that you have the three pieces of information you need: the current period's forecast (61 for month 3), the current period's actual value (58), and a value for the smoothing coefficient (α = 0.3).

• *Solution*

To compute the moving average forecasts:

To compute the exponential smoothing forecasts:

This can also be computed using a spreadsheet, as shown here.

• **Problem 2**

True Beauty is a cosmetics company that uses exponential smoothing ...

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