For a product, the forecast and the actual sales for December

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For a product, the forecast and the actual sales for December 2002 were 25 and 20 respectively. If the exponential smoothing constant (α) is taken as 0.2, the forecast sales for January 2003 would be

1. 21
2. 23
3. 24
4. 27

Correct Option: C

F_t+1 = F_t + α (D_t – F_t)
F_{Jan (2003)} = F_Dec + α (D_Dec – F_Dec )
D_Dec ⇒ 20 units
F_Dec = 25 units
F_Jan = 25 + 0.2 (20 – 25)
= 25 + 0.2 (–5) = 25 –1
F_Jan ⇒ 24 units