Handy, Inc., produces a solar-powered electronic calculator that has experienced the following monthly sales history for the first four months of the year, in thousands of units:
January 23.3 March 30.3
February 72.3 April 15.5
a. If the forecast for January was 25, determine the one-step-ahead forecasts for February through May using exponential smoothing with a smoothing constant of .15.
b. Repeat the calculation in part (a) for a value of .40. What difference in the forecasts do you observe?
c. Compute the MSEs for the forecasts you obtained in parts (a) and (b) for February through April. Which value of gave more accurate forecasts, based on the MSE?