Question: The easy fit tire shop had demand for tires shown below. Split the data two equal parts of seven days each. Assume F₁=198.

a. Develop a spreadsheet using the first seven days of demand to determine the best exponential smoothing model for values of \(\alpha \) =.2, \(\alpha \) =.3, and \(\alpha \) =.4. Select the model with the smallest absolute deviation for seven periods.

b. Develop another spreadsheet using the hold-out sample for the second seven days to compare the best exponential smoothing model found in part a with a three-period moving -average model. Compare the predictions on the basis of total absolute deviation for the second seven periods.

c. What principles does this problem illustrate?

Day Demand Day Demand
1 200 8 208
2 209 9 186
3 215 10 193
4 180 11 197
5 190 12 188
6 195 13 191
7 200 14 196