A steel distributor cuts sheets of steel from coils supplied by major mills. Accurate forecasting of coil usage can be very beneficial in controlling raw material inventories. Eighty percent of the sales price is in the cost of purchased materials. Although determining purchase quantities involves many considerations, a three-month moving average is used to project the usage rate to the next month. Actual coil usage rates in lb for two products are given in the following table:

a. Will an exponential smoothing model provide improved forecasts compared with the three-month moving average? If so, what type of model and smoothing constants would you suggest?
b. What is your forecast of the usage for October of this year?
c. If the actual October usage for A569 is 369,828 lb and for A366 is 677,649 lb, how do you rationalize the difference from your forecasts of these items?

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COL A569 co Pko COIL A366 CO CR Two Years Two Years Ago Last Year This Year Ago Last Year This Year 794,0047 jan. 206,807 304,580 341,786 Feb, 131,075 Mar 124,357 273,725 179,878 Apr 149,454 210,626 226,130 May 169,799 150,587 177,400 445,703 672,040 917967 June 216,843 289,62 182,109 483,058 450,735 532,171 July 288,965 168,590 123,957 446,770 567,928 654,445 Aug 219,018 171,470 54,074 Sept.65,885 209,351 136,795 646,300 481,355 472,664 Oct. 179,739 Nov. 251969 Dec. 205,806 735,663 03,091 590,202 542,897 601,401 499,022 529,784 703,151 633,160 293,434 521,878 757610 6 692,376 806,204 549,355 546,480 470,55 419,846 203,466 145,866 203,742 682611 612,346 606,968 447,021