Referring to Exercise 16-61, the managers at Armstead & Associates need to forecast monthly call volumes in order to have sufficient capacity. Develop a single exponential smoothing model using a = 0.30.

Use as a starting value the average of the first six months’ data.

a. Compute the MAD for this model.

b. Plot the forecast values against the actual data.

c. Use the same starting value but try different smoothing constants (say, 0.10, 0.20, 0.40, and 0.50) in an effort to reduce the MAD.

d. Reflect on the type of time series for which the single exponential smoothing model is designed to provide forecasts. Does it surprise you that the MAD for this method is relatively large for these data?

Explain your reasoning.