6.A toy company buys large quantities of plastic pellets for use in the manufacture of its products. Production manager wants to develop a forecasting system for plastic pellet prices. The price per pound of plastic pellets has varied as shown: (CLO3: 10 Marks)

Month

Plastic pellets price/pound

Month

Plastic pellets price/pound

1

0.39

9

0.35

2

0.41

10

0.38

3

0.45

11

0.39

4

0.44

12

0.43

5

0.40

13

0.37

6

0.41

14

0.38

7

0.38

15

0.36

8

0.36

16

0.39

a)Use exponential smoothing to forecast monthly plastic pellet prices. Compute what the forecasts would have been for all the months of historical data for = 0.1, 0.3, 0.5 if the assumed forecast for all 's in the first month is 0.39.(6 Marks)

b)Which alpha value result in the least mean absolute deviation for Months 7-16? (2 Marks)

c)Use the best alpha value from (b) to compute the forecasted plastic pellets price for month 17. (2 Marks)