Detailed Answer
Answer (B) is correct.
The formula for forecasting sales using exponential smoothing is
Ft = (?)xt – 1 + (1 – ?)Ft – 1 , where F = the forecast for a period, t = the
time period, ? = the smoothing factor (0 < ? < 1), and x = the actual
result for a period. Since June’s forecasted sales are not known, first
solve for this as follows:
F(June) = (?) × May’s actual sales + (1 – ?) × May’s projected sales
= (.7) × 22,000,000 + (1 – .7) × (22,000,000 – 600,000)
= 15,400,000 + 6,420,000
= $21,820,000
Now calculate July’s projected sales as follows:
F(July) = (?) × June’s actual sales + (1 – ?) × June’s projected sales
= (.7) × 22,500,000 + (1 – .7) × (21,820,000)
= 15,750,000 + 6,546,000
= $22,296,000