You\'ve been asked to use the following historical sales information to forecast
ID: 2782713 • Letter: Y
Question
You've been asked to use the following historical sales information to forecast next year's sales for Worldwide Widget Manufacturing, Inc. The actual sales for 2016 were $1,950,000. Year: 2011 sales 1,750000 2012 sales 2,000,000 2013 sales 1,350,000 2014 sales 2,250,000 2105 sales 1,800,000. What would be next year's forcast using the naive approach and the average sales approach? What would be the MAPE using the naive approach and the average sales approach? Can someone show me how to do this and show me how you got the answers?
Explanation / Answer
The forecast for the next year using the naive method = Actual Demand for previous year = 1,950,000
Mean absolute percentage error (MAPE) = 1/n {|Actual -forecast|/|Actual|} *100
Where n is the number of years
MAPE calculation is as follows –
Next year's forecast using the naive approach
Year
The actual sales
Absolute percentage error [|(actual - Forecast)|/|Actual|*100]
2011
1,750,000
11.43%
2012
2,000,000
2.50%
2013
1,350,000
44.44%
2014
2,250,000
13.33%
2015
1,800,000
8.33%
2016
1,950,000
0.00%
Forecast for next year
1,950,000
Mean absolute percentage error (MAPE)
13.34%
The forecast for the next year using the average sales approach is average of actual sales = 1/n actual sales = 1,850,000
Where n is the number of years
MAPE calculation is as follows –
Next year's forecast using the average sales approach
Year
The actual sales
Absolute percentage error [|(actual - Forecast)|/|Actual|*100]
2011
1,750,000
5.71%
2012
2,000,000
7.50%
2013
1,350,000
37.04%
2014
2,250,000
17.78%
2015
1,800,000
2.78%
2016
1,950,000
5.13%
Forecast for next year
1,850,000
Mean absolute percentage error (MAPE)
12.66%
Next year's forecast using the naive approach
Year
The actual sales
Absolute percentage error [|(actual - Forecast)|/|Actual|*100]
2011
1,750,000
11.43%
2012
2,000,000
2.50%
2013
1,350,000
44.44%
2014
2,250,000
13.33%
2015
1,800,000
8.33%
2016
1,950,000
0.00%
Forecast for next year
1,950,000
Mean absolute percentage error (MAPE)
13.34%
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