Given the trouble Nina Industries has been having with recent forecast accuracy.

Question

Given the trouble Nina Industries has been having with recent forecast accuracy. They have asked you to evaluate the past years forecast method against the sales that actually occurred. In the tables below they are providing the sales for last year and the forecast values that were available at the time. You are to use MSE to determine the level of accuracy for this forecast Sales 2327 30 2610 Last Year 2 5 3241 3051 2780 3477 3063 3959 3719 10 12 Last Year Forecast 81 2735 2975 2883 2978 3758 3887 10 12

Explanation / Answer

Mean squared error (MSE) Calculation:

Mean squared error (MSE) is 68078.92

Smaller the value of mean squared error (MSE) is better as in that case we can say that the forecast is closer to the actual sales.

Last year Actual sales Forecast Forecast Error (Value - Forecast) Squared Forecast Error (forecast error^2) 1 2327 2281 46 2116 2 2630 2238 392 153664 3 2610 2997 -387 149769 4 2953 3030 -77 5929 5 3241 3077 164 26896 6 2562 2735 -173 29929 7 3051 2975 76 5776 8 2780 2883 -103 10609 9 3477 2880 597 356409 10 3063 2978 85 7225 11 3959 3758 201 40401 12 3719 3887 -168 28224 Total 816947 Mean squared error (MSE) = Sum of Squared forecast error/number of forecasts = 816947/12= 68078.92

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