A car dealer must choose between two alternative forecasting techniques. Both te

Question

A car dealer must choose between two alternative forecasting techniques. Both techniques have been used to prepare forecasts for a six- month period. Using MAD as a criterion, which technique provides a more accurate forecast? These are skill-building exercises. You should provide formulas, steps, or reasons to support your solutions. You Must show how did you reach every number. Submissions with only the final solutions will not be given any credit. Technique 1 Forecast 488 484 480 490 497 493 Technique 2 Forecast 495 482 478 488 492 493 Month Demand 492 470 485 493 498 492

Explanation / Answer

Month Actual Demand F1 Actual Deviation for F1 F2 Actual Deviation for F2 1 492 488 4 495 3 2 470 484 14 482 12 3 485 480 5 478 7 4 493 490 3 488 5 5 498 497 1 492 6 6 492 493 1 493 1 Sum 28 34 MAD = Sum(A-F)/n MAD for first forecast = 28/6 4.67 MAD for second forecast = 34/6 5.67 The first forecast will be preferred due to lower MAD

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