D Question 20 0.85 pts C&A; uses three different methods to forecast demand of i
ID: 435252 • Letter: D
Question
D Question 20 0.85 pts C&A; uses three different methods to forecast demand of its apple pies for the past 5 months. What can you conclude when using MAD to evaluate the performance of these methods? Month Actual Method A Method B Method C 100 120 200 150 2 150 100 110 130 160 150 146 138 200 160 159 147 250 200196 168 O B is the worst and A is the best O C is the worst and B is the best O A is the worst and C is the best. O A is the worst and B is the best O C is the worst and A is the best 0 Bís the worst and C is the best Previous Not saved Submit Quiz 3 5 8
Explanation / Answer
Solution:
Mean Absolute Deviation (MAD) is calculated as,
MAD = Sum of absolute values of (Actual sales - Forecasted values) / Number of periods
Method A MAD:
MAD = Absolute values of [(100 - 120) + (150 - 100) + (160 - 150) + (200 - 160) + (250 - 200)] / 5
MAD = (20 + 50 + 10 + 40 + 50) / 5
MAD = 170 / 5
MAD A = 34
Method B MAD:
MAD = Absolute values of [(100 - 200) + (150 - 110) + (160 - 146) + (200 - 159) + (250 - 196)] / 5
MAD = (100 + 40 + 14 + 41 + 54) / 5
MAD = 249 / 5
MAD B = 49.8
Method C MAD:
MAD = Absolute values of [(100 - 150) + (150 - 130) + (160 - 138) + (200 - 147) + (250 - 168)] / 5
MAD = (50 + 20 + 22 + 53 + 82) / 5
MAD = 227 / 5
MAD C = 45.4
Mean absolute deviation (MAD) showns the forecast error, that is, the deviation in the forecasted values from the actual values. The forecasting method with a lower MAD value is better than a forecasting method with a higher MAD value because low MAD means low forecasting errors and high MAD means high forecasting errors. From the above calculations, method A has the lowest MAD while method B has the highest MAD. Therefore method A is the best and method B is the worst.
Answer: Option (A) - B is the worst and A is the best.
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