An analyst must decide between two different forecasting techniques for weekly s

ID: 460319 • Letter: A

Question

An analyst must decide between two different forecasting techniques for weekly sales of roller blades: a linear trend equation and the naive approach. The linear trend equation is Ft = 123 + 2.0t, and it was developed using data from periods 1 through 10. Based on data for periods 11 through 20 as shown in the table, which of these two methods has the greater accuracy if MAD and MSE are used? (Round your answers to 2 decimal places.)

Explanation / Answer

Thus,

MAD for naïve method = 5.5

MSE for naïve method = 38.21

MAD for trend method = 5

MSE for trend method = 33

Since trend error found in naïve method in MAD and MSE both is bigger than of trend method. Thus, trend method should be followed.

t Units Sold (Naïve approach) Mode of (X - X') Square of (X - X') 11 146 6.7 44.89 12 148 4.7 22.09 13 150 2.7 7.29 14 142 10.7 114.49 15 156 3.3 10.89 16 150 2.7 7.29 17 156 3.3 10.89 18 157 4.3 18.49 19 159 6.3 39.69 20 163 10.3 106.09 Sum = 55 Sum = 382.1 Mean (X') = 152.7 MAD = (sum of the mod of (x-x') / n MAD = 55/10 = 5.5 MSE = Sum of the square of the (X- X')^2 / n MSE = 382.1/10 = 38.21 t Trend Value (Ft = 123 + 2t) Mod of (X - X") (X-X")^2 11 145 9 81 12 147 7 49 13 149 5 25 14 151 3 9 15 153 1 1 16 155 1 1 17 157 3 9 18 159 5 25 19 161 7 49 20 163 9 81 Mean (X") 154 Sum = 50 Sum = 330 MAD = (sum of the mod of (x-x") / n MAD = 50/10 = 5 MSE = Sum of the square of the (X- X")^2 / n MSE = 330/10 = 33

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An analyst must decide between two different forecasting techniques for weekly s

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An analyst must decide between two different forecasting techniques for weekly s

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