Two different forecasting models were used to forecast sales of a popular soda o

Question

Two different forecasting models were used to forecast sales of a popular soda on a college campus. Actual demand and the two sets of forecasts are shown. Use MAD to explain which method provided a better forecast. Period Actual Demand Forecast 1 Forecast 2 1 89 76 87 2 88 85 86 3 91 84 107 4 97 93 97 5 98 101 104 6 96 103 105 Use MAD to explain which method provided a better forecast. (Round your answers to 2 decimal places, the tolerance is +/-0.01.) MAD1 = MAD2 = Forecast provides a better historical fit using the MAD criterion.

Explanation / Answer

Given Information

For Forecasts 1

If we calculate the Mean Absolute Deviation , from the Six values given .

The absolute deviation is 8.67

For Forecasts 2

If we calculate the Mean Absolute Deviation , from the Six values given .

The absolute deviation is 7.67

Now in above both cases ,

Forecasts 1 MAD is 8.67

Forecasts 2 MAD is 7.67

So as per theory , the less amount of of MAD value is more accurate.

So Forecasts 1 is more accurate than Forecasts 2

So select Forecasts 1.

Period Actual Demand Forecast Forecasts 2 1 89 76 87 2 88 85 86 3 91 84 107 4 97 93 97 5 98 101 104 6 96 103 105

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