2 Problem 3-29 10 points Two independent methods of forecasting based on judgmen

Question

2 Problem 3-29 10 points Two independent methods of forecasting based on judgment and experience have been prepared each month for the past 10 months. The forecasts and actual sales are as follows Skipped Month Sales Forecast 2 769 792 792 775 Forecast 1 768 789 792 775 790 794 776 772 770 761 774 792 794 eBook 764 772 793 792 770 765 773 795 790 10 a. Compute a tracking signal for the 10th month for each forecast using the cumulative error for months 1 to 10, Use action limits of ± 4 Is there bias present? (Do not round your intermediate calculations. Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.) Forecast Method 1 Method 2 Tracking Signal Bias (Click to select) (Click to select) b. Compute 2s control limits for each forecast. (Do not round your intermediate calculations. Round your answers to 2 decimal places.) Control Limits Forecast Method 1 Method 2

Explanation / Answer

a)

Formula's : Mean Absolute Deviation = sum( | Er | ) / No of Obs = 17 /10 =1.7

Running Sum of forecast error = Sum( Er) = 7

Tracking Signal :  Running Sum of forecast error / Mean Absolute Deviation = 7 / 1.7 = 4.12

Answer : Since 4.12 is greater than 4 hence their is Bias

Method 2

Answer : Since 3.50 is less than 4 hence their is no Bias

b)

Method 1

Control limit =778.7+10.83*2 = 800.36

Method 2

Control limit  =779.2+10.99*2 = 801.18

Month Sales Forecast1 Er | Er | 1 771 768 3 3 2 790 789 1 1 3 794 792 2 2 4 776 775 1 1 5 772 771 1 1 6 770 771 -1 1 7 761 764 -3 3 8 774 772 2 2 9 792 793 -1 1 10 794 792 2 2 Total 7 17 Mean Absolute Deviation = 1.7 Running Sum of forecast error = 7 Tracking Signal = 4.12

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