4) Two consulting groups were competing for business from an airline company nam

Question

4) Two consulting groups were competing for business from an airline company named Orwig's Follies. They were asked to present forecasts for the demand for the next five months. After the five months went by Orwig wanted to know which group's forecast was more accurate. Calculate the MAD using the below data. interpret the MADs calculated for each. What do the two MAD calculations mean? Each number represents the number of inquiries about the business in thousands. Consulting Croup A's forecast Consulting Group B's forecast/Actua 45 54 70 90 65 95 86 75 78 85 90 95

Explanation / Answer

Let us first calculate Mean Absolute Deviation of the following:

Consulting Group A's Forcast:

45,49,54,70,90/ 5 = 14.72

MAD = 26.2

Consulting Group B's Forcast:

MAD = 14.2

A's Forecast was over by 26.2 %. Therefore, Forcasts of B is somewhat nearest i.e. 14.2.

A Forcast Actual Absolute Deviation 45 78 33 49 85 36 54 90 36 70 95 25 90 89 1 130

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