Two independent methods of forecasting based on judgment and experience have bee

Question

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:

Compute the MSE and MAD for forecast 1. In calculating the MSE, use (n-1) in the denominator (as the examples worked in the text do). (Round your answers to 2 decimal places.)

Compute the MAPE for forecast 1. Express as a percentage. (Round your intermediate calculations to 5 decimal places and final answers to 4 decimal places.)

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:

Explanation / Answer

a) To calculate the MSE and MAD we have to first calculate the error, absolute error and squared error for all the periods. Where error =:Actual value - forecasted value

Absolute error = absolute value of error

Squared error = square of error

So using the above formula the error, absolute error and squared error are

MSE = Sum of the squared errors for all the periods / number of periods

= (25+2025+0+25+400+900+1600+225+25+225)/(10-1)

= 5450/9

= 605.55

(note : since here we use n-1 in the denominator it is 10-1=9)

MAD = Sum of the absolute errors for all the periods / number of periods

= (5+45+0+5+20+30+40+15+5+15) / 10

= 180/10

= 18.00

b) To calculate the MAPE we have to first calculate the absolute percentage errors for all the periods where,

Absolute percentage error = (absolute error/actual value)100

So using the above formula the absolute percentage errors for all the periods are :

MAPE = Sum of the absolute percentage errors for all the periods / number of periods

=(0.5988%+5.3571%+0%+0.6135%+2.5000+3.5928%+4.9383%+1.7751%+0.6135%+1.8987%)/ 10

= 21. 8878% / 10

= 2.18878%

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