Please show all work. (the answer is A) lopic: Evaluating the Quality of a Forec

Question

Please show all work. (the answer is A)

lopic: Evaluating the Quality of a Forecast 7. Two methods are used to predict how many customers will call in for help in the next four days. The first method predicts the numbers of callers to be 23, 5, 14, and 20 for the four respective days. The second method predicts 20, 13, 14, and 20 for the four respective days. The actual numbers of callers turn out to be 23, 10, 15, and 19. Which method has the smaller mean absolute error (MAE)? A. The first method The second method Both methods have the same MAE Cannot be determined AACSB: Analytical Think

Explanation / Answer

Please find below table which calculates values of absolute Errors under both forecasting methods and also sum of Absolute errors under both forecasting methods. It is to be noted that Absolute error = Absolute difference between Forecasted value and Actual value.

Accordingly , sum of Absolute Errors under both forecasting method as follows :

Hence, Mean Absolute error ( First forecasting method ) = 7/4 = 1.75

Mean Absolute error ( second Forecasting method ) = 8/4 = 2

Thus, Second forecasting method has smaller MAE

THE SECOND METHOD HAS SMALLER MAE

THE SECOND METHOD HAS SMALLER MAE

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