Sales of quilt covers at Bud Banis’s department store in Carbondale over the pas

Question

Sales of quilt covers at Bud Banis’s department store in Carbondale over the past year are shown below. Management prepared a forecast using a combination of exponential smoothing and its collective judgment for the 4 months (March, April, May, and June): uly 100 august 93 september 96 october 110 november 124 december 119 january 92 february 83 march 101 120 april 96 114 may 89 110 june 108 108 Compute MAD and MAPE for management’s technique. b)Do management’s results outperform (i.e., have smaller MAD and MAPE than) a naive forecast? c)Which forecast do you recommend, based on lower forecast error?

Explanation / Answer

a) Compute MAD and MAPE for management’s technique.

MAD = ( 19+18+21+0) / 4 = 58 / 4 = 14.5

MAPE = ( 18.81% + 18.75% + 23.60% + 0.00%) / 4 = 14.72%

b) Do management’s results outperform (i.e., have smallerMAD and MAPE than) a naive forecast?

Naïve Forecast:

MAD = ( 18 + 5 +7 + 19) / 4 = 49/4 = 12.25

MAPE = (17.82% + 5.21% + 7.87% + 17.59% ) / 4 = 12.44%

c) Which forecast do you recommend, based on lower forecast error?

According to my results, the naïve forecast outperforms managements results. There is a greater deviation between management results than from the naïve method.

Month Unit Sales Management's Forecast Deviation MAPE NAÏVE Deviation MAPE March 101 120 19 18.81% 18 18 17.82% April 96 114 18 18.75% 5 5 5.21% May 89 110 21 23.60% 7 7 7.87% June 108 108 0 0.00% 19 19 17.59%

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