Please show formulas, steps, etc. If it is not shown how to get the answer, I wi

Question

Please show formulas, steps, etc. If it is not shown how to get the answer, I will have to give a thumbs down.

A car dealer must choose between two alternative forecasting techniques. Both techniques have been used to prepare forecasts for a six- month period. Using MAD as a criterion, which technique provides a more accurate forecast? These are skill-building exercises. You should provide formulas,_steps,_or reasons to support y given any credit Technique 2 Forecast 495 482 478 488 492 493 Month Demand 492 470 485 493 498 492 Technique 1 Forecast 488 484 480 490 497 493 2 4 5 6

Explanation / Answer

Step 1: Calculate Absolute error for each month for each forecast technique.

Absolute error = Actual demand - Forecast for particular month

For example, absolute error for month for technique 1 = ABS(492-488) = 4

absolute error for month 2 for technique 2 = ABS(470-482) = 12

Step 2: Calculate the average of Absolute errors for each forecast technique. This is the Mean Absolute Deviation (MAD)

MAD of technique 1 forecast = 4.67

MAD of technique 2 forecast = 5.67

Month Demand Technique 1 Forecast Technique 2 Forecast Technique 1 Absolute Error Technique 2 Absolute Error 1 492 488 495 4 3 2 470 484 482 14 12 3 485 480 478 5 7 4 493 490 488 3 5 5 498 497 492 1 6 6 492 493 493 1 1

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