The sales for the past 12 months at Dalworth Company are given below. a. Use a t
ID: 468135 • Letter: T
Question
The sales for the past 12 months at Dalworth Company are given below.
a. Use a three-month moving average to forecast the sales for the months May through December. Fill in the table below (Enter your responses rounded to two decimal places.)
b. Use a four-month moving average to forecast the sales for the months May through December. (Enter your responses rounded to two decimal places.)
c. Compare the performance of the two methods by using the mean absolute deviation as the performance criterion.
The three-month MAD is ____ (Enter your response rounded to two decimal places. Start error measurement in May).
The four-month MAD is ____ (Enter your response rounded to two decimal places. Start error measurement in May).
Which method would you recommend? (Three month or Four month?)
d. Compare the performance of the two methods by using the mean absolute percent error as the performance criterion.
The three-month MAPE is ____% (Enter your response rounded to two decimal places. Start error measurement in May).
The four-month MAPE is _____% (Enter your response rounded to two decimal places. Start error measurement in May).
Which method would you recommend? (Three month or Four month?)
e. Compare the performance of the two methods by using the mean squared error as the performance criterion.
The three-month MSE is ___% (Enter your response rounded to two decimal places. Start error measurement in May).
The four-month MSE is ___% (Enter your response rounded to two decimal places. Start error measurement in May).
Which method would you recommend? (Three month or Four month?)
Month Demand ($ millions) Month Demand ($ millions) January 25 July 54 February 28 August 65 March 30 September 61 April 34 October 41 May 37 November 38 June 50 December 30Explanation / Answer
a. 3-month moving average approach
Forecast for November by 3-month moving avg. = (total of usage in previous 3 months)/3
FMay = (34+30+28)/3 = 30.67
Month
Demand ($ millions)
3-month moving average forecast
Forecast Error
MAD
MAPE
MSE
January
25
February
28
March
30
April
34
May
37
30.67
6.33
6.33
17.12%
40.11
June
50
33.67
16.33
16.33
32.67%
266.78
July
54
40.33
13.67
13.67
25.31%
186.78
August
65
47.00
18.00
18.00
27.69%
324.00
September
61
56.33
4.67
4.67
7.65%
21.78
October
41
60.00
-19.00
19.00
46.34%
361.00
November
38
55.67
-17.67
17.67
46.49%
312.11
December
30
46.67
-16.67
16.67
55.56%
277.78
Total
5.67
112.33
258.82%
1790.33
0.71
14.04
32.35%
223.79
Mean Absolute Deviation (MAD) = average of the absolute value of forecast deviation
MAD = 112.33/8 = 14.04
MAD = 14.04
Mean Absolute percentage error = average of the absolute percentage forecast error = 226.33/10 = 22.63
MAPE = 258.82%/8
MAPE = 32.35%
Mean Squared Error (MSE) = average of the squared forecast error
MSE = 1790.33/8
MSE = 223.79
b. 4-month moving average approach
Forecast for November by 4-month moving avg. = (total of usage in previous 4 months)/4
FMay = (34+30+28+25)/4 = 29.25
Month
Demand ($ millions)
4-month moving average forecast
Forecast Error
MAD
MASE
MSE
January
25
February
28
March
30
April
34
May
37
29.25
7.75
7.75
20.95%
60.06
June
50
32.25
17.75
17.75
35.50%
315.06
July
54
37.75
16.25
16.25
30.09%
264.06
August
65
43.75
21.25
21.25
32.69%
451.56
September
61
51.50
9.50
9.50
15.57%
90.25
October
41
57.50
-16.50
16.50
40.24%
272.25
November
38
55.25
-17.25
17.25
45.39%
297.56
December
30
51.25
-21.25
21.25
70.83%
451.56
Total
17.50
127.50
291.28%
2202.38
Average
2.19
15.94
36.41%
275.30
Mean Absolute Deviation (MAD) = average of the absolute value of forecast deviation
MAD = 127.50/8 = 15.94
MAD = 15.94
Mean Absolute percentage error = average of the absolute percentage forecast error = 226.33/10 = 22.63
MAPE = 291.28%/8
MAPE = 36.41%
Mean Squared Error (MSE) = average of the squared forecast error
MSE = 2202.38/8
MSE = 275.30
c. Compare the performance of the two methods by using the mean absolute deviation as the performance criterion.
The three-month MAD is 14.04
The four-month MAD is 15.94
Which method would you recommend?
Three month is good as its MAD is less.
d. Compare the performance of the two methods by using the mean absolute percent error as the performance criterion.
The three-month MAPE is 32.35%
The four-month MAPE is 36.41%
Which method would you recommend?
Three month as its MAPE is less than four month forecast method.
e. Compare the performance of the two methods by using the mean squared error as the performance criterion.
The three-month MSE is 223.79
The four-month MSE is 275.30
Which method would you recommend?
Three month as its MSE is less than four month forecast method.
Month
Demand ($ millions)
3-month moving average forecast
Forecast Error
MAD
MAPE
MSE
January
25
February
28
March
30
April
34
May
37
30.67
6.33
6.33
17.12%
40.11
June
50
33.67
16.33
16.33
32.67%
266.78
July
54
40.33
13.67
13.67
25.31%
186.78
August
65
47.00
18.00
18.00
27.69%
324.00
September
61
56.33
4.67
4.67
7.65%
21.78
October
41
60.00
-19.00
19.00
46.34%
361.00
November
38
55.67
-17.67
17.67
46.49%
312.11
December
30
46.67
-16.67
16.67
55.56%
277.78
Total
5.67
112.33
258.82%
1790.33
0.71
14.04
32.35%
223.79
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