Homework SourseTwo different forecasting models were used to forecast sales
Two different forecasting models were used to forecast sales of a popular soda on a college campus. Actual demand and the two sets of forecasts are shown. Use MAD to explain which method provided a better forecast.
Period
Actual
Demand
Forecast 1
Forecast 2
6
98
101
108
|
| Actual |
|
|
| 1 | 92 | 76 | 87 |
| 2 | 86 | 85 | 90 |
| 3 | 91 | 85 | 101 |
| 4 | 97 | 91 | 98 |
| 5 | 100 | 98 | 114 |
| 6 | 98 | 101 | 108 |
Solution
Prepare table showing absolute deviations
MAD Forecast 1 = 50
MAD Forecast 2 = 66.6668
As it is less for forecast 1, forecast 1 is better than forecast 2
| Period | Demand | Forecast 1 | Deviation(x-x bar) | Forecast 2 | Dev. | Abs dev FC I | Abs dev FC II |
| 1 | 92 | 76 | -18 | 87 | -2.3333 | 18 | 2.3333 |
| 2 | 86 | 85 | -9 | 90 | 0.6667 | 9 | 0.6667 |
| 3 | 91 | 85 | -9 | 101 | 11.6667 | 9 | 11.6667 |
| 4 | 97 | 91 | -3 | 98 | 8.6667 | 3 | 8.6667 |
| 5 | 100 | 98 | 4 | 114 | 24.6667 | 4 | 24.6667 |
| 6 | 98 | 101 | 7 | 108 | 18.6667 | 7 | 18.6667 |
| 94 | 89.33333 | 50 | 66.6668 | ||||
