Problem 460 The following are monthly actual and forecast de

Problem 4.60 The following are monthly actual and forecast demand levels for May through December for units of a product manufactured by the D. Bishop Company in Des Moines Actual Demand Forecast Demand Month May June July August September October November December 105 78 112 115 105 114 125 115 102 104 101 104 108 102 105 107 For the given forecast, the tracking signalMADs (round your response to two decimal places)

Solution

As has been prompted in the question ( “The tracking signal is = MADs)”) , we have to find the value of MAD ( Mean Absolute deviation) for the forecasted data

Following is to be noted :

Absolute deviation for period t = Absolute difference ( i.e. positive value only) between actual demand and Forecasted demand for period t

MAD = Sum of Absolute Deviations / 8 i.e. number of applicable months

Refer following table for details :

Month

Actual demand

Forecast demand

Absolute deviation

May

105

102

3

June

78

104

26

July

112

101

11

August

115

104

11

September

105

108

3

October

114

102

12

November

125

105

20

December

115

107

8

TOTAL :

94

Therefore , MAD = 94/8 = 11.75

THE TRACKING SIGNAL IS 11.75 MADS

Month	Actual demand	Forecast demand	Absolute deviation
May	105	102	3
June	78	104	26
July	112	101	11
August	115	104	11
September	105	108	3
October	114	102	12
November	125	105	20
December	115	107	8
		TOTAL :	94