Many organizations have trouble evaluating the best decision

Many organizations have trouble evaluating the best decision model to use. What is MAD and why is it important in the selection and use of forecasting models. Present a scenario in which an organization would use MAD. In all discussion question responses ensure that you correctly reference sources you used in researching and analyzing your response. Use appropriate scholarly citation methods.

Solution

The Mean Absolute Deviation (MAD) of a dataset is the average distance between every data point and the mean. It gives us a thought regarding the variability in the dataset.

Here are the means to compute the mean absolute deviation.

Stage 1: Calculate the mean.

Stage 2: Calculate how far away every point is from the mean utilizing positive separations. These are called absolute deviations.

Stage 3: Add those deviations together.

Stage 4: Divide the whole by the number of data points.

MAD (Mean Absolute Deviation) is very important in the decision and use of forecasting models since it\'s a measure of forecasting models on the data of past periods, in other words, it measures how accurate is the forecasting model. If we find that the MAD is low it implies that the model is exact and is fit for the data whereas if the MAD is high then it is less precise and less accurate.

For example, Coca-Cola provides cold drinks to its vendors and the demand of the product fluctuates which might be managed by the coca-cola with the help of Mean Absolute Deviation.

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