Question

# The following shows the performance of a forecasting method: YEAR   ACTUAL DEMAND (units)   FORECAST (units) 1...

The following shows the performance of a forecasting method:

YEAR   ACTUAL DEMAND (units)   FORECAST (units)

1         3765     3821

2      3674   3615

3      3726           3758

Based on these information, the mean absolute deviation (MAD) for this forecasting method is

Mean absolute deviation of a data set refers to the average distance between each data value and its mean. It helps in calculating the absolute dispersion of the deviation, which is measured as the mean of the sum of absolute differences between actual demand and forecasted demand. Thus, the formula is,

Mean absolute deviation (MAD) = (Σ | D- F|)/n,

Where D represents the actual demand for each period,

F represents the forecasted demand for each period,

n represents the number of periods or observations.

 Year Actual Demand Forecast (D-F) | D- F| 1 3765 3821 -56 56 2 3674 3615 59 59 3 3726 3758 -32 32 Sum 11165 11194 -29 147 Average 3721.67 3731.33 -9.67 49.00

Therefore,

MAD = (Σ | D- F|)/n = 147/3= 49.

Thus, the actual demand is 49 units on average, from the forecasted value.

If you liked the answer please give an up-vote, this will be quite encouraging for me, thank you!!