Question

Month                        Estimate        Actual

1                      900                1170

2                      1170               1045

3                      1045               1050

What is tracking signal at the end of period 3?

Answer 1

To calculate the tracking signal we have to calculate the errors and absolute errors for all the periods and the Mean absolute deviation. Where,

Error = Actual value - Estimated valuev

Absolute error = absolute value of error

MAD = Sum of the absolute errors for all the periods / number of periods

So using the above formula the forecast errors and absolute errors for all the periods are

• For month 1 error = 1170-900 = 270 and absolute error = 270
• For month 2 error = 1045-1170 = - 125 and absolute error = 125
• For month 3 error = 1050-1045 = 5 and absolute error = 5

MAD = (270+125+5)/3 = 400/3 = 133.33

Tracking signal = Accumulated forecast errors / MAD

= [270+(-125)+5] / 133.33

= 150/133.33

= 1.13