A company executive is trying to choose between two methods of forecasting sales that he has been using during the past five months. The values are as shown below. Forecast Month Method 1 Method 2 Actual Sales 1 5324 5208 5582 2 5405 5377 4906 3 5195 5462 5755 4 5511 5414 6320 5 5762 5549 5153 Calculate and compare MAD and MSE for these two methods.
A company executive is trying to choose between two methods of forecasting sales that he has been using during the past five months. The values are as shown below. Forecast Month Method 1 Method 2 Actual Sales 1 5324 5208 5582 2 5405 5377 4906 3 5195 5462 5755 4 5511 5414 6320 5 5762 5549 5153 Calculate and compare MAD and MSE for these two methods.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
A company executive is trying to choose between two methods of
forecasting sales that he has been using during the past five months. The
values are as shown below.
Forecast
Month Method 1 Method 2 Actual Sales
1 5324 5208 5582
2 5405 5377 4906
3 5195 5462 5755
4 5511 5414 6320
5 5762 5549 5153
Calculate and compare MAD and MSE for these two methods.
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Follow-up Questions
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Follow-up Question
Based on above assume you are using the moving average forecasting method based on the last four observations. When making the forecast for the last period, the
oldest of the four observations was 1945 and the forecast was 2083. The
true value for the last period then turned out to be 1977. Calculate your
forecast for the next period.
Solution
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