Question

Two types of forecasting methods (F1 and F2) were used to calculate the predicted demand show below.

		PREDICTED DEMAND
Period	Demand	F1	F2
1	68	60	61
2	75	65	68
3	70	73	70
4	74	71	73
5	69	71	74
6	72	65	78
7	80	70	75
8	78	76	80

        

a.	Calculate the Mean Absolute Deviation for F1 and F2. Which is more accurate? (Round your answers to 2 decimal places.)

        

MAD F1
MAD F2

         

(Click to select)F1F2None appears to be more accurate.

        

b.	Calculate the Mean Squared Error for F1 and F2. Which is more accurate? (Round your answers to 2 decimal places.)

        

MSE F1
MSE F2

        

(Click to select)F1F2None appears to be more accurate.

         

c.	You can choose which forecast is more accurate, by calculating these two error methods. When would you use MAD? When would you us MSE? Hint: Control charts are related to MSE; tracking signals are related to MAD.

        

Either one might already be in use, familiar to users, and have past values for comparison. If (Click to select)tracking signalscontrol charts are used, MSE would be natural; if (Click to select)control chartstracking signals are used, MAD would be more natura

        

d.	Calculate the Mean Absolute Percent Error for F1 and F2. Which is more accurate? (Round your intermediate calculations to 2 decimal places and and final answers to 2 decimal places.)

         

MAPE F1
MAPE F2

       

(Click to select)F1F2None appears to be more accurate.

Answer 1

			PREDICTED DEMAND						ABS(F-F1)/F	ABS(F-F2)/F
	Period	Demand F	F1	F2	e = F-F1	e = F-F2	Abs.error= ABS(F-F1)	Abs.error = ABS(F-F2)	e^2=(F-F1)^2	e^2=(F-F2)^2	% Abs.error	% Abs.error
	1	68	60	61	8	7	8	7	64	49	11.76%	10.29%
	2	75	65	68	10	7	10	7	100	49	13.33%	9.33%
	3	70	73	70	-3	0	3	0	9	0	4.29%	0.00%
	4	74	71	73	3	1	3	1	9	1	4.05%	1.35%
	5	69	71	74	-2	-5	2	5	4	25	2.90%	7.25%
	6	72	65	78	7	-6	7	6	49	36	9.72%	8.33%
	7	80	70	75	10	5	10	5	100	25	12.50%	6.25%
	8	78	76	80	2	-2	2	2	4	4	2.56%	2.56%
Average							5.625	4.125	42.375	23.625	7.64%	5.67%
							MAD F1	MAD F2	MSE F1	MSE F2	MAPE F1	MAPE F2

a)

MAD F1 = 5.63

MAD F2 = 4.13

MAD F2 < MAD F1

MAD F2 is more accurate

b)

MSE F1 = 42.38

MSE F2 = 23.63

MSE F2 < MSE F1

MSE F2 is more accurate

c)

MAD is better measure of forecast than MSE

Used to determine future median, MAD is compatible but MSE is used to detrmine future expected value

d)

MAPE F1 = 7.64%

MAPE F2 = 5.67%

MAPE F2 < MAPE F1

MAPE F2 is more accurate