Question

An analyst must decide between two different forecasting techniques for weekly sales of roller blades: a linear trend equation and the naive approach. The linear trend equation is F_t = 124+ 2.1t, and it was developed using data from periods 1 through 10. Based on data for periods 11 through 20 as shown in the table, which of these two methods has the greater accuracy if MAD and MSE are used? (Round your intermediate calculations and final answers to 2 decimal places.)

t	Units Sold
11	148
12	149
13	148
14	145
15	153
16	152
17	152
18	159
19	161
20	165

MAD (Naive)
MAD (Linear)
MSE (Naive)
MSE (Linear)

Provide forecasts with less average error and less average squared error.

Answer 1

Answer:

Data using Linear trend forecasting approach:

Excel working of Linear trend forecasting is as under:

Data using Naïve forecasting approach:

Excel working of Naïve forecasting is as under:

The final answers are:

MAD (Naive)	3.00
MAD (Linear)	3.53
MSE (Naive)	16.11
MSE (Linear)	19.65

Conclusion:

Naïve forecasting is having greater accuracy if MAD and MSE are used.