A company is comparing the accuracy of two different forecasting methods. Use MAD to compare the accuracies of these methods on the five weeks of sales. Which method provides greatest forecast accuracy?
Method A Method B
Week Actual Sales Forecast Forecast
1 25 30 30
2 18 20 16
3 26 23 25
4 28 29 30
5 30 25 28
Steps in MAD computation:
1. Treat each method separately.
2. Compute for the Error for Method A. This can be done by subtracting the Actual Sale with Method A forecast.
3. Get the absolute error to remove the negative signs.
4. Compute the mean of the absolute error, the result of which will ...
This is a step-by-step computation of the mean absolute deviation (MAD) and how it can be used to decide the best forecast method. The steps in MAD computation are given, which include: treating each method seperately, computing the error for Method A, getting absolute error, computing the mean, and comparing the MAD for both methods. This solution in provided in the answer box as well as in Excel.