# The equation for MAD

14 Given the following weekly demand figures, what is the MAD at the end of week 5?

Week Demand Forecast

1 100 120

2 120 130

3 110 120

4 130 125

5 160 145

A. 4.0

B. 11.8

C. 12.0

D. 13.0

E. 15.0

22. You are given that the forecast for period 6 was 70 while the actual demand for period 6 was 76. The forecast for period 7 has been calculated to be 75.8. What must alpha equal (rounded to 4 decimals) if a simple exponential smoothing forecast method is being used?

A. 0.0042

B. 0.9667

C. 0.0400

D. 0.0967

E. None of the above

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#### Solution Preview

For the first problem, you are given the demand and the forecast for each week, and are asked to calculate MAD (i.e. Mean Absolute Deviation). The equation for MAD is as follows:

1/n(epsilon)|Dt - Ft| Where n = the number of observations (in this instance, we are looking at 5 different weekly observations) Dt = demand, and Ft = forecast

To calculate MAD, you must subtract the forecast value from the demand value for each individual week, take the absolute value of this number, then add together the numbers you ...

#### Solution Summary

The equation for MAD is exemplified in this solution.