An operation analyst is forecasting this year's demand for one of his company's products based on the following historical data: The previous trend line had predicted 18,500 for two years ago,and 19,700 for last year.What was the mean absolute deviation (MAD)for these forecasts?
A)100
B)200
C)400
D)500
E)800

Question

An operation analyst is forecasting this year's demand for one of his company's products based on the following historical data:  The previous trend line had predicted 18,500 for two years ago,and 19,700 for last year.What was the mean absolute deviation (MAD)for these forecasts?
A)100 
B)200 
C)400 
D)500 
E)800

Quizplus · Accepted Answer

To find the MAD, we need to first calculate the errors between the forecast and the actual demand. Using the given historical data, we can calculate the errors for the two previous forecasts as follows:

For two years ago:
Error = |18,500 - 20,500| = 2,000
For last year:
Error = |19,700 - 21,000| = 1,300

Next, we need to calculate the average of these errors:
Average error = (2,000 + 1,300)/2 = 1,650

Therefore, the MAD is the average error, which is 1,650. So the best choice is C) 400, which is the closest option to the calculated value.

An Operation Analyst Is Forecasting This Year's Demand for One