A company has actual unit demand for three consecutive years of 124, 126, and 135. The respective forecasts for the same three years are 120, 120, and 130. Which of the following is the resulting MAD value that can be computed from these data?
A) 1
B) 3
C) 5
D) 15
E) 123

Question

Quizplus · Accepted Answer

MAD (Mean Absolute Deviation) is calculated by taking the absolute value of the difference between actual demand and forecasted demand, summing those values, and dividing by the number of periods.

For year 1: 
MAD = |124 - 120| = 4
For year 2: 
MAD = |126 - 120| = 6
For year 3: 
MAD = |135 - 130| = 5

The sum of MAD for three years is 4 + 6 + 5 = 15. 
Therefore, the resulting MAD value is 15. 
Hence, the answer is (C) 5.

A Company Has Actual Unit Demand for Three Consecutive Years