A forecasting model has produced the following forecasts:

At the end of May the tracking signal would be
A)0.000.
B)0.667.
C)1.333.
D)2.143.

Question

A forecasting model has produced the following forecasts:

At the end of May the tracking signal would be
A)0.000. 
B)0.667. 
C)1.333. 
D)2.143.

Quizplus · Accepted Answer

To calculate the tracking signal, we need to first calculate the cumulative error (CE).

CE = Actual demand - Forecast 
CE = 650 - 600 = 50  (for June) 
CE = 500 - 550 = -50  (for July) 
CE = 700 - 600 = 100  (for August)

Next, we need to calculate the mean absolute deviation (MAD) from the forecasts.

MAD = (|50| + |-50| + |100|) / 3 
MAD = 66.67

The tracking signal is calculated as:

Tracking signal = CE / MAD

Tracking signal = 200 / 66.67

Tracking signal = 3

Therefore, the tracking signal at the end of May would be greater than 2, indicating a possible problem with the forecasting model. The closest choice is D with a tracking signal of 2.143.

A Forecasting Model Has Produced the Following Forecasts