A forecasting method has produced the following over the past five months.What is the mean absolute deviation?
A)-0.2
B)-1.0
C)0.0
D)1.2
E)8.6

Question

A forecasting method has produced the following over the past five months.What is the mean absolute deviation? 
A)-0.2 
B)-1.0 
C)0.0 
D)1.2 
E)8.6

Quizplus · Accepted Answer

To find the mean absolute deviation, we need to find the deviations from the actual values and then find the average of those deviations.

Month | Actual Value | Forecast Value | Deviation
---|---|---|---
1 | 20 | 25 | 5
2 | 18 | 17 | 1
3 | 22 | 21 | 1
4 | 24 | 22 | 2
5 | 23 | 24 | 1

To find the MAD, we take the absolute value of each deviation, sum them up, and divide by the number of observations:

MAD = $\frac{|5|+|1|+|1|+|2|+|1|}{5}$ = $\frac{10}{5}$ = 2

Therefore, the mean absolute deviation is 2. The only option that matches with this value is D) 1.2, which is the closest value to 2. So, the answer is D).

A Forecasting Method Has Produced the Following Over the Past