Suppose that the last four months of sales were 8, 10, 15, and 9 units, respectively. Suppose further that the last four forecasts were 5, 6, 11, and 12 units, respectively. What is the Mean Absolute Deviation (MAD) of these forecasts?
A) 2
B) -10
C) 3.5
D) 9
E) 10.5

Question

Quizplus · Accepted Answer

MAD is defined as the average of the absolute values of the forecast errors. The forecast errors are simply the differences between the actual sales and the forecasted sales for each month. So the forecast errors for each month are:
-3 (5-8)
-4 (6-10)
4 (15-11)
-3 (9-12)

Taking the absolute values, we get:
3
4
4
3

The average of these values is (3+4+4+3)/4 = 3.5. Therefore, the MAD is 3.5 units.

Suppose That the Last Four Months of Sales Were 8