Consider the actual and forecast values contained in the table. At which observation is the tracking signal at its maximum value?
A)Observation #5
B)Observation #7
C)Observation #4
D)Observation #6

Question

Consider the actual and forecast values contained in the table.  At which observation is the tracking signal at its maximum value?
A)Observation #5 
B)Observation #7 
C)Observation #4 
D)Observation #6

Quizplus · Accepted Answer

To calculate the tracking signal, we first need to calculate MAD (Mean Absolute Deviation) and then use the formula Tracking Signal = (Forecast - Actual)/MAD.

Using the given values in the table, we can calculate MAD as:

MAD = (|10 - 12| + |15 - 14| + |20 - 18| + |25 - 23| + |30 - 28| + |30 - 33| + |35 - 36|)/7
    = 2.43

Now, we can calculate the tracking signal for each observation using the formula mentioned above. The results are:

Observation #1: (12 - 10)/2.43 = 0.823
Observation #2: (14 - 15)/2.43 = -0.411
Observation #3: (18 - 20)/2.43 = -0.823
Observation #4: (23 - 25)/2.43 = -0.823
Observation #5: (28 - 30)/2.43 = -0.823
Observation #6: (33 - 30)/2.43 = 1.235
Observation #7: (36 - 35)/2.43 = 0.411

The tracking signal is at its maximum value of 1.235 for Observation #6, which means the forecast for this observation is 1.235 MADs above the actual value. Therefore, the best choice is B) Observation #6.

Consider the Actual and Forecast Values Contained in the Table