The last four months of actual sales were 8, 10, 15, and 9 units. The last four forecasts were 7, 6, 13, and 15 units. The Mean Absolute Deviation (MAD) is
A) 2.
B) -10.
C) 3.25.
D) 9.
E) 13.

Question

Quizplus · Accepted Answer

1. Calculate the forecast error for each of the four forecasts:
- For the first forecast: Forecast error = Actual sales - Forecasted sales = 8 - 7 = 1
- For the second forecast: Forecast error = Actual sales - Forecasted sales = 10 - 6 = 4
- For the third forecast: Forecast error = Actual sales - Forecasted sales = 15 - 13 = 2
- For the fourth forecast: Forecast error = Actual sales - Forecasted sales = 9 - 15 = -6
2. Take the absolute value of each of the forecast errors: 
- For the first forecast: |1| = 1
- For the second forecast: |4| = 4
- For the third forecast: |2| = 2
- For the fourth forecast: |-6| = 6
3. Calculate the average of the four absolute forecast errors:
(MAD) = (1+4+2+6)/4 = 3.25
Thus, the answer is C, 3.25.

The Last Four Months of Actual Sales Were 8, 10