Table 10.8
A manager wants to forecast the monthly demand
for a machine the company produces.
$$\begin{array} { | c | c | }
\hline \text { Month } & \begin{array} { c }
\text { No. Machines } \
\text { Sold }
\end{array} \
\hline 1 & 50 \
2 & 65 \
3 & 52 \
4 & 56 \
5 & 55 \
6 & 60 \
\hline
\end{array}$$
-The management of a company specializing in securities analysis has been using two forecasting methods to follow a new stock issue.
Forecast Method
$$\begin{array} { | c | c | c | c | }
\hline \text { Month } & \begin{array} { c }
\text { Exponential } \
\text { Smoothing }
\end{array} & \text { Judgmental } & \begin{array} { c }
\text { Actual } \
\text { Price }
\end{array} \
\hline 1 & 48 & 50 & 51 \
2 & 50 & 52 & 53 \
3 & 51 & 55 & 54 \
\hline
\end{array}$$
Which one of the following statements is TRUE?
A) Based on MAD, the exponential smoothing approach is more accurate.
B) Based on CFE, the bias of the judgment forecasts is larger than the bias of the exponential smoothing forecasts.
C) Based on MAD, the judgmental method is more accurate.
D) Based on CFE, the bias of the exponential smoothing forecasts is steadily improving.

Question

Table 10.8
A manager wants to forecast the monthly demand
for a machine the company produces.
 $$\begin{array} { | c | c | } 
\hline \text { Month } & \begin{array} { c } 
\text { No. Machines } \
\text { Sold }
\end{array} \
\hline 1 & 50 \
2 & 65 \
3 & 52 \
4 & 56 \
5 & 55 \
6 & 60 \
\hline
\end{array}$$
-The management of a company specializing in securities analysis has been using two forecasting methods to follow a new stock issue.
Forecast Method
$$\begin{array} { | c | c | c | c | } 
\hline \text { Month } & \begin{array} { c } 
\text { Exponential } \
\text { Smoothing }
\end{array} & \text { Judgmental } & \begin{array} { c } 
\text { Actual } \
\text { Price }
\end{array} \
\hline 1 & 48 & 50 & 51 \
2 & 50 & 52 & 53 \
3 & 51 & 55 & 54 \
\hline
\end{array}$$
Which one of the following statements is TRUE?
A) Based on MAD, the exponential smoothing approach is more accurate.
B) Based on CFE, the bias of the judgment forecasts is larger than the bias of the exponential smoothing forecasts.
C) Based on MAD, the judgmental method is more accurate.
D) Based on CFE, the bias of the exponential smoothing forecasts is steadily improving.

Quizplus · Accepted Answer

The question asks for a true statement, which means we have to compare the methods using both MAD (mean absolute deviation) and CFE (cumulative forecast error). 
A) Based on MAD, we cannot determine which method is more accurate since the values are not given for all the methods. MAD is a measure of forecast accuracy, but we need more data to compare the methods using this measure. 
B) Based on CFE, we cannot determine the bias of the forecasts. CFE is a measure of forecast error, but bias is the difference between the expected value and the average of the actual values, which is not given in the table. 
C) Based on MAD, we can see that the judgmental method is more accurate since it has a smaller error compared to the other methods. 
D) Based on CFE, we cannot determine if the bias of the exponential smoothing forecasts is improving or not since we only have data for the first three months.

Table 108 a Manager Wants to Forecast the Monthly Demand for

Table 108
a Manager Wants to Forecast the Monthly Demand
for