Silly Putty Inc. has had sales of $10 million, $15 million, and $8 million for each of the last three years. What would be the MAPE if the actual sales were $12 million using the naïve approach?

Question

Quizplus · Accepted Answer

The naïve approach uses the previous year's sales as the forecast for the current year. The forecast for the third year would be $15 million (the sales from the second year). The actual sales were $8 million. The absolute percentage error for the third year is |($8M - $15M)/$8M| * 100% = 87.5%. The forecast for the second year would be $10 million (the sales from the first year). The actual sales were $15 million. The absolute percentage error for the second year is |($15M - $10M)/$15M| * 100% = 33.33%. The MAPE is the average of these errors: (87.5% + 33.33%)/2 = 60.415%. However, the question asks for the MAPE if the actual sales were $12 million, which is not directly calculable from the given data. The closest choice to the calculated MAPE is 33.33%, assuming a misunderstanding in the question.