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 $15 million using the average approach?

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Quizplus · Accepted Answer

The Mean Absolute Percentage Error (MAPE) is calculated by taking the absolute error between the actual and forecasted values, dividing by the actual values, and then taking the average of these percentages. Using the average approach, the forecasted sales would be the average of the past three years: ($10 million + $15 million + $8 million) / 3 = $11 million. The absolute error is the absolute value of the actual minus forecasted sales: |$15 million - $11 million| = $4 million. The MAPE is then ($4 million / $15 million) * 100 = 26.67 percent.