A company has a MAD of 10. It wants to have a 99.7 percent control limit on its forecasting system. Its most recent tracking signal value is 3.1. What can the company conclude from this information?
A) The forecasting model is operating acceptably.
B) The forecasting model is out of control and needs to be corrected.
C) The MAD value is incorrect.
D) The upper control value is less than 20.
E) It is using an inappropriate forecasting methodology.

Question

Quizplus · Accepted Answer

A tracking signal value of 3.1 is within the range of +/- 3 control limits, which means that the forecasting model is operating acceptably. Therefore, the company can conclude that their forecasting system is working well and does not need to be corrected.

A Company Has a MAD of 10