Level of aggregation impacts the accuracy of forecasts. Forecast error is relatively larger when forecasting a greater level of detail. Which of the following is an example of this?
A) The forecast error when predicting sales of hamburgers would be relatively small versus the forecast error when predicting sales of cheeseburgers.
B) The forecast error when predicting sales of engagement rings would be relatively small versus the forecast error when predicting sales of rose-gold, 3 diamond, engagement rings, in size 5.
C) The forecast error when predicting sales of 2000 piece jigsaw puzzles with photos of animals, would be relatively small versus the forecast error when predicting sales of all puzzles.
D) The forecast error when predicting sales of sofas would be exactly the same as the forecast error when predicting sales of leather, 3 seat, sofas with detachable headrests.

Question

Quizplus · Accepted Answer

Forecasting at a more detailed level (e.g., specific type of engagement ring) typically results in larger forecast errors compared to forecasting at a more aggregated level (e.g., all engagement rings).

Level of Aggregation Impacts the Accuracy of Forecasts