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 last period's actual sales as the forecast for the next period. The forecast for the current year would be $8 million (last year's sales). The MAPE is calculated as the absolute error divided by the actual sales, averaged over the periods. Here, the absolute error is $4 million ($12 million - $8 million), and the MAPE is ($4 million / $12 million) * 100 = 33.33 percent.