A company has actual unit demand for three consecutive years of 124,126 and 135.The respective forecasts for the same three years are 120,120 and 130.Which of the following is the resulting MAD value that can be computed from this data?
A)1
B)3
C)5
D)15
E)123

Question

Quizplus · Accepted Answer

MAD (Mean Absolute Deviation) is calculated by finding the absolute difference between the actual demand and forecast, summing those values, and then dividing by the number of periods.

For Year 1: Absolute difference = |124-120| = 4
For Year 2: Absolute difference = |126-120| = 6
For Year 3: Absolute difference = |135-130| = 5

Summing these absolute differences gives a total of 15. Dividing by 3 periods gives an MAD of 5. Therefore, the answer is C.

A Company Has Actual Unit Demand for Three Consecutive Years