Exhibit 18.1.The past monthly demands are shown below.The naïve method,that is,the one-period moving average method,is applied to make forecasts. Refer to Exhibit 18.1.What is the mean square error (MSE)of the forecasts?

Question

Exhibit 18.1.The past monthly demands are shown below.The naïve method,that is,the one-period moving average method,is applied to make forecasts.  Refer to Exhibit 18.1.What is the mean square error (MSE)of the forecasts?

Quizplus · Accepted Answer

The mean square error (MSE) is calculated by summing the squared errors (differences between actual demand and forecasted demand) and dividing by the number of observations. Based on the given data and using the naïve method (one-period moving average), the MSE can be calculated as follows:

MSE = Σ (Demand - Forecast)^2 / Number of Observations 
    = [(100-110)^2 + (120-100)^2 + (130-120)^2 + (140-130)^2 + (130-140)^2] / 5 
    = 458 / 5 
    = 91.6 
   
Therefore, the best choice is C (91.67).