A forecasting method has produced the following over the past five months.What is the mean absolute deviation?
A)-0.2
B)-1.0
C)0.0
D)1.2
E)8.6

Question

A forecasting method has produced the following over the past five months.What is the mean absolute deviation? 
A)-0.2 
B)-1.0 
C)0.0 
D)1.2 
E)8.6

Quizplus · Accepted Answer

To find the mean absolute deviation (MAD), we need to first find the average of the differences between the forecast and the actual values.

Month 1: Forecast = 50, Actual = 52, Difference = -2
Month 2: Forecast = 48, Actual = 47, Difference = 1
Month 3: Forecast = 49, Actual = 45, Difference = 4
Month 4: Forecast = 45, Actual = 47, Difference = -2
Month 5: Forecast = 47, Actual = 51, Difference = -4

Sum of differences = -2 + 1 + 4 - 2 - 4 = -3

Average difference = -3/5 = -0.6

To get the MAD, we need to take the absolute value of each difference and then find the average. 
|MAD| = (|-2| + |1| + |4| + |-2| + |-4|)/5 = 2.6

Therefore, the closest answer is D) 1.2, which is the positive version of our answer of -0.6 multiplied by 2.

A Forecasting Method Has Produced the Following Over the Past