Question

The monthly sales of a retailer are as follows: Month Unit Sales January 55 February 60 Considering α=0.6 and using exponential smoothing to forecast the sale in February, what is the MAD from January to February (The forecasted sale for January is equal to 50) Select one:

a. 5
b. 11
c. 12
d. 6

Answer 1

To calculate the MAD (Mean Absolute Deviation) from January to February using exponential smoothing, we can use the formula and given values to find the forecasted sales for February and then calculate the absolute difference between the actual and forecasted sales.

Step-by-step explanation:

To calculate the MAD (Mean Absolute Deviation) from January to February, we need to first calculate the forecasted sales for February using exponential smoothing. Exponential smoothing is a time series forecasting method that uses weighted averages of past observations to make future predictions.

Given α = 0.6 and the actual sales for January (55), we can calculate the forecasted sales for February as follows:

Forecasted Sales for February = α * Actual Sales for January + (1 - α) * Forecasted Sales for January

Plugging in the values, we get:

Forecasted Sales for February = 0.6 * 55 + (1 - 0.6) * 50 = 33 + 20 = 53

The MAD is then calculated as the absolute difference between the forecasted sales and the actual sales for February:

MAD = |Actual Sales for February - Forecasted Sales for February| = |60 - 53| = 7

Therefore, the MAD from January to February is 7. The correct option is d. 6.