Question

A company has actual unit demand for four consecutive years of 100, 105, 135, and 150. The respective forecasts were 120 for all four years. Which of the following is the resulting MAD value that can be computed from this data?

a. 2.5
b. 10
c. 20
d. 22.5
e. 30

Answer 1

c. 20

Explanation:

Calculation to determine Which of the following is the resulting MAD value that can be computed from this data

Using this formula

MAD= [ABS( Year 1 actual unit demand - Forecast) + ABS (Year 2 actual unit demand - Forecast) + ABS (Year 3 actual unit demand - Forecast) + ABS (Year 4 actual unit demand - Forecast)]/ Number of years

Let plug in the formula

MAD = [ABS(100 - 120) + ABS (105 - 120) + ABS (135 - 120) + ABS (150 - 120)]/4

MAD =(ABS 20) + (ABS 15) + (ABS 15) + (ABS 30)/4

MAD= 80/4

MAD=20

Therefore the resulting MAD value that can be computed from this data is 20