Question

Problem 3-23 After using your forecasting model for six months, you decide to test it using MAD and a tracking signal. Here are the forecast and actual demands for the six-month period: PERIOD May June July August September October FORECAST 425 475 520 600 630 690 ACTUAL 495 510 395 505 700 560 a. Find the tracking signal. (Negative values should be indicated by a minus sign. Round your answers to 2 decimal places.) Tracking Signal Period May June July August September October

Answer 1

First step is to calculate MAD

week	Actual demand	Forecast demand	Absolute deviation= |Forecast - Actual|	Cumulative sum of Absolute deviation	Mean Absolute deviation= Sum of Absolute deviation/week no.
1	495	425	70	70	70.00
2	510	475	35	105	52.50
3	395	520	125	230	76.67
4	505	600	95	325	81.25
5	700	630	70	395	79.00
6	560	690	130	525	87.50

Now, use MAAD to calculate tracking signal, All formulas are mentioned in the table below.

Answers are in BOLD

week	Actual demand	Forecast demand	deviation= Forecast - Actual	Running sum forecast error, RSFE	Mean Absolute deviation= Sum of Absolute deviation/week no.	Tracking signal= RSFE/MAD
1	495	425	-70	-70.00	70.00	-1.00
2	510	475	-35	-105.00	52.50	-2.00
3	395	520	125	20.00	76.67	0.26
4	505	600	95	115.00	81.25	1.42
5	700	630	-70	45.00	79.00	0.57
6	560	690	130	175.00	87.50	2.00

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