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Which of the following conclusions can be drawn based on the following data? Month Actual Forecast Sales January 68 40 February 48 50 March 50 60 April 30 30 Tracking signal is 1.6 so the forecast method does not need to be reviewed Tracking signal is 1.6 so the forecast method needs to be reviewed Tracking signal is 10 so the forecast method does not need to be reviewed Tracking signal is 10 so the forecast method needs to be reviewed MAD is 10 so the forecast method does not need to be reviewed

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Answer #1

In this problem the RSFE (running sum of forecast error) is (68-40)+(48-50)+(50-60)+(30-30) = 16.

The MAD (mean absolute deviation) is (|28|+|12|+|10|+|0|)/4 = 10

The tracking signal is RSFE/MAD = 1.6

Now that the data is verified, we know that MAD alone does not tell us anything. This means we can discard the last three options. Tracking signal on the other hand shows the level of bias present in the forecasting method. The acceptable values range from -4 to +4. Since our TS within this range we can proceed with this method without any review.

Correct answer: Tracking signal is 1.6 so the forecast method does not need to be reviewed.

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