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Given the actual sales data of Honest Iced Tea, develop a naive forecast, as well as exponential forecast with an alpha of 0.

What is the average error in the forecast for Naive forecast
What is the average error in the forecast for Exponential forecast with alpha of 0.45. given that forecast on 5/1/2015 is 327. 
Which is a better forecast?
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Answer #1

Naive forecast

Period Sales Forecast Error abs(error)
1 327
2 288 327 -39 39
3 269 288 -19 19
4 256 269 -13 13
5 286 256 30 30
6 298 286 12 12
7 318 298 20 20
8 329 318 11 11
9 381 329 52 52
10 470 381 89 89
11 443 470 -27 27
12 386 443 -57 57
13 342 386 -44 44
14 319 342 -23 23
15 307 319 -12 12
16 284 307 -23 23
17 309 284 25 25
18 326 309 17 17
19 359 326 33 33
20 376 359 17 17
21 416 376 40 40
22 548 416 132 132
23 506 548 -42 42
24 444 506 -62 62
25 448 444 4 4
26 408 448 -40 40
27 387 408 -21 21
28 373 387 -14 14
29 408 373 35 35
30 420 408 12 12
31 429 420 9 9
32 442 429 13 13
33 499 442 57 57
34 589 499 90 90
MAD 34.36364

With alpha = 0.45

Period Sales Forecast Error abs(error)
1 327
2 288 327 -39 39
3 269 309.45 -40.45 40.45
4 256 291.2475 -35.2475 35.2475
5 286 275.3861 10.61388 10.61388
6 298 280.1624 17.83763 17.83763
7 318 288.1893 29.8107 29.8107
8 329 301.6041 27.39588 27.39588
9 381 313.9323 67.06774 67.06774
10 470 344.1127 125.8873 125.8873
11 443 400.762 42.23799 42.23799
12 386 419.7691 -33.7691 33.76911
13 342 404.573 -62.573 62.57301
14 319 376.4152 -57.4152 57.41515
15 307 350.5783 -43.5783 43.57833
16 284 330.9681 -46.9681 46.96808
17 309 309.8324 -0.83245 0.832446
18 326 309.4578 16.54215 16.54215
19 359 316.9018 42.09818 42.09818
20 376 335.846 40.154 40.154
21 416 353.9153 62.0847 62.0847
22 548 381.8534 166.1466 166.1466
23 506 456.6194 49.38062 49.38062
24 444 478.8407 -34.8407 34.84066
25 448 463.1624 -15.1624 15.16236
26 408 456.3393 -48.3393 48.3393
27 387 434.5866 -47.5866 47.58661
28 373 413.1726 -40.1726 40.17264
29 408 395.095 12.90505 12.90505
30 420 400.9022 19.09778 19.09778
31 429 409.4962 19.50378 19.50378
32 442 418.2729 23.72708 23.72708
33 499 428.9501 70.04989 70.04989
34 589 460.4726 128.5274 128.5274
MAD 45.9698

Naive forecast is better as it has lower MAD

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