Classroom Example. Forecast for period # 8 using the five methods as shown in the tables below.

Find MAD and MAPE for each method. Which method is giving you the best forecast? Why?

 

    Three period Simple Exponential Smoothing Naïve Method  
    Moving Average   Method Alpha = 0.3 Forecast=Average Sales
  Sales Forecast Error %Error Forecast Error  %Error Forecast Error %Error
Period Y Y cap Y –Y cap  APE Y cap Y –Y cap  APE Y cap Y –Y cap APE
1 10       —–     13 -3.00 30.00
2 14       10 4 28.571% 13 1.00 7.14
3 12         .8 6.667% 13 -1.00 8.33
4 11 12 -1 9.091%   -.44 4% 13 -2.00 18.18
5 15 12.333 2.667 17.778%   3.692 24.613% 13 2.00 13.33
6 13 12.667 .333 2.564%   .584 4.495% 13 0.00 0.00
7 16 13 3 18.75%   3.409 21.307% 13 3.00 18.75
Results === 14.667 1.75 12.046 13.61 2.154 14.942 13 1.71 13.68
    Forecast MAD MAPE Forecast MAD MAPE Forecast MAD MAPE

 

 

    Trend Analysis Naïve Method  
        Forecast=Last pd Actual
  Sales Forecast Error %Error Forecast Error %Error
Period Y Y cap Y –Y cap  APE Y cap Y –Y cap APE
1 10 10.964 -.964 9.643%      
2 14 11.643 2.357 16.837% 10 4 28.571%
3 12 12.321 -.321 2.679% 14 -2 16.667%
4 11 13 -2 18.182% 12 -1 9.091%
5 15 13.679 1.321 8.81% 11 4 26.667%
6 13 14.357 -1.357 10.44% 15 -2 15.385%
7 16 15.036 .964 6.027% 13 3 18.75%
Results === 15.714 1.327 10.374 16 2.667 19.188%
    Forecast MAD MAPE Forecast MAD 19.188%

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