Problem : Forecasting

Given these sales figures over the last 7 weeks, your boss needs you to test two different forecasting methods (parts a and b below) to determine which method is best. For your measure of “best”, recommend to your boss that the company should use the method with the lowest mean absolute deviation (MAD). Then use that method to provide your forecast for week 8 in part c.

Week               Unit Sold

1                      10,540

2                      12,650

3                      10,920

4                      11,810

5                      13,450

6                      14,550

7                      13,970

Calculate the MAD for the 4 period moving average forecasting technique.

Calculate the MAD for the 2 period weighted moving average forecasting technique. Use weights of 0.6 and 0.4, with the most recent observation weighted higher.

How many units would you forecast will be sold in week 8?