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Forecasting with Moving Average Method, Mean Absolute Deviation (MAD) and Squared Error
(MSE) Method.
Dalworth Companys past 12 months data:
Month
January
February
March
April
May
June
July
August
September
October
November
December
Ft+1 =
(27+24+20)/3
(31+27+24)/3
(27+31+37)/3
(47+37+31)/3
(53+47+37)/3
(62+53+47)/3
(54+62+53)/3
(36+54+62)/3
(32+36+54)/3
Forecast (Ft )
$
$
$
$
$
$
$
$
$
23.67
27.33
31.67
38.33
45.67
54.00
56.33
50.67
40.67
Ft+1 =
(31+27+24+20)/4
(37+31+27+24)/4
(47+37+31+27)/4
(53+47+37+31)/4
(62+53+47+37)/4
(54+62+53+47)/4
(36+54+62+53)/4
(32+36+54+62)/4
Forecast (Ft )
$
$
$
$
$
$
$
$
25.50
29.75
35.50
42.00
49.75
54.00
51.25
46.00
Actual
Month
Demand,
Forecast,
Error,
Absolute, Error,
Forecast,
Error,
Absolute, Error,
Dt
Ft
Et = Dt Ft
IEtI
Ft
Et = Dt Ft
IEtI
April
31
23.67
7.33
7.33
May
37
27.33
9.67
9.67
25.50
11.50
11.50
June
47
31.67
15.33
15.33
29.75
17.25
17.25
July
53
38.33
14.67
14.67
35.50
17.50
17.50
August
62
45.67
16.33
16.33
42.00
20.00
20.00
September
54
54.00
49.75
4.25
4.25
October
36
56.33
-20.33
20.33
54.00
-18.00
18.00
November
32
50.67
-18.67
18.67
51.25
-19.25
19.25
December
29
40.67
-11.67
11.67
46.00
-17.00
17.00
= 114
Calculation of MAD
114
9
= 12.67
= 124.75
124.75
8
= 15.59
Recommendation: According to our findings, 3-months moving average contains less error than
4-months moving average. So we recommend, 3-months moving average method.
Actual
Month
Demand,
Forecast,
Error,
Error squared
Forecast,
Error,
Error squared
Dt
Ft
Et = Dt Ft
Ft
Et = Dt Ft
April
31
23.67
7.33
53.78
May
37
27.33
9.67
93.44
25.50
11.50
132.25
June
47
31.67
15.33
235.11
29.75
17.25
297.56
July
53
38.33
14.67
215.11
35.50
17.50
306.25
August
62
45.67
16.33
266.78
42.00
20.00
400.00
September
54
54.00
0.00
49.75
4.25
18.06
October
36
56.33
-20.33
413.44
54.00
-18.00
324.00
November
32
50.67
-18.67
348.44
51.25
-19.25
370.56
December
29
40.67
-11.67
136.11
46.00
-17.00
289.00
= 1762.22
Calculation of MSE
1762.22
=
= 195.80
= 2137.69
2137.69
= 267.21
8
Recommendation: According to our findings, 3-months moving average contains less error than 4months moving average. So we recommend, 3-months moving average method.