Calculate forecasting error using MAD 5

Question

Calculate forecasting error using MAD 5

23 Sep 2023

Answer :

Word Count : 457

The Mean Absolute Deviation (MAD) is a measure of the accuracy of a forecasting method. It helps quantify the forecasting error by measuring the average absolute differences between the forecasted values and the actual demand values. The formula for MAD is as follows:

MAD=∑∣Actual Demand−Forecasted Demand∣Number of PeriodsMAD=Number of Periods∑∣Actual Demand−Forecasted Demand∣

Given the demand for the last six months in Table 2, and considering we just calculated the forecasted demand for July as 72 units using the 3-month moving average method, let's calculate the Mean Absolute Deviation (MAD):

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