# Nelson Fabricators sells a por

Nelson Fabricators sells a portable EKG machine. The salesmanager requires a weekly forecast of the portable EKG machine sothat he can schedule production. The manager uses exponentialsmoothing with α = 0.30.

Week Actual Production

1 535

2 689

3 601

4 768

5 433

1. Forecast the number of machines at the end of week5.

2. Calculate the bias and MAD. Which measure is moreaccurate?

Need to show formula either hand or in Excelpls

Let Actual value be and forecastvalue be

We have smoothing constant  α = 0.30.and since we havenot been given we assume that,Hence 2nd row

(1)

We know the formula for forecasting

We simplify to

 Actual (At) Forecast (Ft) 535 535 689 535 601 581.2 768 587.14 433 641.398 578.8786 alpha 0.3 1-alpha 0.7

Using Excel we apply this formula from the second week

We input the values in the forecast column in excel =0.3*At+0.7*Ft

Final Ans: 641.398 = 641

(2)

We don’t have forecast for week 1 and no actual for week six.This reduces our no. of obs ‘n’ = 4

Bias =

 Actual (At) Forecast (Ft) Error(At-Ft) 535 535 0 689 535 154 601 581.2 19.8 768 587.14 180.86 433 641.398 -208.398 578.8786 146.262 alpha 0.3 1-alpha 0.7 Bias 36.5655 =146.262/4

MAD(Mean Absolute Deviation )=

 Actual (At) Forecast (Ft) Error(At-Ft) Absolute Error 535 535 689 535 154 154 601 581.2 19.8 19.8 768 587.14 180.86 180.86 433 641.398 -208.398 208.398 578.8786 Sum 563.058 alpha 0.3 1-alpha 0.7 MAD 140.7645 =563.058/4

A low Bias and MAD indicate a good forecast. In my opinion MADis better error calculator since it takes absolute values of thetotal error,i.e. in terms of magnitude. Whereas bias can bemisleading since it reduces the error due to -ve values.

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