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
Answer:
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 |
MAD = 140.76
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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