The Department Manager Using a Combination of Methods Has Forecast

question 82

Essay

The department manager using a combination of methods has forecast sales of toasters at a local department store. Calculate the MAD for the manager's forecast. Compare the manager's forecast against a naive forecast. Which is better?
$$\begin{array} { | c | c | c | } \hline \text { Month } & \text { Unit Sales } & \frac { \text { Manager's } } { \text { Forecast } } \\\hline \text { January } & 52 & \\\hline \text { February } & 61 & \\\hline \text { March } & 73 & \\\hline \text { April } & 79 & \\\hline \text { May } & 66 & \\\hline \text { June } & 51 & \\\hline \text { July } & 47 & 50 \\\hline \text { August } & 44 & 55 \\\hline \text { September } & 30 & 52 \\\hline \text { October } & 55 & 42 \\\hline \text { November } & 74 & 60 \\\hline \text { December } & 125 & 75 \\\hline\end{array}$$

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Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of a specific product.

Flexible Budget

An adjustable budget framework responsive to shifts in volume or levels of activity.

Activity Level

A measure of the volume of production or operations, often used as a basis for allocating costs or setting prices.

Direct Materials

Raw materials that are directly traceable and integral to the finished product.