The Primary Purpose of the Mean Absolute Deviation (MAD) in Forecasting

question 25

Multiple Choice

The primary purpose of the mean absolute deviation (MAD) in forecasting is to

• A) estimate the trend line
• B) eliminate forecast errors
• C) measure forecast accuracy
• D) seasonally adjust the forecast
• E) all of the above

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Definitions:

Actual Total Variable Overhead Cost

The amount incurred in variable overhead expenses for actual production activities.

Standard Variable Overhead Rate

A predetermined rate used to allocate variable overhead costs to units of production, based on expected activity levels.

Practical Standards

Standards that allow for normal machine downtime and other work interruptions and that can be attained through reasonable, though highly efficient, efforts by the average worker.

Standard Quantity

This term refers to the amount of input (materials, labor, etc.) that should be used in the production of a unit of goods under normal conditions.