Ed Rogers Owns an Appliance Store Which Is the Better Forecasting Model, Based on the MAD

question 43

Essay

Ed Rogers owns an appliance store. Sales data on a particular model of a DVD player for the past six months are shown below along with the results of two different forecasting models that were developed. $\begin{array}{|l|c|c|c|}\hline \text { Month } & \text { Sales } & \text { Forecast 1 } & \text { Forecast 2 } \\\hline \text { Jan } & 35 & 30 & 25 \\\hline \text { Feb } & 29 & 28 & 27 \\\hline \text { Mar } & 39 & 43 & 40 \\\hline \text { Apr } & 42 & 40 & 39 \\\hline \text { May } & 51 & 48 & 41 \\\hline \text { Jun } & 56 & 55 & 53 \\\hline\end{array}$ Which is the better forecasting model, based on the MAD criterion?

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Definitions:

Discount

A reduction from the usual cost of something, or the amount by which an asset's book value is reduced for accounting purposes.

Inception Date

The date on which an agreement, contract, or financial instrument becomes effective.

Forward Contract

A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.

Monetary Liability

An obligation of a company or individual to pay a sum of money in the future, typically involving interest.