The manager is open to suggestions for forecasting models and decides to try both a linear trend model and a simple moving average of two periods
Generate forecasts for the year using these technique and then calculate forecast errors using MAD to determine which is the superior method in this scenario.
After tallying the receipts for their first year of operation, the owners of the Taco Barn are encouraged. Sales of their artisnal tacos, made from such exotic ingredients as ground beef, cheese, and beans, have been strong and seem to give hope to the coming year. Taco sales by month are shown in the table.
Month Sales
January 474
February 485
March 501
April 588
May 579
June 673
July 594
August 679
September 608
October 699
November 732
December 732
Answer: The forecasts and their errors are indicated in the table:
Month Actual Forecast MA MAD MA Forecast Trend MAD Trend
January 474 483 9
February 485 474 11 506 21
March 501 485 16 529 28
April 588 501 87 552 36
May 579 588 9 576 3
June 673 579 94 599 74
July 594 673 79 622 28
August 679 594 85 645 35
September 608 679 71 669 61
October 699 608 91 692 7
November 719 699 20 715 4
December 732 719 13 738 6
The MAD for the Moving Average technique is a whopping 52, while the Trend has a MAD of 26, so trend would be the preferred approach.
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