Weighted Moving Average Forecast and MAD in EXCEL
The problem states that the manager of the Carpet City outlet needs to make an accurate forecast of the demand for Soft Shag carpet (it biggest seller). If the manager does not order enough carpet from the carpet mill, customers will buy their carpet from one of Carpet City many competitors. The manager has collected the following demand data for the past eight month
Month Demand for Soft Shag Carpet 1,000 yd
Compute a 3 month moving average forecast for month 4 through 9
Compute a weighed 3 month moving average forecast for months 4 through 9. Assign weights of .53, .33,and .12 to the month in sequence, starting with the most recent month.
Compare the two forecast by using MAD, which forecast appears to be more accurate.