Question

Lenovo uses the ZX-81 chip in some of its laptop computers. The prices for the chip during the last 12 months were as follows

Month	Price Per Chip	Month	Price Per Chip
January	$1.85	July	$ 1.90
February	$1.61	August	$1.85
March	$1.60	September	$1.70
April	$1.85	October	$1.55
May	$1.91	November	$1.60
June	$1.89	December	$1.75

1) The mean absolute deviation based on a​ 2-month moving average of March through December is __? ​(round your response to three decimal ​places).

2) The mean absolute deviation based on a​ 3-month moving average of April through December is __ ?

Answer 1

FORECAST = SIGMA(PREVIOUS N DEMANDS) / N

WHERE N = 2

FORECAST 3 = (1.85 + 1.61) / 2 = 1.73

FORECAST 4 = (1.61 + 1.6) / 2 = 1.605

FORECAST 5 = (1.6 + 1.85) / 2 = 1.725

FORECAST 6 = (1.85 + 1.91) / 2 = 1.88

FORECAST 7 = (1.91 + 1.89) / 2 = 1.9

FORECAST 8 = (1.89 + 1.9) / 2 = 1.895

FORECAST 9 = (1.9 + 1.85) / 2 = 1.875

FORECAST 10 = (1.85 + 1.7) / 2 = 1.775

FORECAST 11 = (1.7 + 1.55) / 2 = 1.625

FORECAST 12 = (1.55 + 1.6) / 2 = 1.575

FORECAST 13 = (1.6 + 1.75) / 2 = 1.675

PERIOD	ACTUAL DEMAND	FORECAST	DEVIATION(D - F)	ABS DEVIATION
1	1.85
2	1.61
3	1.6	1.73	-0.13	0.13
4	1.85	1.605	0.245	0.245
5	1.91	1.725	0.185	0.185
6	1.89	1.88	0.01	0.01
7	1.9	1.9	0	0
8	1.85	1.895	-0.045	0.045
9	1.7	1.875	-0.175	0.175
10	1.55	1.775	-0.225	0.225
11	1.6	1.625	-0.025	0.025
12	1.75	1.575	0.175	0.175
SIGMA			0.015	1.215

MAD = SIGMA(ABSOLUTE DEVIATION) / N, WHERE N = 10

MAD = 1.215 / 10 = 0.122

2. FORECAST = SIGMA(PREVIOUS N DEMANDS) / N

WHERE N = 3

FORECAST 4 = (1.85 + 1.61 + 1.6) / 3 = 1.687

FORECAST 5 = (1.61 + 1.6 + 1.85) / 3 = 1.687

FORECAST 6 = (1.6 + 1.85 + 1.91) / 3 = 1.787

FORECAST 7 = (1.85 + 1.91 + 1.89) / 3 = 1.883

FORECAST 8 = (1.91 + 1.89 + 1.9) / 3 = 1.9

FORECAST 9 = (1.89 + 1.9 + 1.85) / 3 = 1.88

FORECAST 10 = (1.9 + 1.85 + 1.7) / 3 = 1.817

FORECAST 11 = (1.85 + 1.7 + 1.55) / 3 = 1.7

FORECAST 12 = (1.7 + 1.55 + 1.6) / 3 = 1.617

FORECAST 13 = (1.55 + 1.6 + 1.75) / 3 = 1.633

PERIOD	ACTUAL DEMAND	FORECAST	DEVIATION(D - F)	ABS DEVIATION
1	1.85
2	1.61
3	1.6
4	1.85	1.687	0.163	0.163
5	1.91	1.687	0.223	0.223
6	1.89	1.787	0.103	0.103
7	1.9	1.883	0.017	0.017
8	1.85	1.9	-0.05	0.05
9	1.7	1.88	-0.18	0.18
10	1.55	1.817	-0.267	0.267
11	1.6	1.7	-0.1	0.1
12	1.75	1.617	0.133	0.133
SIGMA			0.042	1.236

MAD = SIGMA(ABSOLUTE DEVIATION) / N, WHERE N = 9

MAD = 1.236 / 9 = 0.137