USA: +1 (725) 712-1730 
Sign in
Two independent methods of forecasting based on judgment and experience have been prepared each month for the past 10 months. The forecasts and actual sales are as follows:
| Month | Sales | Forecast 1 | Forecast 2 |
| 1 | 770 | 771 | 769 |
| 2 | 789 | 785 | 787 |
| 3 | 794 | 790 | 792 |
| 4 | 780 | 784 | 798 |
| 5 | 768 | 770 | 774 |
| 6 | 772 | 768 | 770 |
| 7 | 760 | 761 | 759 |
| 8 | 775 | 771 | 775 |
| 9 | 786 | 784 | 788 |
| 10 | 790 | 788 | 788 |
a. Compute a tracking signal for the 10th month for each forecast using the cumulative error for months 1 to 10. Use action limits of ± 4. Is there bias present? (Do not round your intermediate calculations. Round your answers to 2 decimal places. Negative amounts should be indicated by a minus sign.)
| Forecast | Tracking Signal | Bias |
| Method 1 | Present | |
| Method 2 | Present | |
b. Compute 2s control limits for each forecast. (Do not round your intermediate calculations. Round your answers to 2 decimal places.)
| Forecast | Control Limits |
| Method 1 | |
| Method 2 | |
Expert Answer
Answer
(a)
| Month | Sales | Forecast 1 | Absolute Error |
Error | Cumulative MAD | RSFE | TS =RSFE / MAD |
| 1 | 770 | 771 | 1 | -1 | 1.00 | -1.00 | -1.00 |
| 2 | 789 | 785 | 4 | 4 | 2.50 | 3.00 | 1.20 |
| 3 | 794 | 790 | 4 | 4 | 3.00 | 7.00 | 2.33 |
| 4 | 780 | 784 | 4 | -4 | 3.25 | 3.00 | 0.92 |
| 5 | 768 | 770 | 2 | -2 | 3.00 | 1.00 | 0.33 |
| 6 | 772 | 768 | 4 | 4 | 3.17 | 5.00 | 1.58 |
| 7 | 760 | 761 | 1 | -1 | 2.86 | 4.00 | 1.40 |
| 8 | 775 | 771 | 4 | 4 | 3.00 | 8.00 | 2.67 |
| 9 | 786 | 784 | 2 | 2 | 2.89 | 10.00 | 3.46 |
| 10 | 790 | 788 | 2 | 2 | 2.80 | 12.00 | 4.29 |
| Month | Sales | Forecast 2 | Absolute Error |
Error | Cumulative MAD | RSFE | TS =RSFE / MAD |
| 1 | 770 | 769 | 1 | 1 | 1.00 | 1.00 | 1.00 |
| 2 | 789 | 787 | 2 | 2 | 1.50 | 3.00 | 2.00 |
| 3 | 794 | 792 | 2 | 2 | 1.67 | 5.00 | 3.00 |
| 4 | 780 | 798 | 18 | -18 | 5.75 | -13.00 | -2.26 |
| 5 | 768 | 774 | 6 | -6 | 5.80 | -19.00 | -3.28 |
| 6 | 772 | 770 | 2 | 2 | 5.17 | -17.00 | -3.29 |
| 7 | 760 | 759 | 1 | 1 | 4.57 | -16.00 | -3.50 |
| 8 | 775 | 775 | 0 | 0 | 4.00 | -16.00 | -4.00 |
| 9 | 786 | 788 | 2 | -2 | 3.78 | -18.00 | -4.76 |
| 10 | 790 | 788 | 2 | 2 | 3.60 | -16.00 | -4.44 |
| Forecast | Tracking Signal | Bias |
| Method 1 | 4.29 | Present |
| Method 2 | -4.44 | Present |
(b)
2s Control Limits = 0 +/- 2*√MSE
| Month | Sales | Forecast 1 | Error | Error^2 |
| 1 | 770 | 771 | -1 | 1 |
| 2 | 789 | 785 | 4 | 16 |
| 3 | 794 | 790 | 4 | 16 |
| 4 | 780 | 784 | -4 | 16 |
| 5 | 768 | 770 | -2 | 4 |
| 6 | 772 | 768 | 4 | 16 |
| 7 | 760 | 761 | -1 | 1 |
| 8 | 775 | 771 | 4 | 16 |
| 9 | 786 | 784 | 2 | 4 |
| 10 | 790 | 788 | 2 | 4 |
| MSE = | 10.44 | |||
| Month | Sales | Forecast 2 | Error | Error^2 |
| 1 | 770 | 769 | 1 | 1 |
| 2 | 789 | 787 | 2 | 4 |
| 3 | 794 | 792 | 2 | 4 |
| 4 | 780 | 798 | -18 | 324 |
| 5 | 768 | 774 | -6 | 36 |
| 6 | 772 | 770 | 2 | 4 |
| 7 | 760 | 759 | 1 | 1 |
| 8 | 775 | 775 | 0 | 0 |
| 9 | 786 | 788 | -2 | 4 |
| 10 | 790 | 788 | 2 | 4 |
| MSE = | 42.44 |
| Forecast | Control Limits |
| Method 1 | (-6.46, 6.46) |
| Method 2 | (-13.03, 13.03) |
