Exercise 2: (5 marks)

Two independent methods of forecasting based on judgment and experience have been prepared each month for the past four months. The forecasts and the actual sales are as follows:

Month	Sales	Forecast 1	Forecast 2	Error Forecast 1	Error Forecast 2
1	779	775	773	4	6
2	785	783	787	2	2
3	791	790	793	1	2
4	795	793	794	2	1
5	799	790	795	9	4
6	812	791	798	21	14
7	815	791	810	24	5
8		791	814
MAD Calculation				9.0	4.8

1. Forecast month No 5 in forecast-1, by using a weighted average forecast with weights .5 for the previous month, 0.3 for the month before that, and 0.2 for the last month
2. Forecast month No 5 for forecast-2, by using exponential smoothing with =0.85
3. Given the sales of months 5, 6, 7 to be (799, 812, and 815) compute the above forecasts with the same models (weighted average for F-1 and exponential smoothing for F-2), and then calculate MAD and decide which technique is superior.

MAD Forecast 1: 9

MAD Forecast 2: 4.85

Technique Forecast 2 is superior.

Hint: Dont forget to calculate month (8)

Question: up to which month will you calculate MAD?