# Production Planning and Control Questions and Answers – Forecast Errors

This set of Production Planning and Control Multiple Choice Questions & Answers (MCQs) focuses on “Forecast Errors”.

1. Which one of the following is not a method to find forecast error?
a) Mean forecast error
b) Tracking signal
c) Mean absolute deviation
d) Regression

Explanation: Regression is a category of forecasting which is defined as a statistical method to define analytic relationship between two variables.

2. What will be the mean forecast error of the following given data?

Period Demand Forecast
1 13 14
2 12 14
3 14 13
4 16 15

a) +0.20
b) -0.20
c) +0.25
d) -0.25

Explanation: The formula to calculate mean forecast error is given by,
MFE = $$\frac {\sum_{t=1}^nA_t-F_t}{n}$$
Here, At-Ft for all the four periods is given by, -1, -2, 1, 1
So, MFE = $$\frac {-1-2+1+1}{4}$$ = -0.25

3. The average forecast error is always positive over the time period in mean absolute deviation.
a) True
b) False

Explanation: The average forecast error is always positive over the time period as the error taken in mean absolute deviation is always the sum of modulus of each period.

4. What will be the mean absolute deviation of the given data?

Period Demand Forecast
1 12 14
2 14 14
3 14 12
4 16 18
5 15 16

a) -1.4
b) 1.4
c) 0.4
d) -0.4

Explanation: The formula to calculate mean absolute deviation is given by,
MAD=$$\frac {\sum_{t=1}^n|A_t-F_t|}{n}$$
The value of |At-Ft| for different periods is given by, 2, 0, 2, 2, 1
So, MAD = $$\frac {2+0+2+2+1}{5}$$ = 1.4

5. What will be tracking signal of the given data?

Period Demand Forecast
1 12 14
2 14 16
3 14 14
4 16 14
5 16 18

a) 0
b) 1
c) -1
d) 0.5

Explanation: Tracking signal is calculated by the formula, $$\frac {n(MFE)}{MAD}$$
MAD = $$\frac {\sum_{t=1}^n|A_t-F_t|}{n}$$ and MFE = $$\frac {\sum_{t=1}^nA_t-F_t}{n}$$
So, MFE = $$\frac {-2-2+0+2+2}{5}$$ = 0
And, MAD = $$\frac {2+2+0+2+2}{5}$$ = 1.6
Hence, Tracking signal = $$\frac {n\times 0}{1.6}$$ = 0

Sanfoundry Global Education & Learning Series – Production Planning and Control.