Given the following data, compute the

tracking signal and decide whether or not the

forecast should be reviewed.

Tracking signal is computed as the running sum of forecast

error (RSFE) divided by MAD. We compute RSFE by
summing up the forecast errors over time. Forecast errors
for January is the difference between its actual and
forecast sales. RSFE for January is equal to the
cumulative forecast errors.

Forecast Error =

RSFE = -2

Actual Forecast =
8 -10 = -2

Forecast errors for February is the difference between its

actual and forecast sales. RSFE for February is equal to
the cumulative forecast errors of January and February.

Forecast Error =
Actual Forecast =

RSFE = -2 + 1
= -1

11 -10 = 1

Forecast errors for March is the difference between its

actual and forecast sales. RSFE for March is equal to the
cumulative forecast errors of January, February and
March.

Forecast Error =
Actual Forecast =

RSFE = -1 + 2
= 1

12 -10 = 2

Forecast errors for April is the difference between its actual

and forecast sales. RSFE for April is equal to the
cumulative forecast errors of January, February, March and
April.

Forecast Error =
Actual Forecast =
14 -10 = 4

RSFE = 1 + 4
= 5

MAD for January is computed by averaging the absolute

errors over time. Tracking signal for January is computed
by dividing its RSFE by MAD.

Absolute Error =
Absolute (Actual Forecast) =

MAD = 2

TS = RSFE/MAD
= -2/2 = -1

Absolute(8 -10) = 2

MAD for February is computed by averaging the absolute

errors of January and February. Tracking signal for
February is computed by dividing its RSFE by MAD.

Absolute Error =
Absolute (Actual Forecast) =

MAD = (2+1)/2
= 1.5

TS = RSFE/MAD
= -1/1.5 = -0.67

Absolute(11 -10) = 1

MAD for March is computed by averaging the absolute

errors of January, February and March. Tracking signal for
March is computed by dividing its RSFE by MAD.

Absolute Error =
Absolute (Actual Forecast) =

MAD = (2+1+2)/3
= 1.67

TS = RSFE/MAD
= 1/1.67 = 0.6

Absolute(12 -10) = 2

MAD for April is computed by averaging the absolute

errors of January, February, March and April. Tracking
signal for April is computed by dividing its RSFE by MAD.

Absolute Error =
Absolute (Actual Forecast) =
Absolute(14 -10) = 4

TS = RSFE/MAD
MAD = (2+1+2+4)/4

= 5/2.25 = 2.22

= 2.25

Since the tracking signals for months January to April are

within +/- 4, the forecast needs not be reviewed.

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