Two methods are used to predict how many customers will call in for help in the next four days. The first method predicts the number of callers to be 23, 5, 14, and 20 for the four respective days. The second method predicts 20, 13, 14, and 20 for the four respective days. The actual number of callers turns out to be 23, 10, 15, and 19. Which method has the bigger forecast bias? a- the second methodb- both are equally biasedc- both are not biasedd- the first method

The method that has the bigger forecast bias is:

the first method.

Explanation:

a) Data and Calculations:

Days                                                                        1     2     3      4    Total

First method, number of callers predicted         23    5    14    20      62

Second method, number of callers predicted   20   13    14    20      67

Actual number of callers                                     23   10    15    19      67

Comparison with actual callers:

Actual number of callers                                      23   10    15    19      67

First method, number of callers predicted         23    5    14    20     62

Forecast bias                                                         0    -5    -1     +1       -5

Comparison with actual callers:

Actual number of callers                                     23   10    15    19      67

Second method, number of callers predicted   20   13    14   20      67

Forecast bias                                                        -3   +3     -1    +1        0

b) A forecast bias between first method of prediction and actual number of callers occurs because there is a difference between the total actual number of callers and the total predicted forecasts of callers.  But there is no difference between the total actual number of callers and the predicted forecasts of the callers for method two.