Answer: C. To determine the capacity cushion.
Explanation:
Forecast error cannot be use to determine the capacity cushion.
Answer: C. To determine the capacity cushion
Explanation: To forecast is to estimate how something will be in the future based on observable trends from past and present data. Forecasting plays a major role in a company success or failure and at the base level, when done accurately can keep prices low and increase knowledge of the market for businesses.
Forecast error is given as the difference between an observed value and its forecast based on all previous observations. As such, it is the difference between the actual and the predicted; forecast value of a time series; or any other phenomenon of interest.
While forecast errors can be used to monitor erratic demand observations or outliers, to determine when the forecasting method is no longer tracking actual demand and needs to be reset and to determine parameter values that provide the most accurate forecasts, it however cannot be applied to determine the capacity cushion (reserved capacity that a firm has to satisfy unexpected increases in demand or temporary breakdown in production capacity).
