Under what condition is MAPE undefined?

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Study for the Taitt Supply Chain Management Exam 1. Utilize flashcards and multiple choice questions, each with hints and explanations. Prepare thoroughly for your exam!

Multiple Choice

Under what condition is MAPE undefined?

Explanation:
MAPE expresses forecast error as a percentage of what actually occurred, so for each period you divide the absolute error by the actual value. If the actual demand is zero, you would be dividing by zero, which has no meaning in mathematics. That makes MAPE undefined in that situation. In practice, analysts handle this by either omitting periods with zero actuals or using alternative metrics or adjustments (like adding a small epsilon) to avoid the division by zero.

MAPE expresses forecast error as a percentage of what actually occurred, so for each period you divide the absolute error by the actual value. If the actual demand is zero, you would be dividing by zero, which has no meaning in mathematics. That makes MAPE undefined in that situation. In practice, analysts handle this by either omitting periods with zero actuals or using alternative metrics or adjustments (like adding a small epsilon) to avoid the division by zero.

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