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Cost Estimation; High-low Method; MAPE: Horton Manufacturing Inc. produces blinds and other window treatments for residential...

Cost Estimation; High-low Method; MAPE: Horton Manufacturing Inc. produces blinds and other window treatments for residential homes and offices. The owner is concerned about the maintenance costs for the production machinery because maintenance costs for the previous fiscal year were higher than he expected. The owner has asked you to assist in estimating future maintenance costs to better predict the firm's profitability. Together, you have determined that the best cost driver for maintenance costs is machine hours. The data from the previous fiscal year for maintenance costs and machine hours follow:

Month Maintenance Costs Machine Hours

1

 $2,625 1,499
2 2670 1590
3 2720 1605
4 2822 1655
5 2855

1775
6 3005 1880
7 2865 1785
8 2905 1805
9 2780 1695
10 2570 1410
11 2590 1550
12 2890 1425

Question:

- Use the high-low method to estimate the fixed and variable portions for maintenance costs.

- Graph the data points to check for possible outliers and determine whether the points selected in requirement 1 are representative of the date.

- Calculate the mean absolute percentage average error (MAPE) for the cost equation you developed in requirement 1.

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