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, as 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 expense and machine hours follows:

 

Month	Expense	Hours
1	$2,625	1499
2	$2,670	1590
3	$2,720	1605
4	$2,820	1655
5	$2,855	1775
6	$3,005	1880
7	$2,865	1785
8	$2,905	1805
9	$2,780	1695
10	$2,570	1410
11	$2,590	1550
12	$2,890	1405

Required
1. What is the cost equation for maintenance cost using the high-low method? Graph the data points to check for outliers.
2. Calculate MAPE for the cost equation you developed in part1.

Transcribed Image Text:

Model to fit Maintenance Expense = a + b x M (machine hours) The graph below shows that the selected high and low points are representative of the data, but there s one significant outlier, the point for month 12