Question

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	$	2,665			1,699
2		2,711			1,802
3		2,762			1,819
4		2,866			1,876
5		2,900			2,012
6		3,052			2,131
7		2,910			2,023
8		2,951			2,046
9		2,824			1,921
10		2,611			1,598
11		2,631			1,757
12		2,936			1,615

Required:

1. Use the high-low method to estimate the fixed and variable portions for maintenance costs. (In your calculations, round "slope (unit variable cost)" to 4 decimal places. Enter the "slope (unit variable cost)" rounded to 4 decimal places and all other calculations, to nearest whole dollar.)

Maintenance cost = _____ + ( _____ x ______)

2. Graph the data points to check for possible outliers and determine whether the points selected in requirement 1 are representative of the data. (To earn full credit for this graph you must plot all required points for each curve. While plotting the points a tool icon will pop up. You can use this to enter exact co-ordinates for your points as needed.)

MAINTENANCE COSTS $3,500 Tools $3,000 1st Month 2nd Month $2,500 $2,000 3rd Month 4th Month $1,500 5th Month 6th Month $1,000 $500 500 1000 1500 2000 2500 3000

3. Calculate the mean absolute percentage error (MAPE) for the cost equation you developed in requirement 1. (Do not round intermediate calculations, with the exception of MAPE for each month, which should be rounded to three decimal places. Input your final answer as a percentage rounded to 1 decimal place (i.e., .0540 = 5.40%).)

Mean absolute percentage error (MAPE) ___%

Answer 1

Computation of vauable f fixed cost using high low method Vauable costa Defference between maintainence cost for hight low point Deffeunce between operating hours for the high & low point $3052 - $264 2131-1596 $441 533 & 0 Fixed poition: $3052 - (213) XO-8294) $1289 Equation $1289 + (0082748m) ma machine hours ONE

3000 Esvo 2000 tvo 1000 500 500 1000 1500 2000 2500 3000 Machine hry 25 SUNDAY

25 26 27 28 29 30 13 Estimate (actual-estimate achal Achial $2665 $ 2701 $ 2762 $2866 $2900 1 $1289+ (699x 0.8274) ? $2695 2) 1289 + (1802 X0.8284) - $2780 3) 1289 + 0819x 0·8294) - $2794 ) 1289 + (1 876 x 0-8274) – $2841 2_1289 + ( 2012 X 0.8274) - $2954 1289 + (2/31 x 0-8274) - $3052 1 1289 + (2023 x 0.8274) $2963 3 1289 + (2046 * 0-8274) - $2982 al 1289 + (192) * 0·82742 = $ 2878 0 289 + (1598 X08274) $2612 17 1269 + (1757 x 0-8274) - $2743 2) 1289 t (1615 0.8274) : $2625 MAPE 1-11° 2.48% 1.15 % o-g% 1-83% 0.00% 1.79% 2-25% 1 88% 0.00% 4.08% 11.85% 2.44% $8910 s 2915 $2824 $8619 $2631 $ 2936 MAPE = 2.44%