Answer:
Month Maintenance Machine Equation MAPE
costs hours error (Abs.)
1 $2,750 1,840 $269 9.78%
2 $2,910 1,920 $197 6.77%
3 $3,060 2,000 $135 4.41%
4 $3,170 2,020 $47 1.48%
5 $<u>3,250</u> <u>2,050</u> 0 0%
6 $3,220 2,030 $8 0.25%
7 $3,160 2,010 $46 1.46%
8 $3,000 1,990 $184 6.13%
9 $2,770 1,850 $260 9.39%
10 <u>$2,370</u> <u>1,250</u> 0 0%
11 $2,380 1,450 $210 8.82%
12 $2,600 1,740 $309 <u>11.88%</u>
60.37%
variable cost per unit = (highest activity cost - lowest activity cost) / (highest activity units - lowest activity units) = ($3,250 - $2,370) / (2,050 - 1,250) = $880 / 800 units = $1.10 per unit
fixed cost = $3,250 – ($1.10 x 2,050) = $995
Cost model = $995 + $1.10X
2. Calculate the mean absolute percentage error (MAPE) for the cost equation you developed in requirement 1.
MAPE = 60.37% / 12 = 5.03%
