Calculate the mean absolute percentage error (MAPE) for the cost equation you developed above.
Horton Manufacturing Incorporated 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:
| Maintenance Costs | Machine Hours | |
|---|---|---|
| 1 | $ 2,660 | 1,557 |
| 2 | 2,705 | 1,660 |
| 3 | 2,755 | 1,675 |
| 4 | 2,855 | 1,725 |
| 5 | 2,890 | 1,845 |
| 6 | 3,040 | 1,895 |
| 7 | 2,900 | 1,855 |
| 8 | 2,940 | 1,875 |
| 9 | 2,815 | 1,765 |
| 10 | 2,605 | 1,445 |
| 11 | 2,625 | 1,620 |
| 12 | 2,925 | 1,460 |
Maintenance cost = 1208 + (0.9667 x Machine hours)
1. Calculate the mean absolute percentage error (MAPE) for the cost equation you developed above.
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