Ethan Manufacturing Incorporated produces floor mats for automobiles. The owner, Joseph Ethan, has asked you to assist in estimating maintenance costs. Together, you and Joseph determine that the single best cost driver for maintenance costs is machine hours. These data are from the previous fiscal year for maintenance costs and machine hours: Month Maintenance Costs Machine Hours 1 $ 2,780 1,870 2 2,940 1,950 3 3,090 2,030 4 3,200 2,050 5 3,280 2,080 6 3,250 2,060 7 3,190 2,040 8 3,030 2,020 9 2,800 1,880 10 2,400 1,280 11 2,410 1,480 12 2,630 1,770 Required: 1. What is the cost equation for maintenance costs using the high-low method? 2. Calculate the mean absolute percentage error (MAPE) for the cost equation you developed in requirement 1.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Ethan Manufacturing Incorporated produces floor mats for automobiles. The owner, Joseph Ethan, has asked you to assist in estimating maintenance costs. Together, you and Joseph determine that the single best cost driver for maintenance costs is machine hours. These data are from the previous fiscal year for maintenance costs and machine hours:
| Month | Maintenance Costs | Machine Hours |
|---|---|---|
| 1 | $ 2,780 | 1,870 |
| 2 | 2,940 | 1,950 |
| 3 | 3,090 | 2,030 |
| 4 | 3,200 | 2,050 |
| 5 | 3,280 | 2,080 |
| 6 | 3,250 | 2,060 |
| 7 | 3,190 | 2,040 |
| 8 | 3,030 | 2,020 |
| 9 | 2,800 | 1,880 |
| 10 | 2,400 | 1,280 |
| 11 | 2,410 | 1,480 |
| 12 | 2,630 | 1,770 |
Required:
1. What is the cost equation for maintenance costs using the high-low method?
2. Calculate the mean absolute percentage error (MAPE) for the cost equation you developed in requirement 1.
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