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Estimate the fixed cost and variable cost

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Reference no: EM13339994

Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the behavior of the company's costs. One of those costs is the cost of washing cars. The company operates its own car wash facility in which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the costs of operating the car wash should be related to the number of rental returns. Accordingly, the following data have been compiled:

Month Rental
Returns		 Car Wash
Costs
January 2,320 $10,118
February 2,490 $12,518
March 2,687 $10,818
April 2,650 $12,700
May 3,500 $15,000
June 4,700 $21,200
July 5,237 $21,618
August 5,319 $19,270
September 4,518 $21,615
October 3,605 $17,418
November 2,406 $11,225
December 2,619 $12,018

Required:

Using least-squares regression, estimate the fixed cost and variable cost elements of monthly car wash costs.

Reference no: EM13339994

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