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Estimate the fixed cost and variable cost elements

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Question - EZ Rental Car offers rental cars in an off-airport location near a major tourist destination in Florida. 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 2,490 $ 11,913

February 2,543 $ 13,591

March 2,821 $ 12,705

April 3,144 $ 15,649

May 3,720 $ 17,134

June 5,221 $ 25,055

July 5,612 $ 23,070

August 5,718 $ 24,430

September 4,808 $ 23,660

October 4,458 $ 23,783

November 2,286 $ 11,630

December 3,125 $ 17,381

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

Reference no: EM131798294

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