QuestionEZ Rental Car offers rental cars in an off-airport location near a ma

11 May QuestionEZ Rental Car offers rental cars in an off-airport location near a ma

Posted at 14:01h in 2General studies by Past Papers

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 2,310 $ 10,113
February 2,453 $ 12,691
March 2,641 $ 10,905
April 2,874 $ 12,949
May 3,540 $ 15,334
June 4,861 $ 21,455
July 5,432 $ 21,270
August 5,268 $ 19,930
September 4,628 $ 21,860
October 3,720 $ 18,383
November 2,106 $ 9,830
December 2,495 $ 11,081

Required:
Using least-squares regression, estimate the fixed cost and variable cost elements of monthly car wash costs. (Round the “Variable cost per unit” to 2 decimal places and “Fixed cost” to the nearest dollar amount. Omit the “$” sign in your response.)

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