Question

Exercise 5A-2 Least-Squares Regression [LO5-11]

 

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 variable and fixed portions of it car washing costs. 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 variable portion of its car washing costs relates to the number of rental returns. Accordingly, the following data have been compiled:

Month	Rental Returns		Car Wash Costs
January	2,400		$	11,000
February	2,500		$	13,100
March	2,700		$	11,800
April	3,000		$	14,300
May	3,600		$	16,200
June	5,000		$	23,300
July	5,500		$	22,200
August	5,500		$	22,200
September	4,700		$	22,800
October	4,000		$	21,100
November	2,200		$	10,700
December	2,800		$	14,200

 

Exercise 5A-2 Part 2

2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)

Fixed Cost Per Month	?
Variable Cost Per Rental Return	?

Answer 1

		X	Y
		Rental Returns	Car wash cost
		2400	$11,000
		2500	$13,100
		2700	$11,800
		3000	$14,300
		3600	$16,200
		5000	$23,300
		5500	$22,200
		5500	$22,200
		4700	$22,800
		4000	$21,100
		2200	$10,700
		2800	$14,200
	Click "Data"
	Click "Data Analysis"
	Select "Regression" tool
	Click"OK"
	Input y_Range (Car Wash Costs)
	Input x_Range (Rental returns)
	Click "OK"
	Car Wash Cost (Y)=Intercept(a)+X Variable(b)*Rental Returns(X)
	Intercept	2750.952498
	X variable	3.869899089
	Y=2460.78+3.81X
	Fixed Cost per month	$2,750.95
	Variable Cost per rental return	$3.87