Question

Lorenzo operates a brushless car wash. Incoming cars are put on an automatic, continuously moving conveyor belt. A car is washed as the conveyor belt carries it from the start station to the finish station. After the car moves off the conveyor belt, workers dry it and clean and vacuum the inside. Workers are managed by a single supervisor.

Lorenzo's accountant wants to estimate costs in December, when 11,150 cars are expected to be washed. She tried two different methods to estimate December costs, account analysis and high-low, with number of cars washed as the independent variable for both methods.

To estimate the cost function parameters using account analysis, she analyzed actual costs in June, when 10,600 cars were washed. Her analysis revealed the following total fixed costs and total variable costs for each cost item:

Cost Item	Total Cost	Variable Cost
Soap, cloths, and supplies	$2,120	$2,120
Water	$4,240	$4,240
Car wash labor	$30,390	$27,560
Power for conveyor	$12,140	$9,540
Supervisor and cashier	$3,300	$0

To estimate the cost function parameters using high-low, she used the following total cost and activity data from July and August:

Cost Item	July	August
Soap, cloths, and supplies	$2,580	$3,360
Water	$5,160	$6,720
Car wash labor	$25,160	$31,920
Power for conveyor	$9,280	$11,360
Supervisor and cashier	$4,250	$4,250
Total	$46,430	$57,610
Cars washed	8,600	11,200

REQUIRED [ROUND PER-UNIT COSTS TO TWO DECIMAL PLACES AND TOTAL COSTS TO THE NEAREST DOLLAR.]

Part A (6 tries; 5 points)
1. Using account analysis, what is the accountant's estimate of total fixed costs for December?  

2. Using account analysis, what is the accountant's estimate of variable costs per unit for December?  

Part B (6 tries; 5 points)
1. Using the high-low method, what is the accountant's estimate of total fixed costs for December?  

2. Using the high-low method, what is the accountant's estimate of total variable costs for December?  

Answer 1