Question

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		$	10,800
February	2,500		$	13,000
March	2,700		$	11,600
April	3,000		$	14,000
May	3,600		$	16,000
June	5,000		$	22,900
July	5,500		$	22,000
August	5,400		$	21,700
September	4,700		$	22,600
October	3,900		$	20,500
November	2,200		$	10,500
December	2,700		$	13,500

Required:

1. Prepare a scattergraph plot. (Place car wash costs on the vertical axis and rental returns on the horizontal axis.)

Instructions:

1. On the graph below, use the point tool (January) to plot rental returns on the horizontal axis and car wash costs on the vertical axis.

2. Repeat the same process for the plotter tools (February to December).

3. To enter exact coordinates, click on the point and enter the values of x and y.

4. To remove a point from the graph, click on the point and select delete option.

car wash cost

$30000

$25000

$20000

$15000

$10000

$5000

0 1000 2000 3000 4000 5000 6000 7000

rental returns

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.)

Answer 1