Spentz Company offers rental cars in several off-airport locations. Management would like to better understand the behaviour of the company's costs. One of those costs is the cost of cleaning cars. The company operates its own car wash and cleaning facilities 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 cleaning facilities should be related to the number of rental returns-
Accordingly, the following data have been compiled:
Rental Cleaning
Month Returns Costs
January 4,620 $15,170
February 4,906 $19,036
March 5,282 $16,358
April 5,748 $19,423
May 7,080 $23,001
June 9,722 $32,182
July 10,864 $31,905
August 10,536 $29,895
September 9,256 $32,790
October 7,480 $27,574
November 4,212 $14,745
December 4,990 $16,621
Required:
Using least-squares regression; estimate the fixed cost and variable cost elements of monthly car wash costs. The fixed cost element should be estimated to the nearest dollar and the variable cost element to the nearest cent.