How to estimate the fixed cost


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 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 2,320     $10,118
  February 2,490     $12,518
  March 2,687     $10,818
  April 2,650     $12,700
  May 3,500     $15,000
  June 4,700     $21,200
  July 5,237     $21,618
  August 5,319     $19,270
  September 4,518     $21,615
  October 3,605     $17,418
  November 2,406     $11,225
  December 2,619     $12,018

Required:

Using least-squares regression, estimate the fixed cost and variable cost elements of monthly car wash costs.

  Fixed cost $  
  Variable cost $  

Request for Solution File

Ask an Expert for Answer!!
Accounting Basics: How to estimate the fixed cost
Reference No:- TGS0683874

Expected delivery within 24 Hours