Question

i ne tollowing intormation applies to the questions displayed below 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 January February March April May June July August September October November December Rental Returns 2,500 2,500 2,800 3,100 3,700 5,200 5,600 5,700 4,800 4,900 2,300 3,100 Car Wash Costs $ 11,800 $ 13,500 $ 12,600 $ 15,500 $ 17,000 $ 24,900 $ 23,000 $ 24,200 $ 23,600 $ 23,500 $ 11,500 $ 17,000

Answer 1

Month	Rental returns (sum of X)	Car wash costs (Sum of Y)
Jan	2500	11800
Feb	2500	13500
Mar	2800	12600
Apr	3100	15500
May	3700	17000
Jun	5200	24900
July	5600	23000
Aug	5700	24200
Sep	4800	23600
Oct	4900	23500
Nov	2300	11500
Dec	3100	17000
Total (12 months)	46200	218100

using variable cost per unit calculated as 3.96 per rental return (b)

Fixed cost = [Sum of Y - b(sum of X)] /n

              = [218100 - 3.96(46200)]/12

               = [218100 - 182952]/12

               = 35148/12

               = $ 2929