Bargain Rental Car offers rental cars in an off-airport location near a major to
ID: 2573930 • Letter: B
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:
2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. What is the R2 rounded to the nearest whole percentage? (Round Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)
Month Rental Returns Car Wash Costs January 2,300 $ 10,200 February 2,500 $ 12,700 March 2,700 $ 11,000 April 2,900 $ 13,100 May 3,600 $ 15,400 June 4,900 $ 21,700 July 5,400 $ 21,400 August 5,300 $ 20,200 September 4,600 $ 22,000 October 3,800 $ 18,700 November 2,100 $ 9,900 December 2,500 $ 11,400Explanation / Answer
Workings:
Unit variable cost = n * total of xy - (Total of x * total of y) n * total of x^2 -(Total of x)^2 Where n = 12, Total of xy = 728840000, Total x * total y = 42600 * 187700 Total of x^2 = 167720000 , (Total of x)^2 = 42600 * 42600 Unit variable cost = ((12*728840000) - (42600 * 187700))/((12*167720000 - 1814760000) =(8746080000 -7996020000) / (2012640000 - 1814760000) = 750060000 / 197880000 = 3.79 Variable cost per rental return = $3.79 Fixed cost = (Total of y - unit cost * toal of x)/n =( 187700 - 3.79*42600)/12 = 26246/12 = 2187Related Questions
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