Question

(The following information 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

Statement showing Computations
Particulars	Amount
Cost at highest level of activity	24,200.00
Cost at Lowest level of activity	11,500.00
Highest level of activity	5,700.00
Lowest Level of activity	2,300.00
Variable cost per unit = (24200 - 11500)/(5700 - 2300)
Variable cost per unit = (12700)/(3400)
Variable cost per unit = $3.73
Fixed Costs = 24200 - 3.73*5700
Fixed Costs = $2939