Least-Squares Regression
EZ Rental Car offers rental cars in an off-airport location near a major tourist destination in Florida.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 whicheach rental car that is returned is thoroughly cleaned before being released for rental to anothercustomer.Management believes that the costs of operating the car wash should be related to thenumber of rental returns. Accordingly, the following data have been compiled:
Month | Rental Returns | Car Wash Costs |
January | 2,310 | $10,113 |
February | 2,453 | $12,691 |
March | 2,641 | $10,905 |
April | 2,874 | $12,949 |
May | 3,540 | $15,334 |
June | 4,861 | $21,455 |
July | 5.432 | $21,270 |
August | 5,268 | $19,930 |
September | 4,628 | $21,860 |
October | 3,720 | $18,383 |
November | 2.106 | $9,830 |
December | 2,495 | $11,081 |
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.
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