Chapter 5.A, Problem 2E

EXERCISE 5A-2 Least-Squares Regression LO5-11
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:

Required:

1. Prepare a scattergraph plot. (Place car wash costs on the vertical axis and rental returns on the horizontal axis.)
2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. The total fixed cost should be estimated to file nearest dollar and the variable cost per rental return to the nearest cent.