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.

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	Rental Returns		Car Wash Costs
January	2,400		$	11,300
February	2,500		$	13,300
March	2,800		$	12,100
April	3,100		$	14,700
May	3,700		$	16,500
June	5,100		$	23,900
July	5,600		$	22,500
August	5,600		$	22,900
September	4,700		$	23,100
October	4,100		$	22,000
November	2,200		$	11,000
December	2,900		$	15,300

Required:

1. Prepare a scattergraph plot. (Place car wash costs on the vertical axis and rental returns on the horizontal axis.) 

Instructions:

1. On the graph below, use the point tool (January) to plot rental returns on the horizontal axis and car wash costs on the vertical axis.

2. Repeat the same process for the plotter tools (February to December).

3. To enter exact coordinates, click on the point and enter the values of x and y.

4. To remove a point from the graph, click on the point and select delete option.

Thanks
2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars.
 

Explanation

2.

The intercept provides the estimate of the fixed cost element, $3,075 per month, and the slope provides the estimate of the variable cost element, $3.84 per rental return. Expressed as an equation in the form Y = a + bX, the relation between car wash costs and rental returns is

Y = $3,075 + $3.84X

where X is the number of rental returns.

Note that the R² is approximately 0.90, which is quite high, and indicates a strong linear relationship between car wash costs and rental returns.