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    least-squares regression for Hertz Rental Cars

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    24. Hertz 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 which each rental car that is returned is thoroughly cleaned before being released for rental to another customer. Management believes that the costs of operating the car wash should be related to the number of rental returns. Accordingly, the following data has been compiled:

    Month Rental
    Returns Car Wash
    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

    Using least-squares regression, estimate the fixed cost and variable cost elements of monthly car wash costs and calculate R2. The fixed cost element should be estimated to the nearest dollar and the variable cost element to the nearest cent. Express your cost formula in the form Y = a + bX.

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    Solution Summary

    Excel file contains estimation of the fixed cost and variable cost elements of monthly car wash costs using least-squares regression.