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 its 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:
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
A1
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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 its 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
4,500
2,300
3,100
Car Wash
Costs
$ 11,900
$ 13,600
Fixed cost per month
Variable cost per rental return
$ 12,700
$ 15,600
$ 17,100
$ 25,100
$ 23,100
$ 24,400
$ 23,700
$ 23,800
$ 11,600
$ 17,400
2. Using least-squares regression, estimate the variable cost per rental return and the monthly fixed cost incurred to wash cars. (Round
Fixed cost to the nearest whole dollar amount and the Variable cost per unit to 2 decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0bfef053-4e2b-48c4-8be8-8ed375aff541%2F61ab30d5-0c68-4650-ac11-81d166986ff2%2Fgq3rr4m_processed.png&w=3840&q=75)
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