question archive Lorenzo operates a brushless car wash
Lorenzo operates a brushless car wash
Subject:AccountingPrice: Bought3
Lorenzo operates a brushless car wash. Incoming cars are put on an automatic, continuously moving conveyor belt. A car is washed as the conveyor belt carries it from the start station to the finish station. After the car moves off the conveyor belt, workers dry it and clean and vacuum the inside. Workers are managed by a single supervisor.
Lorenzo's accountant wants to estimate costs in December, when 11,450 cars are expected to be washed. She tried two different methods to estimate December costs, account analysis and high-low, with number of cars washed as the independent variable for both methods.
To estimate the cost function parameters using account analysis, she analyzed actual costs in June, when 10,900 cars were washed. Her analysis revealed the following total fixed costs and total variable costs for each cost item:
