Lorenzo operates a brushless car wash. Incoming cars are put on an automatic, continuously moving conveyor belt. Cars are washed as the conveyor belt carries the car from the start station to the finish station. After the car moves off the conveyor belt, the car is dried manually.

Workers then clean and vacuum the inside of the car. Lorenzo serviced 80,000 cars in 2016. Lorenzo reports the following costs for 2016:

Account Description.....................................Costs

Car wash labour ....................................... $260,000

Soap, cloth, and supplies ............................42,000

Water ..................................................38,000

Electric power to move conveyor belt ............72,000

Depreciation ..........................................64,000

Salaries ................................................46,000

Required

1. Classify each account as variable or fixed with respect to cars washed. Explain.

2. Lorenzo expects to wash 90,000 cars in 2017. Use the cost classification you developed in requirement 1 to estimate Lorenzo's total costs in 2017. Depreciation is computed on a straight-line basis.