Question

Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract for its new computer wheel alignment and balancing machine. Managers feel that maintenance expense should be related to usage, and they collected the following information on weekly usage (hours) and annual maintenance expense (in hundreds of dollars).

Weekly Usage (hours)	Annual Maintenance Expense
16	19
13	24
23	32
31	39
35	49
20	33
27	35
34	41
43	54
41	42

a. Develop the estimated regression equation that relates annual maintenance expense (in hundreds of dollars) to weekly usage hours (to 3 decimals).

EXPENSE = ___________ + __________ WEEKLY USAGE

b. Test the significance of the relationship in part (a) at a  level of significance.

Compute the value of the  test statistic (to 2 decimals). ___________

The p value is_________

c. Jensen expects the new machine to be used 30 hours per week. What is the expected annual maintenance expense in hundreds of dollars (to 2 decimals)? __________________

Develop a 95% prediction interval for the company's annual maintenance expense for this machine (to 2 decimals).

(_____ , _____)

Answer 1

Solution: We can use the excel regression data analysis tool to find the answers to the given questions. The excel output is given below:

a. Develop the estimated regression equation that relates to annual maintenance expense (in hundreds of dollars) to weekly usage hours (to 3 decimals).

EXPENSE = 9.741+0.956 x WEEKLY USAGE

b. Test the significance of the relationship in part (a) at a  level of significance.

Compute the value of the test statistic (to 2 decimals). 6.78

The p-value is 0.0000

c. Jensen expects the new machine to be used 30 hours per week. What is the expected annual maintenance expense in hundreds of dollars (to 2 decimals)?

Develop a 95% prediction interval for the company's annual maintenance expense for this machine (to 2 decimals).

(27.91,48.94)