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 20 23 17 28 27 36 35 43 39 53 24 37 31 39 38 45 47 58 45 46 Develop the estimated regression equation that relates annual maintenance expense (in hundreds of dollars) to weekly usage hours (to 3 decimals). Expense = + Weekly Usage Test the significance of the relationship in part (a) at a .05 level of significance. Compute the value of the F test statistic (to 2 decimals). The p value is What is your conclusion? 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). ( , ) If the maintenance contract costs $3000 per year, would you recommend purchasing the contract for the new machine in part (c)?

Answer 1