Question
In: Statistics and Probability
A. Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance...
A. 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 ($100) 13 17.0 20 30.0 28 37.0 32 47.0 17 30.5 24 32.5 40 51.5 38 40.0 A2. Using the OLS results and find the predicted value of yi, i.e., , that corresponds with 32 hours of weekly usage of this machine: a. 37.2004 b. 41.2348 c. 33.1660 d. 47.2865 A5. Find sy.x (=sɛ) (standard error of the model): a. 137.4193 b. 4.7857 c. 26.9705 d. 8.9594 A6. Find the 99% confidence interval for β1: a. (0.5555, 1.4617) b. (1.4617, 0.3221) c. (0.3221, 1.6951) d. (0.5555, 1.6951) A7. Using a 5% level of significance, is the effect of “Weekly Usage” on “Annual Maintenance Expense”: a. positively and significantly b. positively and insignificantly c. negatively and significantly d. negatively and insignificantly
Solutions
Expert Solution
Solution: We can use the excel regression data analysis tool to find the answer to the given questions. The excel output is given below:
| SUMMARY OUTPUT | ||||||
| Regression Statistics | ||||||
| Multiple R | 0.9120 | |||||
| R Square | 0.8318 | |||||
| Adjusted R Square | 0.8038 | |||||
| Standard Error | 4.7857 | |||||
| Observations | 8 | |||||
| ANOVA | ||||||
| df | SS | MS | F | Significance F | ||
| Regression | 1 | 679.5494948 | 679.5494948 | 29.6704924 | 0.001591769 | |
| Residual | 6 | 137.4192552 | 22.90320921 | |||
| Total | 7 | 816.96875 | ||||
| Coefficients | Standard Error | t Stat | P-value | Lower 99.0% | Upper 99.0% | |
| Intercept | 8.9594 | 5.1904 | 1.7261 | 0.1351 | -10.2837 | 28.2025 |
| x | 1.0086 | 0.1852 | 5.4471 | 0.0016 | 0.3221 | 1.6951 |
Using the OLS results and find the predicted value of yi, i.e., , that corresponds with 32 hours of weekly usage of this machine:
Answer: b. 41.2348
Explanation:
The regression equation is:
Find sy.x (=sɛ) (standard error of the model):
Answer: b. 4.7857
Find the 99% confidence interval for β1:
Answer: c. (0.3221, 1.6951)
Using a 5% level of significance is the effect of “Weekly Usage” on “Annual Maintenance Expense”:
Answer: a. positively and significantly
orchestra answered 1 year agoRelated Solutions
Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract...
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
17
25
14
30
24
38
32
45
36
55
21
39
28
41
35
47
44
60
42
48
Develop...
Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract...
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
15
24
12
29
22
37
30
44
34
54
19
38
26
40
33
46
42
59
40
47
A.)...
Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract...
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....
Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract...
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
13
17.0
10
22.0
20
30.0
28
37.0
32
47.0
17
30.5
24
32.5
31
39.0
40
51.5
38
40.0
(a)...
Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract...
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
15
20
12
25
22
33
30
40
34
50
19
34
26
36
33
42
42
55
40
43
Develop...
Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance contract...
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...
(Solve this problem manually.) Jensen Tire & Auto is in the process of deciding whether to...
(Solve this problem manually.) 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 ($100)
17
17
20
...
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A
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A company is deciding whether to lease or purchase an asset. In this question we will...
A company is deciding whether to lease or purchase an asset. In
this question we will evaluate the NPV of the purchase
decision.
The capital cost required to purchase the asset is $1,000,000
(at time zero) with a salvage value of $500,000 at the end of the
5th year. The purchased asset can be depreciated based on MACRS
5-year life depreciation with the half year convention (table A-1
at IRS) over six years (from year 0 to year 5).
The...
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