Question

ensen 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) 15 12 Annual Maintenance Expense 18 23 30 34 19 26 38 48 32 34 40 53 42 a. Develop the estimated regression cquation that relates annual maintenance expense in hundreds of dollars) to weckly usage hours (to 3 decimals). Expense- b. 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). Weekly Usage The p value is - Select your answer - What is your conclusion? Select your answer 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). d. If the maintenance contract costs $3000 per year, would you recommend purchasing the contract for the new machine in part (c)? why or why not? Select your answer

Answer 1

a)expence = 9.6975 +.9561* usage

b) calculated f-test statistics is 203.83

p value is 0.0001412

ie less then .01

so we will not conclude that there is any relationship between usage and expences

c) expected cost is 3838.05$

confidence interval is (21.93,38.07)

d)yes the maintenance cost is greater then 3000 , it is 3838.05

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