Question

Companies in the U.S. car rental market vary greatly in terms of the size of the fleet, the number of locations, and annual revenue. In 2011, Hertz had 320,000 cars in service and annual revenue of approximately $4.2 billion. Suppose the following data show the number of cars in service (1,000s) and the annual revenue ($ millions) for six smaller car rental companies.

Company	Cars (1,000s)	Revenue ($ millions)
Company A	11.5	120
Company B	10.0	135
Company C	9.0	98
Company D	5.5	35
Company E	4.2	40
Company F	3.3	34

(a)

Develop a scatter diagram with the number of cars in service as the independent variable.

(b)

What does the scatter diagram developed in part (a) indicate about the relationship between the two variables?

There appears to be a positive linear relationship between cars in service (1,000s) and annual revenue ($ millions).There appears to be a negative linear relationship between cars in service (1,000s) and annual revenue ($ millions).    There appears to be no noticeable relationship between cars in service (1,000s) and annual revenue ($ millions).

(c)

Use the least squares method to develop the estimated regression equation that can be used to predict annual revenue (in $ millions) given the number of cars in service (in 1,000s). (Round your numerical values to three decimal places.)

ŷ =

(d)

For every additional car placed in service, estimate how much annual revenue will change (in dollars). (Round your answer to the nearest integer.)

Annual revenue will increase by $  , for every additional car placed in service.

(e)

A particular rental company has 6,000 cars in service. Use the estimated regression equation developed in part (c) to predict annual revenue (in $ millions) for this company. (Round your answer to the nearest integer.)

$ _____ million

Answer 1

using excel here we get scatter plot and regression equation for the data given ,

b] there appears to be a positive linear relationship between cars in service and annual revenue .

c] using regression equation calculator in excel we get the least square line as

d] for every 1000 additional cars , the revenue increases by $12.977 million ,

so for 1 additional car we get ,

so Annual revenue will increase by $12977 for every additional car placed in service

e] for 6000 cars we give ,

we get