Question

# 1. Jensen Tire & Auto is in the process of deciding whether to purchase a maintenance...

1. 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 information on weekly usage (hours) and annual maintenance expense (in thousands of dollars).

 SUMMARY OUTPUT Regression Statistics Multiple R 0.9272 R Square 0.8597 Adjusted R Square 0.8422 Standard Error 4.1466 Observations 10 ANOVA df SS MS F Significance F Regression 1 843.1737 843.1737 49.0391 0.00011 Residual 8 137.5513 17.1939 Total 9 980.7250 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 10.3350 3.8186 2.7065 0.0268 1.5293 19.1408 Weekly Usage (in Hrs) 0.9586 0.1369 7.0028 0.0001 0.6429 1.2742
1. Write down what the estimated regression equation is that relates annual maintenance expense to weekly usage.
2. Test the significance of regression at .05 level of significance using p-value approach
3. Test the significance of regression at .05 level of significance using critical-value approach
4. Comment on how good the relationship fit is. How is that determined?
5. What is R-Sq? How is that determined?
6. What is the value of the correlation coefficient in this problem?
7. Jensen expects to use the new machine 30 hours per week. What is the 95% confidence interval for the company’s annual maintenance expense (Use the correct units) based on the above report for a given “x bar” = 30 hours per week.
8. If maintenance contract costs \$30,000 per year for a machine, would you recommend purchasing it for the new machine in part (g)? Why or why not?

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