Question

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?  

Answer 1