In the file Jensen.xlsx, Jensen auto is deciding whether to purchase a new maint

Question

In the file Jensen.xlsx, Jensen auto is deciding whether to purchase a new maintenance contract for its new computer wheel alignment and balancing machine. The data in the file shows the relationship between usage and annual expense.

a. Develop a scatter chart with usage as the independent variable.

b. Use the data to develop a regression equation that could be used to predict the annual maintenance expense for a given numbers of hours of weekly usage. What is the model?

c. How much of the variation in the sample values of annual maintenance does the model you estimate in part b explain (Hint: Use r squared to explain).

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

Explanation / Answer

Let us assume y = maintenance expense and x = weekly usage

a) Scatter chart for the given data set:

b) Excel output ANOVA

Regression equation: y = 0.95645x + 10.5017

c) r2 = 0.8399

This is the value of explained variation.

SUMMARY OUTPUT Regression Statistics Multiple R 0.926115097 R Square 0.857689173 Adjusted R Square 0.83990032 Standard Error 4.236830413 Observations 10 ANOVA df SS MS F Significance F Regression 1 865.4941444 865.4941444 48.2149779 0.00011917 Residual 8 143.6058556 17.95073195 Total 9 1009.1 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0% Intercept 10.501744 3.73359821 2.81276758 0.022745866 1.892051098 19.11143691 1.892051098 19.11143691 X Variable 1 0.956452806 0.137743959 6.943700591 0.00011917 0.638814669 1.274090944 0.638814669 1.274090944

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