ASSIGNMENT 5

SOLUTIONS

1. REPR MINICASE
a. Plot indicates that, as units go up, the service times tends to increase.

Scatterplot of TIME vs UNITS

180

160

140

120
TIME

100

80

60

40

20
0 2 4 6 8 10
UNITS

b. Y = 5.57 + 15.34 X, where X= Units and Y = Time.

The slope of the line is 15.34 and the Y-intercept is 5.57. This implies that the
service time goes up by 15.34 minutes whenever an additional unit needs to be
repaired. If the linear regression is valid over the entire range of X values, then
every job requires a fixed time of 5.57 minutes (set up time) irrespective of the
number of units which need to be repaired.

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c. F = 338.59 > 5.32 (F value with 1 and 9 DF at a level of significance of 5%).
Hence we reject the null hypothesis H0 : 1 =0 in favor of H1 : 1 0.
Alternatively, the p value for this value of F = 338.59 is 0.000%, which is less
than 5%. Hence the results are statistically significant. The standard error of
estimate is 8 minutes and the value of r2 = 0.977 or 97.7%. This implies that the
average error in estimating the service time from this regression equation is plus
or minus 8 minutes. Furthermore, 97.7% of the variation in service time is
explained by the variation in the number of units.

d.

Residuals Versus UNITS

(response is TIME)

2.0

1.5
Standardized Residual

1.0

0.5

0.0

-0.5

-1.0

0 2 4 6 8 10
UNITS

The residuals appear to have a random pattern. The linear regression model
adequately explains the service times, because the results are statistically
significant and the residuals are random.

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e. Y = 5.57 + 15.34 X, where X= Units and Y = Time. When X= 6,

Y = 97.6 minutes. Se = 8 minutes. Therefore a 95% prediction interval for the time
required to complete a 6- unit job is:

97.6 plus or minus t.025 x 8 = (79,116)

This implies that 95% of all jobs will have a service time between 79 and 116
minutes.

f. Y = 5.57 + 15.34 X, where X= Units and Y = Time. When X= 25,

Y = 389 minutes.

This prediction may not be accurate because of extrapolation. The linear model
with a slope of 15.34 may not hold for large numbers of units.

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2. KEYNES MINICASE

.1. SOURCE DF SS MS F
Regression 1 58.748 58.748 40.54
Residual Error 7 10.143 1.449
Total 8 68.891

H0 : 1= 0
H1 : 1 0

Since F > F.05 (1,7) [ 40.54 > 5.59 ] , we accept the alternate
hypothesis and conclude that a linear relationship exists.

2. SSR/SST = 0.853. Therefore 85.3% of the variation in consumer spending is

explained by the variation ion income levels.

3. R2 = SSR/SST = 0.853
Therefore R = 0.853 = 0.923.

4. Se = 1.204. A measure of the average prediction error is

plus or minus 1.204.

5. 4.56, 10.11, 13.81, 15.66.

6. The residual plot is not random. It looks like the relationship is curvilinear. It
seems that the per capita spending has leveled off when the income level
exceeds 3. See plot of Per Capita Spending (Y) versus Average Disposal
Income levels (X) and the residual plot on the next page.

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 Fitted Line Plot
Y = 4.563 + 1.847 X
15.0 S 1.20375
R-Sq 85.3%
Y = Per Capita Household Spending

R-Sq(adj) 83.2%

12.5

10.0

7.5

5.0

0 1 2 3 4 5
X = Average Disposal Income Level

Residuals Versus X
(response is Y)

1.0

0.5
Standardized Residual

0.0

-0.5

-1.0

-1.5

-2.0

-2.5
0 1 2 3 4 5
X