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    Random Motors Pooja Adhiya

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    Pooja A
    The document discusses a project for Random Motors that involves testing new car models called Rocinante36 and Marengo32 against their design specifications. It formulates null and alternative hypotheses, performs hypothesis tests on mileage and top speed, identifies which type of error would be more expensive, develops regression equations to predict sales, calculates predicted profits for each model, and determines which model to invest in based on predicted profits. It also analyzes how sales would be affected by a price increase and rebuilds the regression models removing insignificant variables, noting the change in adjusted R-square values.

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    Random Motors Pooja Adhiya

    Uploaded by

    Pooja A
    45 views10 pages
    The document discusses a project for Random Motors that involves testing new car models called Rocinante36 and Marengo32 against their design specifications. It formulates null and alternative hypotheses, performs hypothesis tests on mileage and top speed, identifies which type of error would be more expensive, develops regression equations to predict sales, calculates predicted profits for each model, and determines which model to invest in based on predicted profits. It also analyzes how sales would be affected by a price increase and rebuilds the regression models removing insignificant variables, noting the change in adjusted R-square values.

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    The document discusses a project for Random Motors that involves testing new car models called Rocinante36 and Marengo32 against their design specifications. It formulates null and alternative hypotheses, performs hypothesis tests on mileage and top speed, identifies which type of error would be more expensive, develops regression equations to predict sales, calculates predicted profits for each model, and determines which model to invest in based on predicted profits. It also analyzes how sales would be affected by a price increase and rebuilds the regression models removing insignificant variables, noting the change in adjusted R-square values.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    45 views10 pages

    Random Motors Pooja Adhiya

    Uploaded by

    Pooja A
    The document discusses a project for Random Motors that involves testing new car models called Rocinante36 and Marengo32 against their design specifications. It formulates null and alternative hypotheses, performs hypothesis tests on mileage and top speed, identifies which type of error would be more expensive, develops regression equations to predict sales, calculates predicted profits for each model, and determines which model to invest in based on predicted profits. It also analyzes how sales would be affected by a price increase and rebuilds the regression models removing insignificant variables, noting the change in adjusted R-square values.

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    You are on page 1of 10

    Random Motors Project

    Submission
    Name – Pooja Adhiya
    Q-1a) Formulate the null hypotheses to check whether the new models are
    performing as per the desired design specifications.

    For Rocinante36: For Marengo32:

    Mileage HO : 22hm/ltr Mileage HO : 15hm/ltr

    Top speed HO : 140km/hr Top speed HO : 210km/hr


    Q-1b) Formulate the alternate hypotheses to check whether the new models are
    performing as per the desired design specifications.

    For Rocinante36: For Marengo32:

    Mileage H1 : Mileage is not equal Mileage H1 : Mileage is not equal


    to 22km/ltr to 15km/ltr

    Top speed H1 : Top speed is not Top speed H1 : Top speed is not
    equal to 140km/hr equal to 210km/hr
    Q-2) In order to comment on whether the design specifications are being
    matched or not, perform relevant hypothesis tests and calculate the p-value for
    each. What will you conclude? Assume you are performing the tests at 95%
    confidence level.
    For Rocinante36: Conclusion

    p-value for mileage = 0.0829


    p-value for top speed = 0.0829 If p-value = 0.05, reject Ho at
    confidence levels <95%
    For Marengo32:
    (1.0-0.05 = 0.95)
    p-value for mileage = 0.0829
    p-value for top speed = 0.373
    Q-3) You have learnt about the possible errors that might result from the
    hypothesis tests. What type of error is more expensive for Random motors
    based on the hypothesis they are testing? Why? Assume that you need to
    refund all your customers if your cars deviate from specifications.
    The type of error which is more Reason:
    expensive:

    Type 2 error for Rocinante and Type 2 error is committed when you
    Marengo fail to reject a null hypothesis that is
    actually false.
    Type 2 error occurs when a false null
    hypothesis is not rejected
    Q-4) Develop a regression equation for each model at 95 percent confidence
    level. From the regression equation predict the sales of the two models.
    Develop the regression equation for the Develop the regression equation for the
    Rocinante models and Predict the number Marengo models and Predict the number of
    of unit sales of Rocinante36 model? unit sales of Marengo32 model?

    Regression coefficients Regression coefficients

    Price: 0.795026441 (p-value <0.05) Price: -0.186728172 (p-value <0.05)

    Mileage: 0.795026441 (p-value <0.05) Mileage: 0.041301187 (p-value >0.05)

    Top speed: -0.018572564 (p-value >0.05) Top speed: 0.220801682 (p-value <0.05)

    Equation: Y=50.72312718 - 0.795026441 Equation: Y=-13.44764889-0.186728172 *41+


    *7+ 8.306331092 * 22 0.220801682 *210

    Predicted Sales(in units): 2,27,897 Predicted Sales(in units): 25.26485


    Q-5) Based on sales prediction, what is the overall predicted profit for
    Rocinante36 model and Marengo32 model ?

    Overall predicted profit

    Rocinante36 Model: 228 lacs

    Marengo32 Model: 202.1187 lacs


    Q-6) As a CEO, you wish to invest only in the model which is predicted to be
    more profitable. Which model among Rocinante36 and Marengo32 will you
    invest in?

    Which model you will invest in?

    As the predicted profit for Rocinante36 is 228 lacs, which is higher than the
    predicted profit of Marengo32, which is 202.1187 lacs, I will invest in
    Rocinante36.
    Q-7) Now you must have derived the regression equation for both models, Rocinante and
    Marengo. Now if you increase the price of Rocinante36 and Marengo32 by 1 lac rupees
    each, which car will have a higher impact on the sales due to increase in price? Give proper
    logic for your answer. You can consider that all other specifications such as mileage and top
    speed remain the same for both models.

    Which car is most affected by a price increase? Why?


    Rocinante36:
    Sales price – manufacturing cost
    = 8lacs – 6lacs = 2lacs
    Profit = 227*2 – 454lacs
    Marengo32:
    Sales price – manufacturing cost
    = 42lacs – 33lacs = 9lacs
    Profit = 25.26485*9 – 227.384lacs
    Hence, Rocinate36 will be most affected by price increase.
    Q-8) After developing the regression equation for both models (Rocinante and Marengo), if you
    analyse the p values for coefficients in the regression results, you will notice that some of the
    regression variables (top speed, mileage and price) are insignificant. Remove the insignificant
    regression variables from your selection and rebuild the regression model using only significant
    variables. Compare the Adjusted R square value for the new and old regression model. Do you
    notice any change in Adjusted R square value? If yes, explain the reason for the change.

    Is there a change on Adjusted R square Value? If so, Why?

    Adjusted R-square for Rocinante36 has decreased from


    0.995356039 to -0.007157597
    Adjusted R-square for Marengo32 has decreased from
    0.84787522 to -0.031719164
    Adjusted R-square value has decreased when the added variable is not
    improving the model.

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