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Math · Statistics And Probability
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Module 8 Question 13: 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 following information on weekly usage (hours) and annual maintenance expense (in hundreds of dollars).

Weekly Usage
(hours)
Annual
Maintenance Expense
16 23
13 28
23 36
31 43
35 53
20 37
27 39
34 45
43 58
41 46

a. Develop the estimated regression equation that relates annual maintenance expense (in hundreds of dollars) to weekly usage hours (to 3 decimals).

Expense = ___ + ___ Weekly Usage

b. Test the significance of the relationship in part (a) at a .05 level of significance.

-Compute the value of the F test statistic (to 2 decimals).

-The p value is -less than .01 or between .01 and .025 or between .025 and .05 or between .05 and .10 or greater than .10?

-What is your conclusion?

c. Jensen expects the new machine to be used 30 hours per week. What is the expected annual maintenance expense in hundreds of dollars (to 2 decimals)?

Develop a 95% prediction interval for the company's annual maintenance expense for this machine (to 2 decimals).
( ___ , ___ )

d. If the maintenance contract costs $3000 per year, would you recommend purchasing the contract for the new machine in part (c)?

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