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Random Motors Project Submission: Name - Avanish Pratap Pauli

The document discusses a project for Random Motors that involves testing new car models, Rocinante36 and Marengo32, against their design specifications. It formulates null and alternative hypotheses to test mileage and top speed, performs hypothesis tests and reports p-values, discusses the risks of different error types, develops regression equations to predict sales, calculates predicted profits for each model, and considers the effects of price increases on sales and profits. The CEO is advised to invest in Rocinante36 since it has higher predicted profits. Adjusted R-square values decrease when insignificant variables are removed from the regression models.

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867 views

Random Motors Project Submission: Name - Avanish Pratap Pauli

The document discusses a project for Random Motors that involves testing new car models, Rocinante36 and Marengo32, against their design specifications. It formulates null and alternative hypotheses to test mileage and top speed, performs hypothesis tests and reports p-values, discusses the risks of different error types, develops regression equations to predict sales, calculates predicted profits for each model, and considers the effects of price increases on sales and profits. The CEO is advised to invest in Rocinante36 since it has higher predicted profits. Adjusted R-square values decrease when insignificant variables are removed from the regression models.

Uploaded by

avanish pratap
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Random Motors Project

Submission
Name -
AVANISH PRATAP PAULI
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 : 22km/ltr Mileage HO :15km/ltr

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


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 :car mileage not equal Mileage H1 :car mileage not equal
22km/ltr 15km/ltr

Top speed H1 :top speed not equal Top speed H1 :top speed not equal
to 140km/hr too 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 If p-value =0.05


p-value for top speed =0.0829 Reject Ho at confidence level lesser
than 95%
For Marengo32: (1-0.05=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 hypoteseis 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 Marengo
Rocinante models and Predict the number of models and Predict the number of unit sales of
unit sales of Rocinante36 model? Marengo32 model?

Regression coefficients:50.72312718 Regression coefficients:-13.44764889

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*7 + Equation: Y=-13.44764889-


8.306331092*22 0.186728172*41+0.220801682*210

Predicted Sales(in units):227897 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: 228lacs

Marengo32 Model: 202.1187lacs


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 Rocinante is 228 lacs is more compared to Marengo
is 202.148 lacs
So I will invest where I get more profit that is rocinante 36(228lacs)
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-manufactured cost
8 lacs -6lacs =2lacs
Profit 227*2=454lac
Marengo32
42-33=9
Profit 25.26485*8=227.383lacs
Racinante36 will still have the higher impact on sales as manufactured cost is
not changing and the top speed and mileage is still the same
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-sq for Rocinante has decreased from 0.995356039 to -
0.007157597.
Adjusted R-sq for Rocinante has decreased from 0.84787522 to -0.031719164

Adjusted R-sq value has decreased when the added variable is not improving
the model.

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