Jensen Tire Auto is in the process of deciding whether to p

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). Develop the estimated regression equation that relates annual maintenance expense (in hundreds of dollars) to weekly usage hours (to 3 decimals). Expense = + weekly Usage 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 What is your conclusion 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)

Solution

y = 4.917+0.956x

b) H0: beta=0

Ha: Beta not 0

Two tailed test

F = MSM / MSE = (explained variance) / (unexplained variance)