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    Random Motors Presentation Ganesh Misra

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    Ganesh Misra
    This document contains Ganesh Misra's submission for the Random Motors Project. It includes forming null and alternative hypotheses to test if two new car models, Rocinante36 and Marengo32, meet design specifications for mileage and top speed. Hypothesis tests are performed and p-values are calculated. Regression equations are developed to predict sales for each model, and the Rocinante36 is predicted to be more profitable. The impact of a price increase on each model is considered, with Rocinante36 expected to see a larger drop in sales. Insignificant variables are removed from the regression models, slightly increasing the adjusted R-squared values.

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    Random Motors Presentation Ganesh Misra

    Uploaded by

    Ganesh Misra
    1K views10 pages
    This document contains Ganesh Misra's submission for the Random Motors Project. It includes forming null and alternative hypotheses to test if two new car models, Rocinante36 and Marengo32, meet design specifications for mileage and top speed. Hypothesis tests are performed and p-values are calculated. Regression equations are developed to predict sales for each model, and the Rocinante36 is predicted to be more profitable. The impact of a price increase on each model is considered, with Rocinante36 expected to see a larger drop in sales. Insignificant variables are removed from the regression models, slightly increasing the adjusted R-squared values.

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    Random Motors

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    This document contains Ganesh Misra's submission for the Random Motors Project. It includes forming null and alternative hypotheses to test if two new car models, Rocinante36 and Marengo32, meet design specifications for mileage and top speed. Hypothesis tests are performed and p-values are calculated. Regression equations are developed to predict sales for each model, and the Rocinante36 is predicted to be more profitable. The impact of a price increase on each model is considered, with Rocinante36 expected to see a larger drop in sales. Insignificant variables are removed from the regression models, slightly increasing the adjusted R-squared values.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    1K views10 pages

    Random Motors Presentation Ganesh Misra

    Uploaded by

    Ganesh Misra
    This document contains Ganesh Misra's submission for the Random Motors Project. It includes forming null and alternative hypotheses to test if two new car models, Rocinante36 and Marengo32, meet design specifications for mileage and top speed. Hypothesis tests are performed and p-values are calculated. Regression equations are developed to predict sales for each model, and the Rocinante36 is predicted to be more profitable. The impact of a price increase on each model is considered, with Rocinante36 expected to see a larger drop in sales. Insignificant variables are removed from the regression models, slightly increasing the adjusted R-squared values.

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    Random Motors Project

    Submission
    GANESH MISRA
    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/hr Top speed HO : = 210km/ltr


    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 : ≠ 22km/ltr Mileage H1 : ≠ 15km/ltr

    Top speed H1 : ≠ 140 km/hr Top speed H1 : ≠ 210 km/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
    Rocinante36: Since P values are greater than
    p-value for mileage = 0.082
    0.05, hence at 95% confidence level, we 'Fail to
    p-value for top speed = 0.432 reject' null hypothesis of Mileage and Top Speed
    (H0=22km/litre and H0=140km/hr)
    For Marengo32:
    Marengo32: Since P values are greater than
    0.05, hence at 95% confidence level, we 'Fail to
    p-value for mileage = 0.134 reject' null hypothesis of Mileage and Top Speed
    (H0=15km/litre and H0=210km/hr)
    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:
    If mileage is less than 22 km/ltr but based on In situation of ‘Type 2 error’, Random Motors
    calculations, we ‘Fail to reject’ null hypothesis will manufacture cars which are not meeting the
    (HO : = 22km/ltr). This will be a ‘Type 2 error’ claims of mileage and it will create bad
    impression which will be a loss to its reputation.
    A ‘Type 2 error’ will be more expensive, where Also, once the cars are on the road, customers
    we ‘Fail to reject’ null hypothesis and will raise lot of complaints which will result in
    manufacture vehicles which are giving less than losses by giving refunds.
    22km/ltr mileage.
    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: - 0.7950 Price: - 0.1867

    Mileage: 8.3063 Mileage: 0.04130

    Top speed: - 0.0185 Top speed: 0.2208

    Equation: Sales = 50.723 - 0.795*PRICE + 8.306*MILEAGE Equation: Sales = -13.448 - 0.1.87*PRICE + 0.221*TOP SPEED

    Predicted Sales(in units): 227.890 Units Predicted Sales(in units): 25.295 Units
    Q-5) Based on sales prediction, what is the overall predicted profit for
    Rocinante36 model and Marengo32 model ?

    Overall predicted profit

    Rocinante36 Model: Rs 2,27,89,000.00

    Marengo32 Model: Rs 2,02,36,000.00


    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?

    In my opinion, I will invest in manufacturing of Rocinante36 car models.

    Reason: Rocinante36 showed opportunity of more profits compared to Marengo32


    car model. As per predications I found that there is a difference of Rs 25,53,000
    between profits of Rocinante36 and Marengo32.
    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:
    Equation: Sales = 50.723 - 0.795*PRICE + 8.306*MILEAGE
    Estimated Sales at Rs 7 lakhs price = 227.890 units
    Estimated Sales at Rs 8 lakhs price = 227.095 units
    Marendo32:
    Equation: Sales = -13.448 - 0.1.87*PRICE + 0.220*TOP SPEED
    Estimated Sales at Rs 41 lakhs price = 25.295 units
    Estimated Sales at Rs 42 lakhs price = 25.108 units

    Comments: If we increase the prices of both the models by Rs 1 lakh, the drop in number of units for Rocinante36 is
    of 0.795 units. Whereas the drop in number of units for Marengo32 is just 0.187 units. Therefore, increase of Rs
    1lakh will have negative/higher impact on sales of Rocinante36 car model.
    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?

    Rocinante36: In this model, TOP SPEED is an ‘Insignificant’ variable and if we remove it and rebuild the regression model, we
    see very minor difference between the old and new R and Adjusted R square values. (Displayed in the table below). Saw slight
    increase in Adjusted R square value which states that there was very slight or negligible effect on overall regression analysis.

    Marengo32: In this model, MILEAGE is an ‘Insignificant’ variable and if we remove it and rebuild the regression model, we see
    very minor difference between the old and new R and Adjusted R square values. (Displayed in the table below). Saw slight
    increase in Adjusted R square value which states that there was very slight or negligible effect on overall regression analysis.

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