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The document discusses hypothesis testing performed on two new car models, Rocinante36 and Marengo32, to determine if they meet design specifications for mileage and top speed. Calculations are shown for p-values and it is concluded that neither model shows enough evidence to reject the null hypotheses that specifications are being met. Sales predictions using regression analysis are also provided, showing Rocinante36 is expected to be more profitable.

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35 views10 pages

Project Template

The document discusses hypothesis testing performed on two new car models, Rocinante36 and Marengo32, to determine if they meet design specifications for mileage and top speed. Calculations are shown for p-values and it is concluded that neither model shows enough evidence to reject the null hypotheses that specifications are being met. Sales predictions using regression analysis are also provided, showing Rocinante36 is expected to be more profitable.

Uploaded by

sukhvindertaak
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Random Motors Project

Submission
Name – Sukhvinder Kaur
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 : The average mileage Mileage HO : The average mileage


of Rocinante36 = 22 km/litre of Marengo32 = 15 km/litre

Top speed HO : The average top Top speed HO : The average top
speed of Rocinante36 = 140 km/hr speed of Marengo32 = 210 km/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 : The average mileage Mileage H1 : The average mileage


of Rocinante36 ≠ 22 km/litre of Marengo32 ≠ 15 km/litre

Top speed H1 : The average top Top speed H1 : The average top
speed of Rocinante36 ≠ 140 km/hr speed of Marengo32 ≠ 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
In Hypothesis Testing, simple rule follow while using
p-value for mileage = 0.0822 P-value method.
p-value for top speed = 0.4316
If the P-value > α or significance level (1-confidence
level), then we fail to reject the null hypothesis.
For Marengo32:
As you can see, the P-values of mileage and top
speed of both models Rocinante36 and Marengo32
p-value for mileage = 0.1342 is greater than our significance value of 5% or 0.05,
p-value for top speed = 0.3730 hence our result is not statistically significant, there
is not enough evidence to reject the null hypothesis.
Thus, we accept the Chief Engineer claim.
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:
In this case, the null hypothesis is that the average mileage
expensive: and top speed of both models Rocinante36 and Marengo32
meet the promised specifications. If we fail to reject this
hypothesis when it is false, it means that we will ship cars to
Type-2 error is more expense for customers that do not meet their expectations.
Random Motors.
• This will result in refunds, which can be very costly for the
Type 2 error occurs when we fail to company.
• It can damage Random Motors' brand reputation and make
reject a false null hypothesis. it more difficult to attract and retain customers in the
future, which will further affect future sales and revenue.
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: 0.0413

Top speed: -0.0186 Top speed: 0.2208

Equation: 50.7231+(-0.7950*Price)+ (8.3063 Equation: -13.4476+(-0.1867*Price)+(0.2208*


*Mileage) Top speed)

Predicted Sales(in units): 227897 Predicted Sales(in units): 25266


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

Rocinante36 Model: ₹2278.97 in Crores

Marengo32 Model: ₹2021.26 in Crores

Rocinante36 will generate ₹257.71 cores more profit as compared to


Marengo32.
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 a CEO, will invest in Rocinante36, as it will be more profitable than


Marengo32.
The Rocinante36 model predicted a 12.75% increase in overall profit
compared to the Marengo32 model. This suggests that the changes made in
the model, have led to a better understanding of the factors influencing
profit.
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?


Price is the significant variable in both models and change in price will impact the price
coefficient values of both models. If we increase the price by 1 lac rupees, the sales of
both models decreases. Rocinante36 decrease by 795 units and Marengo32 decrease
by 187units, hence, based on the reduce units we can conclude that the Rocinante36
will be impacted the most.
Rocinante36 Marengo32
New Predicted Sales 227102 25079
Old Predicted Sales 227897 25266
Unit Difference -795 -187
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?

As we remove the insignificant variables from Regression analysis of both models, we


observe there is slight increase in the adjusted R-Square value.

Rocinante36 All Variables Significant Variables


Adjusted R Square 0.99536 0.99545
Marengo32
Adjusted R Square 0.84788 0.85309

Since there is minimal change in the adjusted R-square value, we conclude that the
insignificant variable slightly or does not affect the sales of cars.

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