SUMMARY OUTPUT

Regression Statistics
Multiple R
R Square
Adjusted R Square
Standard Error
Observations

0.931468903
0.867634318
0.855225035 If the Adjusted R squre in decreasing with the addition of a variable then t
4153.770855
36

ANOVA
df
Regression
Residual
Total

3
32
35

SS
MS
F
Significance F
3619064866 1.21E+09 69.91816842 3.84E-14
552121994.1 17253812
4171186860

Coefficients
Standard Error
t Stat
P-value
Lower 95%
-1292.518556
11842.92945 -0.10914 0.913774235 -25415.8
43.57264654
3.629219357 12.00607 2.16354E-13 36.18017
883.9995737
83.15073842 10.63129 4.96484E-12 714.6271
62.56808263
115.7174928 0.540697 0.592460622 -173.141

Intercept
Machine Hours
Batches
Attendance

RESIDUAL OUTPUT
Observation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Predicted Overhead Cost
98988.60293
85483.89809
92316.45563
82264.42281
100324.7233
107411.2358
115353.2529
75508.01215
104568.8617
88082.77892
106951.6134
96689.71433
104724.673
99366.62052
101325.1602
112780.2166
111286.9019
90400.27066
97178.04261
108331.6286

Residuals
809.3970697
2320.10191
1364.544367
-2.422813371
6643.276651
513.7641725
1933.747144
1359.987853
1432.138274
655.2210812
-1121.613359
-7959.714326
-4100.672951
-509.6205216
1296.839818
-4721.216597
-1232.901859
1491.729342
1514.957392
2198.37135

21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

98204.9765
95344.37893
98265.99636
102463.7959
91537.72977
83108.81321
117174.2335
95683.57998
101188.6953
97938.87526
84887.97591
95455.06928
113447.22
110291.6959
92489.31373
112640.5645

-1321.9765
4248.621074
-3701.996357
3288.204102
1686.27023
-7710.813212
-4037.233482
-10074.57998
-2690.695336
3864.124737
3483.024092
6963.930722
3735.780043
-2463.695857
-4457.313728
5302.435457

0% Upper 95.96512 1053.74 -25415.18017 50.141 298.8 22830.372 298. ignificance F Upper 95%Lower 95.6271 1053.0% 22830.96512 36.2769 -173.74 50.e addition of a variable then the added variable is harming your model and you should eliminate it.2769 .372 714.

6114E-12 Intercept Machine Hours Batches RESIDUAL OUTPUT Observation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Predicted Overhead Cost 98391.365084 2804.45145 101603.4046174 -166.4514511 1018.SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.60458248 2353.688967 -4741.866425021 0.549170949 43.53639812 3.756845 -606.0261279 557166199.59538 82428.649409 2281.99309 36 ANOVA df Regression Residual Total 2 33 35 SS MS F 3614020661 1807010330 107.85237 Residuals 1406.6179252 82.09201 100227.930819542 0.678209 6603.12887472 1.1 16883824.35059 85522.74289124 2.605222512 0.115584 -7866.8523694 .575934 951.666779 957.9028 107869.5759 90940.9495609 1980.1888 111055.52769 1750.188802 -1001.3677 88553.0920107 6740.13407 104910.858329567 4108.22 4171186860 Coefficients Standard Error t Stat P-value 3996.25140753 10.63492 107725.83418 107350.05044 96712.1156 96596.4723 75117.5894837 12.097234 55.04645E-13 883.8963 97610.33322 92723.62525 105066.311 112800.865928 1090.10374 -727.650932 0.62525 -4442.1658179 -1520.7568 99463.632275 184.3954 114933.

087872 3629.1465 112227.6396 4279.38076 -4497.683607 1153.15629 97794.176373 -10541.73098 102930.6428 98155.910818 -2108.54941 82713.3164 92070.835 95609.22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 95313.91213 84741.843712 -3230.360447 .519545 -3990.0892 109936.08087 101277.38076 117634.08087 -2779.450589 -7315.146503 5715.64283 3647.88762 113279.165001 6809.1764 96150.112379 3903.5195 92022.730981 2821.

0% Upper 95.75374E-15 Lower 95% -9438.23353862 50.83925761 36.90705 -9438.959672 716.Significance F 3.2761784 1050.959672 .550632 17431.2761784 Upper 95% Lower 95.23353862 716.90705 50.0% 17431.550632 36.83925761 1050.

and these variables. Here is data from the past 3 years. G H If a relationship can be found between Overhead cost. and some adjustments are made) 3. when the production plan is firmed up. the machines stop working. then Hansa can choose to cut down on some discretionary expenditure.1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 A B C D E F Hansa is the production manager at a pharma company. Average attendance % of workers She has information about the first two around the start of the month. Can you help Hansa find a solution? Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Machine Hours 1539 1284 1490 1355 1500 1777 1716 1045 1364 1516 1623 1376 1327 1178 1491 1667 1769 1104 1196 1794 1379 1448 1505 1420 1475 1118 1433 1589 1585 1493 1124 1536 1678 1723 1413 1390 Batches 31 29 27 22 35 30 41 29 47 21 37 37 49 50 37 41 34 44 46 29 38 32 32 42 27 34 58 26 32 33 36 28 41 35 30 54 Attendance 93 83 77 81 85 76 90 90 78 76 77 85 78 82 79 83 87 75 91 93 93 84 91 76 75 90 76 76 82 80 86 81 86 89 91 90 Overhead Cost 99798 87804 93681 82262 106968 107925 117287 76868 106001 88738 105830 88730 100624 98857 102622 108059 110054 91892 98693 110530 96883 99593 94564 105752 93224 75398 113137 85609 98498 101803 88371 102419 117183 107828 88032 117943 Predicted SOLUTION: Overhead Predicted = 3997 + 43 (Machine Hours) + 883 (Batches) Only m/c hrs m/c & Batch All Three cost predicted = 48621+(m/c Hrs)*34. AFTER the month is over. The accounts department gives her overhead cost numbers. so that the current months Overhead cost is under control. The number of hours for which the machines have run in the factory 2. She believes the O/H costs may be related to two variables: 1.536(m/c hours)+883. One of her KPI's is keeping the overhead costs under control.7 Predicted Cost = 3996.678 + 43. By then. The number of batches of tablets produced. it is too late to do anything. (After each batch. To take pre-emptive action. she wants to predict the Overhead cost before the month is over.618(Batches) Pedicted Cost = -1292+43.5*attendace .57*m/c hrs+884*batches+62.

CORREL function tells u Close to zero means ver Close to +1 means high Close to -1 means high n Overhead vs Machine Hours 130000 120000 110000 100000 Correlation 90000 Series1 80000 70000 60000 1000 1200 1400 1600 1800 2000 Overhead vs Batches Correlation 130000 120000 110000 100000 90000 Series1 80000 70000 60000 15 25 35 45 55 65 Overhead vs Attendance 130000 120000 110000 100000 Correlation .

100000 90000 Series1 80000 70000 60000 70 75 80 85 90 95 .

CORREL function tells us correlation Close to zero means very little correlation Close to +1 means high positive correlation Close to -1 means high negative correlation Correlation 0.01823866 .52054353 Correlation 0.63188453 Correlation 0.

Also… t-value is larger than 3 Also… the confidence interval does not include zero . Std Error of estimate (=4108) indicates that 2/3 of predicted costs will fall within plus -minus 4108 of ac 95% of predicted costs will fall within plus-minus 8216 of actua Estimation of population's regression equation: Machine Hours and Batches are both significant explainers.8583 Mean of squares 1807010330 16883824.536 883.8664 Degrees of freedom Sum of squares 2 3614020661 33 557166199.22 t-value 0.618 Standard Error 6603.1289 10.536 (Machine Hours) + 883.7429 Our conclusions Predicted Cost=3996.678 + 43.589 82.9308 R-square 0.86 indicates that a majority of the variance in Cost is explained by these two variables.618 (Batches) R-square of 0.251 Adjusted R-square 0.Summary ANOVA Table Explained Unexplained Regression Table Constant Machine Hours Batches Multiple R 0. because… p-value is smaller than 10%.651 3.678 43.1 Coefficient 3996.6052 12.

5492 <0.551 17431.StErr of estimate 4108.0001 p-value <0.234 50.0001 <0. all within plus-minus 8216 of actual cost .0001 Confidence interval 95% Lower Upper -9438.96 xplained by these two variables.993 F-Ratio 107. ll fall within plus -minus 4108 of actual costs.0261 p-value 0.276 1050.907 36.839 716.

6401 16310.1834119 .748277 18 ANOVA df Regression Residual Total 3 14 17 SS MS 126939063.817392 -2.983561433 352.733593 -494.129542 12172.88158 16814.839034 1800.64014 17219.10968 9395.01438 16000.6 42313021 1742038.015684223 6.47567636 743.5364867 9.88494 12708.4794887 266.5 Coefficients Standard Error t Stat -4880.4333299 9.51844485 -81.33395 16771.42528 15458.67785 17463.24103189 76.26641 14938.47949 12913.71035 0.42527873 -173.102088211 0.8461462 46.8849402 228.986462357 0.SUMMARY OUTPUT Regression Statistics Multiple R R Square Adjusted R Square Standard Error Observations 0.8815805 343.15385 12825.10968493 319.93753637 12.36433 Intercept Population Advertising Previous_Advertising RESIDUAL OUTPUT Observation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Predicted Sales 16083.84992192 27.29931 15890.52432 19606.0143828 -380.6660549 -60.8704577 75.3598625 -20.11903 269.508975 120.35990062 -83.81659 Residuals -370.24103 20597.29930731 -502.3 128681102.48156 13937.993208114 0.677853 66.857 124431.

23941E-09 99.11943 141.6625 248.0% 0.0% Upper 95.135728 0.7472 1.7472 99.6625 .0511387 2.6E-13 P-value Lower 95% Upper 95%Lower 95.068449 0.47 1.21 -1018.4105 290.47 -8743.135728 8.38122E-05 0.4105 290.21 -1018.11943 141.48129E-13 248.068449 0.F Significance F 340.016910427 -8743.

81112 6.43354 13541.8026462 Observations 18 ANOVA df Regression Residual Total SS MS F Significance F 2 1.1015 3.3691 302.8653 16290.332 117.74772 261.9311 523.945494787 Adjusted R Square 0.0059 Residuals -1165.7984 76.164 17336.7887 322.10569 13541.61207 15255.997 526.1653 221.3879 364.3938 551.3691 Intercept Advertising Previous_Advertising RESIDUAL OUTPUT Observation 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Predicted Sales 16878.3569 -406.34E-10 15 7013791 467586.118837 1.7672155 18.97092 13672.25574 1.22E+08 60833656 130.03E-08 5407.332 7933.7321 853.49354 592.24762 6.164 193.994 .64308 14850.74772 158.972365562 R Square 0.731 130.2695 289.19E-10 221.0% 6670.434 -669.97 -735.96E-05 76.06886 13332.92538 16015.73053 16421.865 -902.655 5407.1 17 1.606168 11696.29E+08 Coefficients Standard Error t Stat P-value Lower 95% Upper 95%Lower 95.0746 1142.00295 14758.32792 16747.7730459 19.21131 9392.328 -137.106 -361.938227425 Standard Error 683.6303 11.SUMMARY OUTPUT Regression Statistics Multiple R 0.73053 20543.26792 19496.32792 17336.328 -520.95336 13.

7984 302.655 158.Upper 95.0% 7933.1653 .

916 18 16287.303 12514.43 15 15427.658394 -0.63 11 17385.36 7 17265.63 -1350.18656 0.01 -1571.09632 2.262386 Adjusted R Square 0.464 2 13687.719 9 14933.494108 0.050079 0.22 5416.6 -66.8 0.512236 R Square 0.42 870.102028 15 94917028 6327802 17 1.288466 0.4131 70.111 3 15419.6579 12 12683.18656 160.99 1462.476 13 13741.111023 0.52 4027.19 -2547.28 2566.628387 -20489.165 17 15949.00629 309.5819 .44 -20489.43 -2335.34 144.29E+08 Coefficients Standard Error t Stat P-value Lower 95% Upper 95%Lower 95.8198 11.21 14 14583.164037 Standard Error 2515.01 16 15613.05 -86.014 6 15462.776 10 15794.03704 11.6039 8 18107.512 Observations 18 ANOVA df Regression Residual Total Intercept Population Advertising SS MS F Significance F 2 33764074 16882037 2.667915 0.451067 0.8 32856.54 1185.21 -4026.0% 6183.16 -328.11 -750.92 -329.0521 5 13925.19 4 16313.286718 -0.36 -2282.00629 RESIDUAL OUTPUT Observation Predicted SalesResiduals 1 14527.08 0.SUMMARY OUTPUT Regression Statistics Multiple R 0.

286718 309.8198 .44 0.0% 32856.Upper 95.

00 26.00 15.00 35.00 104347.00 12.Can you predict sales of a restaurant in its 19th year? Data on Sales and Other Potentially Relevant Variables for a Particular Restaurant are below.00 111576.00 40.00 25.00 19 ??????? Population 102558.00 14 12248.00 111844.00 35.00 117830.00 5.00 28.00 16 15285.00 106562.00 30.00 20.00 109185.00 15.00 117316.00 35.00 2 12937.00 16.00 25.00 21.00 15.00 11 17530.00 Advertising Previous_Advertising 20.00 106180.00 105209.00 15 13856.00 121069.00 10 14444.00 22.00 16.00 25.00 25.00 109976.00 25.00 12.00 20.00 15.00 113784.00 118148.00 18 17158.00 8 20674.00 7 17199.00 12 16711.00 5 15388.00 101792.00 30.00 6 13180.00 24.00 9 20350.00 26.00 25.00 40.00 35. Year Sales 1 15713.00 116487.00 13 9715.00 24.00 112482.00 118481.00 17 15620.00 5.00 .00 30.00 3 12872.00 110659.00 20.00 4 16227.00 21.00 22.

88144 16814.42514 15458.26628 14938.129402 12172.48141 13937.33381 16771.5242 19606.a Particular Restaurant are below.63997 16310.64001 17219.88482 12708.67772 17463.839+0.81645 17858.47936 12913.10208821*(Population)+120. Estimated 16083.10955 9395.4333*(Advertising .29918 15890.96037 Ans Estimated Sales = -4880.01424 16000.2409 20597.15373 12825.

536487*(Advertising orv yr) .4333*(Advertising this yr)+269.opulation)+120.

. a non-linear relationship exists between In such cases.Month Cost 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Units 45623 46507 43343 46495 47317 41172 43974 44290 29297 47244 43185 42658 39178 41198 43505 35805 39181 40248 28157 34761 45148 33447 45686 45296 37179 41199 31259 37705 42757 47332 44914 46105 45972 46295 45218 45357 601 738 686 736 756 498 828 671 305 637 499 578 641 452 674 475 536 527 275 495 568 418 694 653 471 669 298 399 549 863 764 800 609 667 705 637 55000 50000 45000 40000 35000 30000 25000 0 200 400 0 200 400 50000 45000 40000 35000 30000 25000 Conclusion: Sometimes. we do non-linear regression.

(Units) 400 600 800 1000 on-linear relationship exists between two things. . e do non-linear regression.7359 Units Linear (Units) 400 600 800 1000 Units vs Cost y = -0.Units vs Cost y = 30.533x + 23651 R² = 0.06x2 + 98.35x + 5792.8216 Units Poly.8 R² = 0.

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