Random Motors Project

Submission
AMIT RAUT
Q-1a) Formulate the null hypotheses to check whether the new models are
performing as per the desired design specifications.

Rocinante36: Marengo32:

Mileage Ho :
Mileage Ho :
Average Mileage of Rocinante36 (μ) = 22 Km/Liter
Average Mileage of Marengo (μ) = 15 km/Liter

Top speed Ho: Top speed Ho :

Top speed of Rosinante (μ) = 140 km/hr. Top speed of Marengo (μ) = 210 Km/hr.

If Random Motors selects Rosinante 36, it can claim If Random Motors selects Marengo 32, it can claim
that Rosinante 36 has a mileage of 22kmpl & top that Marengo 32 has a mileage of 15 kmpl & top
speed of 140 kmph speed of 210 kmph
Q-1b) Formulate the alternate hypotheses to check whether the new models
are performing as per the desired design specifications.

Rocinante36 Marengo32

Mileage Ha Mileage Ha
Average Mileage of Rocinante36 (μ) ≠ 22 km/liter Average Mileage of Marengo (μ) ≠ 15 km/liter

Top speed Ha Top speed Ha

Top speed of Rosinante (μ) ≠ 140 km/hr. Top speed of Marengo (μ) ≠ 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.
Rocinante36: Conclusion
After performing the two-tail t-test on the given sample
p-value for mileage = 0.082212 data we came to know that all the p values are greater
than 0.05 (95% Significance Interval) . Whenever this
p-value for top speed = 0.431567 condition occurs, we FAIL TO REJECT THE NULL
HYPOTHESIS. This also means that our claims are correct.
Marengo32:
We can confidently say the following about two models:
p-value for mileage = 0.134227 Rosinante : This car will deliver a mileage of 22 Km/liters
and a top speed of 140km/hr.
p-value for top speed = 0.372991 Marengo : This car will deliver a mileage of 15 Km/ liters
and a top speed of 210 Km/hr.
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 a Type II error occurs for either Rocinnante36 or
Marengo32 customers may rage out with frustrations of
Type II error is more expensive. Type II error occurs mileage and top speed not been delivered by random
when we fail to reject the null hypothesis (Ho) when it is motors.
false.
They may demand back their investments on the car. At
If a Type II error occurs in case of Random Motors, then some point of time the company may need to refund the
the mileage and top speed of proposed models will not money back to customers resulting in significant financial
deliver as per the said specifications. losses.

Overall, This can lead to a damaged reputation, reduced

revenue, and plenty of negative reviews.
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 unit
of unit sales of Rocinante36 model? sales of Marengo32 model?

Regression Values Variable Regression Values Variable

Coefficients Type Coefficients Type
Intercept 50.7231 Intercept -13.4476
Price -0.795 Significant Price -0.186 Significant
Mileage 8.3063 Significant Mileage 0.0413 Insignificant
Top Speed -0.0185 Insignificant Top Speed -0.2208 Significant

Equation: 50.7231 - 0.7950 * price + 8.3063 * mileage Equation: -13.44764+(-0.18672)*Price + 0.22080* Top Speed

Predicted Sales : 227897 Units Predicted Sales(in units): 25265 units

Q-5) Based on sales prediction, what is the overall predicted profit for
Rocinante36 model and Marengo32 model ?
Overall predicted profit
Rocinante36 Model:
Predicted Profit =Predicted Sales * (Price – Manufacturing cost)
Predicted Profit = 227897 * (7L -6L)
Predicted Profit in Lakhs = 227897 L
Predicted Profit in Crores = 2278.97 Cr
Predicted Profit in Rs = ₹ 2,27,89,671,000
Marengo32 Model:
Predicted Profit =Predicted Sales * (Price – Manufacturing cost)
Predicted Profit = 25265 *(41L -33L)
Predicted Profit = 202118 L
Predicted Profit in Crores = 2021.18 Cr
Predicted Profit in Rs = ₹ 2,02,11,879,200
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 per the validations from Question 5 , I will invest in Rocinante36 as this

specific model is more profitable compared to Marengo32
Car Model Earned Profit

Rocinante36 227897 L

Marengo 32 202118 L
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?

From Observation we conclude that Rocinante36 would be affected on the sales when we increase the price by 1
lakh . As shown on excel sheets it would get down sales of Rosinante 36 by around 795 units. The same price
increase causes Marengo 32 to go down in sales unit by 187 units. Negative coefficient shows if independent
variable increase then dependent variable decreases. Also, in this case price coefficient of Rosinante 36 is greater
than price coefficient of Marengo32

Car Model Original Units Units adding 1 Change in sales

Lakh unit
Rocinante36 227897 227102 -795

Marengo32 25265 25078 -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?

Adjusted R value Square shows a very minute trend of increase after removing
insignificant variable from equation. Removing insignificant variable show a model
improvement. This happens as we are removing the variance in the data by not
considering variable which is not contributing to model building.
Rosinante 36 Marengo 32

Old Adjusted R square 0.99536 0.84788

New Adjusted R square 0.99545 0.85309