Random Motors Project

Submission
Name –Dr. Mannam Sreedevi
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 = 22 Km/litre Mileage HO = 15 Km/litre

Top speed HO = 140 Km/hr Top speed HO = 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 ≠ 22 Km/litre Mileage H1 ≠ 15 Km/litre

Top speed H1 ≠ 140 Km/hr Top speed H1 ≠ 210/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

p-value for mileage = 0.0823

p-value for top speed =0.4315
For Marengo32:
p-value for mileage = 0.1354
p-value for top speed =0.373
From the Hypothesis test, since
P-Value > significance level (0.05) for
Rocinante 36 and Marengo32,
“we fail to reject the null hypothesis.”
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: Type 2 error is committed when you
fail to reject a null hypothesis that is
actually false.
Type 2 error for Rocinante
and Marengo If Random motors fail to meet the
specifications, it would be more
expensive as they need to refund the
money to customer.
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 Marengo
Rocinante models and Predict the number of models and Predict the number of unit sales of
unit sales of Rocinante36 model? Marengo32 model?

Regression coefficients: 50.72313 (intercept= β0)
Price : β1 = 0.79503 (P-Value <0.05)
Mileage: β2 = 8.30633 (P-Value <0.05)
Top speed: β3 = 0 (Since P-Value>0.05)
Equation:
Y (Sales) = 50.72313 - 0.7950*7 + 8.30633*22 +
0*140
Predicted Sales(in units): 227897
Regression coefficients: -13.44765 (Intercept = β0)
Price: β1 = -0.18673 (P-Value <0.05)
Mileage: β2 = 0 (Since P-Value >0.05)
Top speed: β3 = 0.22080 (P-Value <0.05)
Equation: Y (Sales)
-13.44765 - 0.18673 *41+ 0*15 +0.22080*210
Predicted Sales(in units): 25265

Note: Regression coefficients values are considered up to

Note: Regression coefficients values are considered up to
5 decimal points (refer excel sheet)
5 decimal (refer excel sheet)
Q-5) Based on sales prediction, what is the overall predicted profit for
Rocinante36 model and Marengo32 model ?
Overall predicted profit

Rocinante36 Model:
Overall predicted Profit = Sales * (Price-Manufactrung cost)
= 227897 * 7 Lakhs – 6 Lakhs
= 227897*1 = 227897 Lakhs
Marengo32 Model:
Overall predicted Profit = Sales * (Price-Manufactrung cost)
= 25265 * 41 Lakhs – 33 Lakhs
= 25265*8 = 20212 Lakhs
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?

• Predicated profit for Rocinante36 is 227897 lakhs which is more compared to

Marengo profit 202120 lakhs.

• So, I will invest in Rocinante36

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?

Though the sales are decreased after increasing the Price by 1 lakh for both Rocinante and Marengo,
Rocinante36 will still have the higher impact on sales due to increase in overall predicted profitability after
increasing price by 1 lakh.
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 Square Adjusted R Square Change
(Old Regression model) (New Regression model)
Rocinante32 0.99536 = 99.536% 0.99545 = 99.545% Slightly increased
Marengo36 0.84788 = 84.788% 0.85301 = 85.301 Marginally
Increased

After removing insignificant regression variable, adjusted R-square value

increased marginally. Increase in adjusted R-square value indicates that, the
removed independent insignificant variable is not improving the model.
THANK YOU