Random Motors Project
Submission
Name - AAKASH GERA
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 :Mean = 22 km/litre Mileage HO :Mean = 15 km/litre
Top speed HO :Mean = 140 km/hr Top speed HO :Mean = 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 :Mean μ ≠ 22 km/litre Mileage H1 :Mean μ ≠ 15 km/litre
Top speed H1 :Mean μ ≠ 140 Top speed H1 :Mean μ ≠ 210
km/hr 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
• Assuming significance level of 0.05 at a confidence
p-value for mileage = 0.082 level of 95%.we fail to reject null hypothesis of any
specification promised by the company
p-value for top speed = 0.431
Results are
For Marengo32: p(0.082) > 0.05 fail to reject H0 (Rocinante36 mil)
p(0.431) > 0.05 fail to reject H0 (Rocinante36 [Link])
p-value for mileage = 0.134 p(0.134) > 0.05 fail to reject H0 (Marengo32 mil)
p-value for top speed = 0.373 p(0.373) > 0.05 fail to reject H0 (Marengo32 [Link])
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:
In all the 4 scenarios we have
Type 2 Error is more Expensive (Type 1)Company will go with more R&D and its costing
(Type 2)Company will loose trust and value, also will
need to refund all the customers
Hence Type 2 error is more expensive
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: (in lakh) -0.795026441 Price: (in lakh) -0.186728172
Mileage: (in km/ltr) 8.306331092 Mileage: (in km/ltr) 0.041301187
Top speed: (in km/h) -0.018572564 Top speed: (in km/h) 0.220801682
Equation:Sales = 50.7231271792463 - Equation:Sales = -13.4476488883451 -0.186728172116573*
0.795026440875324* Price + 8.30633109237939 *Mileage Price + 0.22080168203862 *Top Speed
Predicted Sales(in units): 227897.226 Predicted Sales(in units):25264.849
Q-5) Based on sales prediction, what is the overall predicted profit for
Rocinante36 model and Marengo32 model ?
Overall predicted profit
Rocinante36 Model: (in lakh) 227897.2261
Marengo32 Model: (in lakh) 202118.7943
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?
Looking at profit our company should invest in Rocinante
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?
Due to huge price sensitivity and reg coeff. of price in Rocinante (-0.795)has
higher negative impact than reg coeff. of price in marengo(-0.186) Hence
Drop in big number of sales
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?
Parameter All variables Significant variables
Rocinante Adjusted R Square 0.995356039 0.995447556
Marengo Adjusted R Square 0.84787522 0.853091209
Rocinante:-Adj r square increased since removed variable(top speed) is insignificant
Marengo:-Adj r square increased since removed variable(millege) is insignificant