Problem 1:

So by summary output we can say that, Family Sedan causes 0.118923077 more cost/mile than
Small Sedan and Upscale sedan causes 0.23025641 more cost/mile that small sedan.
For Small Sedan, Y (Cost/Mile) = 0.523
For Family Sedan, Y (Cost/Mile) = 0.523076923 + 0.118923077 = 0.642
For Upscale Sedan, Y (Cost/Mile) = 0.523076923 + 0.23025641 = 0.753

Estimated regression equation:

Y = 1.370958672 + (-2.265880553) Cost/Mile + 0.011133265 Road-Test Score + 0.166209912
Predicted Reliability + 0.022778289 Family Sedan + 0.068110502 Upscale Sedan.
Using 0.5 level of significance, we can say that Size (Small, Family, Upscale) is not significant.

Variables
Cost/Mile
Road-Test Score
Predicted Reliability
Family Sedan
Upscale Sedan

P-value
1.20027E-15
4.22267E-11
8.55419E-21
0.55159251
0.210839972

Significance
< 0.5
< 0.5
< 0.5
> 0.5
> 0.5

The new regression equation:

Y = 1.244429083 + (-2.043251067) Cost/Mile + 0.011377003 Road-Test Score + 0.165103629
Predicted Reliability.

Variables
Intercept
Cost/Mile
Road-Test Score
Predicted Reliability
Family Sedan
Upscale Sedan

Coefficients
1.370958672
-2.265880553
0.011133265
0.166209912
0.022778289
0.068110502

By Coefficient, we can say that Upscale cars provide better value compare to Small car.
For Small Sedan, Y (Cost/Mile) = 1.370958672 + (-2.265880553) Cost/Mile + 0.011133265 RoadTest Score + 0.166209912 Predicted Reliability
For Family Sedan, Y (Cost/Mile) = (1.370958672 + 0.022778289) + (-2.265880553) Cost/Mile +
0.011133265 Road-Test Score + 0.166209912 Predicted Reliability
For Upscale Sedan, Y (Cost/Mile) = (1.370958672+0.068110502) + (-2.265880553) Cost/Mile +
0.011133265 Road-Test Score + 0.166209912 Predicted Reliability
Regression equation to predict Value Score by using Road-Test score:
Y = 0.902037519 + 0.005782726 Road-Test Score
Ra2 = 0.0191267259306344

F Statistics = 2.03348363251656 (P- Value = 0.15984362452677 > 0.05)

Regression equation to predict Value Score by using Predicted Reliability
Y = 0.762932961 + 0.173324022 Predicted Reliability
Ra2 = 0.403072283382843
F Statistics = 36.787969673038 (P- Value = 0.000000151818680561319 < 0.05)
Conclusions: Predicted Reliability is a significant factor to predict the overall Value Score of the
cars. And the model using predicted reliability is also useful in prediction of Value Score.

Problem 2:
Regression Equation:
P(1) = exp(Y')/(1 + exp(Y'))
Y' = -2.146 + 0.342 Spending + 1.099 Card
Probability of using coupon with Annual Spending
Spending ($)
1000
2000
3000
4000
5000
6000
7000
1000
2000
3000
4000
5000
6000
7000

Value
-1.804
-1.462
-1.12
-0.778
-0.436
-0.094
0.248
-0.705
-0.363
-0.021
0.321
0.663
1.005
1.347

Probabili
ty
0.14
0.19
0.25
0.31
0.39
0.48
0.56
0.33
0.41
0.49
0.58
0.66
0.73
0.79

Car
d
NO
NO
NO
NO
NO
NO
NO
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Strategy >
0.40
Dont Send
Dont Send
Dont Send
Dont Send
Dont Send
Send
Send
Dont Send
Send
Send
Send
Send
Send
Send

For probability 0.40, the Y' value would be = ln (.0.40/ (1-0.40)) = - 0.405465
So after putting -0.405465 in the equation we get,
= (-0.405465 +2.146)/0.342 = 5089.28 (Without Card)
= (-0.405465 +2.146 1.099)/0.342 = 1875.83 (With Card)
Strategy:
With card the customer has to have a spending of minimum $ 1875.83 and above and without
card the customer has to have a spending of minimum $ 5089.28 an above to become eligible to
receive the coupon.

Problem 3:

problem 3
a)
Carlson Department Store had there been no hurricane
Equation
Y (t) = 2.1478 + 0.01140t
Seasonal Index
0.967
January
68
Februar 0.805
y
11
0.907
March
2
0.951
April
29
1.012
May
12
0.947
June
27
0.933
July
39
0.960
August
26
Septem 0.795
ber
68
0.948
October 71
Novemb 1.122
er
03
Decemb 1.649
er
26
Forecast/estimate with no hurricane
Period
49
50
51
52

Months
Septem
ber
October
Novemb
er
Decemb
er

Foreca
st
2.153
32
2.578
26
3.062
08
4.519
73

b)
Countywide departmental stores had there been no storm
Equation
Y (t) = 62.264 - 0.0710t
Seasonal Index
January
Februar
y
March
April
May
June
July
August
Septem
ber
October
Novemb
er
Decemb
er

0.761
12
0.793
66
0.977
98
0.926
73
0.989
48
0.927
48
0.907
37
1.013
14
0.852
09
0.929
86
1.147
84
1.773
23

Forecast/estimate with no hurricane

Perio
d
49
50
51
52

Months
Septem
ber
October
Novemb
er
Decemb
er

Forec
ast
50.09
1
54.59
6
67.31
3
103.8
62

Comparing the forecast of countywide department store with actual sales, there is an increasing
factor in sales due to the hurricane.

Period

Months

49

Septemb
er

50

October
Novemb
er
Decemb
er

51
52

Total

Forec
ast
50.09
1
54.59
6
67.31
3
103.8
62
275.8
62

Actual

Multiplicative
Factor

69

1.3775

75

1.3737

85.2

1.2657

121.8

1.1727

351

1.2724

Hence there has been a total increase of 27.24% in the sales of countywide departmental store
due to the hurricane
Part c)
Estimate of lost sales for Carlson for September through December
Period
49

Months
Septemb
er

50 October
Novemb
er
Decemb
52
er
51

Forec Multiplicati Lost

ast
ve Factor
Sales
2.153 1.37749296 2.9661
32
3
83
2.578 1.37372701 3.5418
26
3
25
3.062
3.8757
1.26572876
08
63
4.519 1.17270994 5.3003
73
2
32
15.684
Total
1

Based on the analysis Carlson Department stores had a loss of $15.6841 million in sales. Based
on this analysis, Carlson Department Stores can make a case to the insurance company.