Reference no: EM132472818
DBC, a manufacturer of high end racing bicycles, is interested in determining the cost associated with the warranty costs on their bicycles. Three cost drivers are believed to be important in explaining the cost of this activity: the speed (ft/min.) of the manufacturing line, the number of defective products produced and the hours of inspection. To determine if this hypothesis is valid, the company's analysts examined the past 3 years of warranty cost data and ran a multiple regression analysis.
The following output is obtained:
Parameter Estimate t-stat Pr>t
Intercept 3,300 80.00 0.0001
Line Speed 25 5.31 0.0033
Number of defects 50 2.58 0.0050
Inspection hours R2 = 0.88 -15 -1.96 0.0250
Observations 250
Question 1: How can get the estimated cost model for the company's warranty repair cost?
Question 2: Then, if You're given certain variables such as if DBC expects to run their line at 30 ft/ min. and to have 65 defects per week and to spend 40 hours on inspection, what is their anticipated warranty repair cost?
Question 3: And how can determine if the line speed is positively or negatively correlated with warranty costs, defects, inspection hours?
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