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uaLa Analysls for 1om's MusLangs

Aprll 2010
CM333 Applled Managerlal SLaLlsLlcs

1he execuLlve summary
1hls shorL paper ls a summary of Lhe daLa l recelved from 1om relaLed Lo asklng prlces of used MusLangs
ln Lhe area l revlewed Lhe daLa ln scaLLer ploL graphs and by runnlng regresslon analysls Lo see lf Lhere ls
a correlaLlon ln asklng prlce and color and age of MusLangs 8ased on Lhe daLa l was able Lo see a
correlaLlon of hlgher asklng prlce beLween age of car and lf Lhe model ls a converLlble or C1 Lype l'd
suggesL Lo 1om Lo use Lhese caLegorles when prlclng hls MusLangs 8elow ls more deLall along wlLh Lhe
graphs and analysls l compleLed As sLaLed ln Lhe concluslon l suggesLed LhaL more daLa should be
collecLed so 1om could prlce hls MusLangs more relevanL Lo Lhose ln Lhe area

lnLroducLlon
1om has recenLly opened a used car loL AlLhough he has very llLLle buslness experlence hls passlon has
always been for vlnLage auLomoblles 1om has been collecLlng and repalrlng old cars slnce he was a
Leenager and has loLs of Lechnlcal knowledge abouL carbureLors shock absorbers alr condlLloners and
so forLh 1om has declded Lo Lurn hls hobby lnLo a moneymaklng venLure for hlmself unforLunaLely
1om knows almosL noLhlng abouL adverLlslng Laxes soclal securlLy paymenLs for hls employees
bookkeeplng or oLher aspecLs of Lhe buslness of selllng cars lor Lhls reason 1om ls Laklng a few
buslness courses aL Lhe local communlLy college (bowermand CConnell !bCrrls Murphree 2010)
8ackground on Lhe problem
1he car loL has been open for a few monLhs and several of 1om's cusLomers have Lold hlm LhaL hls
asklng prlces are way ouL of llne wlLh Lhe resL of Lhe markeLsomeLlmes Loo hlgh and someLlmes Loo
low buL never close Lo Lhe golng raLe 1om Lyplcally relles on a guL feellng for deLermlnlng asklng prlces
lor lnsLance all else Lhe same he Lhlnks LhaL red cars appear sporLler and can be sold aL a premlum Pe
knows LhaL older cars sell for less buL he doesn'L know exacLly how much less ApparenLly Lhls lnformal
scheme ls noL worklng very well
PypoLheses
1he prlce of a musLang ls dependenL on several facLors such as lf Lhe musLang ls a converLlble or C1
model Lhe age of Lhe car Lhe color of Lhe car lf Lhe musLang has alr condlLlonlng Lhe number of
cyllnders ln Lhe englne lf lL's an auLomaLlc or manual Lransmlsslon how many prevlous owners and Lhe
mlles on Lhe odomeLer 1om has a Lheory LhaL red cars appear sporLler and can be sold aL a premlum
and he knows LhaL older cars sell for less l wlll work wlLh Lhe daLa he has collecLed Lo analyze lf color ls a
facLor and lf red cars sell for more along wlLh LesLlng lf older cars sell for less llnally slnce 1om needs
and ldea of whaL a good selllng prlce would be for hls cars l'll do an analysls based on Lhe daLa he's
collecLed Lo glve hlm an ldea of a good selllng prlce based on Lhe characLerlsLlcs of Lhe car

naLure of Lhe daLa
1o more Lhoroughly undersLand Lhls lssue 1om has secreLly vlslLed a compeLlLor's loL buL Lhere are so
many physlcal characLerlsLlcs of a car LhaL he ls havlng Lrouble plnpolnLlng a useful prlclng scheme
llndlng perfecL maLches for hls cars ls nearly lmposslble glven all of Lhe posslble opLlons on cars
(bowermand CConnell !bCrrls Murphree 2010) 1om has hlred me Lo perform a sLaLlsLlcal analysls
of asklng prlces for used MusLangs 1om has already collecLed lnformaLlon from Lhe local newspapers
and oLher sources 1om has provlded me wlLh over 33 used MusLangs and 10 dlfferenL characLerlsLlcs
Analysls and meLhods secLlon
l flrsL wanLed Lo look lnLo 1om's clalm LhaL 8ed MusLangs sell for more Lhan oLher colored musLangs 1o
do Lhls l flrsL performed a scaLLerploL on Lhe caLegory color ln relaLlon Lo Lhe asklng prlce Craph #1
shows Lhe scaLLerploL graph When l added Lhe Lrend llne lL shows LhaL Lhere ls no real correlaLlon
beLween Lhe asklng prlce of Lhe car and Lhe color buL Lo be sure a llnear regresslon analysls can be
performed on Lhe daLaseL regardlng color as seen ln llgure #1 of Lhe appendlx 1he proporLlon of Lhe
LoLal varlaLlon ls explalned by 001363 (r2) and Lhe sLrengLh of a poslLlve llnear relaLlonshlp ls 012308
(r) whlch lndlcaLes Lhere ls noL a sLrong poslLlve llnear relaLlonshlp slnce Lhe closer Lhe number ls Lo 1
Lhe hlgher Lhe correlaLlon 1he oLher lndlcaLor would be Lhe lLesL value Lhe pvalue lndlcaLes lf lL's
a slgnlflcanL conLrlbuLor Lo Lhe asklng prlce Lhe closer lL ls Lo zero and Lhe lLesL ls used Lo LesL
slgnlflcance of llnear regresslon and Lhe hlgher Lhe number Lhe sLronger Lhe correlaLlon ln Lhls case Lhe
l LesL ls 032 whlch ls low and Lhe value ls 0474 whlch ls hlgh compared Lo zero 1hls suggesLs LhaL
elLher more daLa ls needed or LhaL 1om's LhoughL LhaL Lhe color of a 8ed car carrles a hlgher asklng prlce
ls noL proven 1he daLa suggesL LhaL color ls noL a Lrue lndlcaLor of asklng prlce
1he 2nd Lhlng 1om was confldenL ln ls LhaL older cars have a lower asklng prlce l wlll run a scaLLerploL
and regresslon analysls on Lhe caLegory of age and asklng prlce slmllar Lo whaL l dld for color Lo LesL
1om's Lheory llgure # 2 ln Lhe appendlx shows Lhe analysls and graph 1he scaLLerploL lndlcaLes by Lhe
Lrend llne LhaL 1om ls rlghL Lhe lower Lhe age of Lhe car Lhe hlgher he can seL Lhe asklng prlce Lo
conflrm LhaL Lhe regresslon analysls lndlcaLes a sLrong correlaLlon beLween Lhe 2 varlables by Lhe l LesL
of 682 llnally l revlewed Lhe 3 facLors LhaL seemed Lo have Lhe mosL lmpacL on asklng prlce for
MusLangs age model C1 or converLlble Lhls covers 93 of Lhe daLa and has a hlgh l value whlch
lndlcaLes a sLrong correlaLlon beLween Lhe asklng prlce and Lhe 3 caLegorles
Concluslon
1he analysls based on a sample of 33 cars may be Loo small buL lL does provlde a slgnlflcanL amounL of
daLa Lo conclude LhaL Lhe color of Lhe car ls noL a varlable ln Lhe asklng prlce and LhaL Lhe age of Lhe car
ls a facLor on Lhe asklng prlce l also found LhaL Lhe converLlble and C1 models seem Lo be slgnlflcanL ln
Lhe asklng prlce l'd suggesL LhaL furLher daLa be collecLed and analyzed Lo ensure 1om's asklng prlces
are ln llne wlLh oLher dealers ln Lhe area buL Lo sLarL 1om should use Lhe daLa l have provlded as a good
sLarL for havlng selllng prlces LhaL are relevanL Lo Lhe area l'd also suggesL LhaL 1om uses Lhe 3
characLerlsLlcs of Model CL or converLlble and age as Lhe ma[or deLermlnaLlon on hls asklng prlce for
MusLangs
8lbllography
bowermand 8 CConnell 8 1 !bCrrls Murphree L S (2010) LssenLlals of 8uslness SLaLlsLlcs Mc
CrawPlll lrwln
Appendlx
llgure # 1 | | | | | | |
8egresslon Analysls for CCLC8 | | | | |
| | | | | | |
| r | 0016 | n | 33 | | |
| r | 0123 | k | 1 | | |
| SLd Lrror | 3810211 | uep var | 8lCL | | |
| | | | | | |
AnCvA Lable | | | | | |
Source | SS | df | MS | l | pvalue | |
8egresslon | 7614378 | 1 | 76143784173 | 032 | 4740 | |
8esldual | 479084371 | 33 | 143177082139 | | | |
1oLal | 486698930 | 34 | | | | |
| | | | | | |
| | | | | | |
8egresslon ouLpuL | | | | confldence lnLerval |
varlables | coefflclenLs | sLd error | L (df33) | pvalue | 90 lower | 90
upper |
lnLercepL | 7098 | 1644 | 4317 | 00014 | 4316 |
9881 |
CCLC8 | 231 | 319 | 0724 | 4740 | (309) | 771
|
| | | | | | | |
| | | | | |
| | | | | | | |
| | 0016 | n | 33 | | | |
| | 0123 | k | 1 | | | |
|
| | 3810211 | uep var | 8lCL | | | |
| | | | | | | |
| | | | | | |
| | df | MS | l | pvalue | | |
| | 1 | 76143784173 | 032 | 4740 | | |
| | 33 | 143177082139 | | | | |
| | 34 | | | | | |
| | | | | | | |
| | | | | | | |
| | | | confldence lnLerval | |
| | sLd error | L (df33) | pvalue | 90 lower | 90 upper |
|
| | 1644 | 4317 | 00014 | 4316 | 9881 |
|
llgure # 2 | | | | | | | |
8egresslon Analysls for ACL | | | | | |
| | | | | | | |
| r | 0674 | n | 33 | | | |
| r | 0821 | k | 1 | | | |
| SLd Lrror | 2193014 | uep var | 8lCL | | | |
| | | | | | | |
AnCvA Lable | | | | | | |
Source | SS | df | MS | l | pvalue | | |
8egresslon | 327991630 | 1 | 327991630 | 6820 | 133L09 |
| |
8esldual | 138707299 | 33 | 4809312 | | | |
|
1oLal | 486698930 | 34 | | | | | |
| | | | | | | |
| | | | | | | |
8egresslon ouLpuL | | | | confldence lnLerval | |
varlables | coefflclenLs | sLd error | L (df33) | pvalue | 90 lower | 90
upper | |
lnLercepL | 13727 | 766 | 17927 | 141L18 | 12431 |
13023 | |
ACL | (1393) | 169 | 8238 | 133L09 | (1679) | (1108)
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llgure # 3 8egresslon Analysls | | | | | |
| | | | | | |
| 8 | 0932 | | | | |
| Ad[usLed 8 | 0923 | n | 33 | | |
| 8 | 0963 | k | 3 | | |
| SLd Lrror | 1033778 | uep var | 8lCL | | |
| | | | | | |
AnCvA Lable | | | | | | |
Source | SS | df | MS | l | pvalue | |
8egresslon | 433369373 | 3 | 131189791 | 14147 | 338L18
| |
8esldual | 33129377 | 31 | 1068696 | | | |
1oLal | 486698930 | 34 | | | | |
| | | | | | |
| | | | | | |
8egresslon ouLpuL | | | | confldence lnLerval |
varlables | coefflclenLs | sLd error | L (df31) | pvalue | 90 lower | 90
upper |
lnLercepL | 1131627 | 41497 | 27732 | 186L23 | 1081268
| 1221986 |
CCnvL81 | 316233 | 38907 | 8128 | 332L09 | 230268
| 382202 |
ACL | (133340) | 7972 | 16726 | 433L17 | (146836) |
(119823) |
C1 | 287964 | 36366 | 7918 | 613L09 | 226304 |
349624 |
| | 319 | 0724 | 4740 | (309) | 771 | |
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