Instruction 13-6
One of the Most Common Questions of Prospective

question 145

Multiple Choice

Instruction 13-6
One of the most common questions of prospective house buyers pertains to the average cost of heating in dollars (Y) .
To provide its customers with information on that matter,a large real estate firm used the following 4 variables to predict heating costs: the daily minimum outside temperature in degrees of Celsius (X₁) ,the amount of insulation in cm (X₂) ,the number of windows in the house (X₃) ,and the age of the furnace in years (X₄) .Given below are the Microsoft Excel outputs of two regression models.
$\begin{array}{lr}{\text { Model 1 }} \\\hline {\text { Regression Statistics }} \\\hline \text { R Square } & 0.8080 \\\text { Adjusted R Square } & 0.7568 \\\text { Observations } & 20 \\\hline\end{array}$
ANOVA
$\begin{array}{lrrrrrr}\hline & d f & & S S & M S & F & \text { Significance } F \\\hline \text { Regression } & 4 & 169503.4241 & 42375.86 & 15.7874 & 2.96869 \mathrm{E}-05 \\\text { Residual } & 15 & 40262.3259 & 2684.155 & & \\\text { Total } & 19 & 209765.75 & & & \\\hline\end{array}$

$\begin{array}{lrrrrrrr}\hline & \text { Coefficients } & \text { Standard Error } & {t \text { Stat }} & {\text { P-value }} & \text { Lower 90.0\% } & \text { Upper 90.0\% } \\\hline \text { Intercept } & 421.4277 & 77.8614 & 5.4125 & 7.2 \mathrm{E}-05 & 284.9327 & 557.9227 \\\mathrm{X}_{1} \text { (Temperature) } & -4.5098 & 0.8129 & -5.5476 & 5.58 \mathrm{E}-05 & -5.9349 & -3.0847 \\\mathrm{X}_{2} \text { (Insulation) } & -14.9029 & 5.0508 & -2.9505 & 0.0099 & -23.7573 & -6.0485 \\\mathrm{X}_{3} \text { (Windows) } & 0.2151 & 4.8675 & 0.0442 & 0.9653 & -8.3181 & 8.7484 \\\mathrm{X}_{4} \text { (Furnace Age) } & 6.3780 & 4.1026 & 1.5546 & 0.1408 & -0.8140 & 13.5702\end{array}$ $\begin{array}{l}\text { Model } 2\\\begin{array}{lr}\hline {\text { Regression Statistics }} \\\hline \text { R Square } & 0.7768 \\\text { Adjusted R } & \\\text { Square } & 0.7506 \\\text { Observations } & 20 \\\hline\end{array}\end{array}$
ANOVA
$\begin{array}{lrrrrrr} & d f & &{\text { SS }} & M S & F & \text { Significance } F \\\hline \text { Regression } & & 2 & 162958.2277 & 81479.11 & 29.5923 & 2.9036 \mathrm{E}-06 \\\text { Residual } & 17 & 46807.5222 & 2753.384 & & \\\text { Total } & 19 & 209765.75 & & & \\\hline\end{array}$

$\begin{array}{lrrrrrrr} & \text { Coefficients } & \text { Standard Error } & \text { t Stat } & \text { P-value } & \text { Lower 95\% } & \text { Upper 95\% } \\\hline \text { Intercept } & 489.3227 & 43.9826 & 11.1253 & 3.17 \mathrm{E}-09 & 396.5273 & 582.1180 \\\mathrm{X}_{1} \text { (Temperature) } & -5.1103 & 0.6951 & -7.3515 & 1.13 \mathrm{E}-06 & -6.5769 & -3.6437 \\\mathrm{X}_{2} \text { (Insulation) } & -14.7195 & 4.8864 & -3.0123 & 0.0078 & -25.0290 & -4.4099\end{array}$
-Referring to Instruction 13-6,what can you say about Model 1?

• A)The model explains 80.8% of the sample variability of heating costs;after correcting for the degrees of freedom,the model explains 75.7% of the sample variability of heating costs.
• B)The model explains 77.7% of the sample variability of heating costs;after correcting for the degrees of freedom,the model explains 75.1% of the sample variability of heating costs.
• C)The model explains 75.7% of the sample variability of heating costs;after correcting for the degrees of freedom,the model explains 80.8% of the sample variability of heating costs.
• D)The model explains 75.1% of the sample variability of heating costs;after correcting for the degrees of freedom,the model explains 77.7% of the sample variability of heating costs.

Calculate the differentiation value of a product relative to its competitors.

Determine the reference value for setting prices in a competitive market.

Develop pricing strategies based on a product's cost, market position, and unique value proposition.

Understand the impact of operating costs on the total cost of ownership of a product.

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Definitions:

Vicarious Experiences

Learning or feeling an emotion through the experiences of another person, often through stories, media, or observing others.

Encouragement

The action of giving someone support, confidence, or hope to motivate or positively influence them.

Self-regulation

The ability of an individual to manage their emotions, thoughts, and behaviors in accordance with long-term goals.

Directing

In management, the process of guiding, leading, and overseeing the tasks and activities of an organization or team to achieve predetermined objectives.