# Question: Production Costs introduced in Chapter 19 A manufacturer produces custom

Production Costs (introduced in Chapter 19) A manufacturer produces custom metal blanks that are used by its customers for computer-aided machining. The customer sends a design via computer (a 3-D blueprint), and the manufacturer comes up with an estimated price per unit, which is then used to determine a price for the customer. This analysis considers the factors that affect the cost to manufacture these blanks. The data for the analysis were sampled from the accounting records of 195 previous orders filled during the last three months. The data measure performance at two plants, identified as “OLD” and “NEW” in the column Plant.

(a) Would it be appropriate for management to compare the two plants using a two-sample comparison of the costs per unit, or would such a comparison be confounded by different requirements for machine use per unit in the two plants?

(b) Perform the two-sample t-test to compare the average cost per unit at the two plants. Summarize this analysis, assuming that there are no lurking variables.

(c) Compare the average cost per unit at the two plants using an analysis of covariance. Summarize the comparison based on this analysis. Represent these categories using a dummy variable coded as 1 if the plant is new. (Assume for the moment that the model meets the conditions for the MRM.)

(d) Compare the results from parts (b) and (c). Do they agree? Explain why they agree or differ. You should take into account the precision of the estimates and your answer to part (a).

(e) Does the estimated multiple regression used in the analysis of covariance meet the similar variances condition?

(a) Would it be appropriate for management to compare the two plants using a two-sample comparison of the costs per unit, or would such a comparison be confounded by different requirements for machine use per unit in the two plants?

(b) Perform the two-sample t-test to compare the average cost per unit at the two plants. Summarize this analysis, assuming that there are no lurking variables.

(c) Compare the average cost per unit at the two plants using an analysis of covariance. Summarize the comparison based on this analysis. Represent these categories using a dummy variable coded as 1 if the plant is new. (Assume for the moment that the model meets the conditions for the MRM.)

(d) Compare the results from parts (b) and (c). Do they agree? Explain why they agree or differ. You should take into account the precision of the estimates and your answer to part (a).

(e) Does the estimated multiple regression used in the analysis of covariance meet the similar variances condition?

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