The facility manager at a pharmaceutical company wants to build a regression model to forecast monthly electricity cost (Cost in $). Three main variables are thought to influence electricity cost: 

(1) Average outdoor temperature (Temp in °F) 

(2) Working days per month (Days)

(3) Tons of product produced (Tons). A portion of the past monthly data on 80 observations is shown in the accompanying table.

 

a. Estimate the linear model Cost = β₀ + β₁Temp + β₂Days + β₃Tons + ɛ. What is the predicted electricity cost in a month during which the average outdoor temperature is 65°, there are 23 working days, and 76 tons are produced? 

b. Estimate the exponential model ln(Cost) = β₀ + β₁Temp + β₂Days + β₃Tons + ɛ. What is the predicted electricity cost in a month during which the average outdoor temperature is 65°, there are 23 working days, and 76 tons are produced? 

c. Based on R² , which model provides the better fit?

Transcribed Image Text:

Cost 16747 7901 ⠀ 11380 Temp 46 31 4 56 Days 22 24 ⠀ 28 Tons 75 98 ⠀ 84