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

(1) Average outdoor temperature (Temp),

(2) Working days per month (Days), and

(3) Tons of product produced (Tons). A portion of the past year's monthly data is shown in the accompanying table.

a. Estimate the linear model: Cost = β0 + β1 Temp + β2 Days + β3 Tons + ε. 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 + β1 Temp + β2 Days + β3 Tons + ε. 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:

Tons 80 73 Cost ($) Temp (°F) Days 24100 23700 26 32 24 21 26000 69