The facility manager at a pharmaceutical company wants to build a regression model to forecast monthly electricity
Question:
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?
Step by Step Answer:
Business Statistics Communicating With Numbers
ISBN: 9780078020551
2nd Edition
Authors: Sanjiv Jaggia, Alison Kelly