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. The data for the analysis were sampled from the accounting records of 195 orders that were filled during the previous three months. Formulate the regression model with Y as the average cost per unit and X as the material cost per unit.
(a) Does the scatterplot of Y on X or the plot of the residuals on X indicate a problem with the fitted equation?
(b) Use the context of this regression to suggest any possible lurking variables. Recognize that the response reflects the cost of all inputs to the manufacturing task, not just the materials that are used.
(c) Consider a scatterplot of the residuals from this regression on the number of labor hours. Does this plot suggest that the labor input is a lurking variable?