Cost function estimation using Quantitative Analysis The obiective of this exercise is for you to help the manager of Limoscene, Inc. better understand how the company's operating costs behave. Limoscene offers transportation services in the Worcester area. Your goal is to use the quantitative methods to help Limoscene's management generate a cost function that will be useful for predicting future operating costs. You are provided with the two most recent years of operating data for total operating costs and three selected cost drivers: number of trips, number of miles driven and number of driver hours. In June of 2017, they increased the number of vehicles by 50%. Also, in January 2018, a blizzard shut them down for two weeks. 1. Cost estimation: Regression, Multiple Regression and Cost Hierarchies a. Estimate the cost function using number of miles driven. b. Estimate the cost function using number of driver hours. c. Estimate the cost function using each pair of cost drivers for three separate estimations. d. Estimate the cost function using all three cost drivers. e. Make a table or spreadsheet where all seven regression output are easily compared. f. Which cost function do you recommend Limoscene use? Why? Refer to economic plausibility, goodness of fit and significance of independent variables. If your recommended cost function has more than one independent variable, assess the likelihood of issues from multicollinearity. g. For the cost function you selected, perform a specification analysis of estimation assumptions (linearity within relevant range, constant variance of the residuals, independence of residuals and normality of residuals). Focus E S English (United States) 3 D E 10 10 June July Number Year of Trips January 2017 705 February 2017 710 March 2017 950 April 2017 670 May 2017 504 2017 1020 2017 990 August 2017 910 September 2017 1290 1 October 2017 1350 2 November 2017 1170 3 December 2017 1410 4 January 2018 320 5 February 2018 1550 16 March 2018 1169 7 April 2018 1390 18 May 2018 1272 9 June 2018 1790 0 July 2018 1640 11 August 2018 1420 12 September 2018 1683 23 October 2018 1720 24 November 2018 1500 s December 2018 1759 Number Number of Miles of Driver Number Driven Hours of Drivers 13845 2800 14205 2600 19037 2500 15996 1700 9992 1500 27132 3400 19873 4900 21014 3900 24822 5900 29879 6500 28803 5200 41931 6100 4210 950 38754 5700 26875 4100 29400 4600 34800 5270 48590 6790 44650 5487 41209 4980 39740 5390 42780 6130 34760 5200 46520 6040 Number Operating of Cars Costs 10 29965 22910 10 35503 10 26312 19160 39605 46496 49320 54247 62511 58974 63987 33950 53900 51230 56590 59689 69763 15 68210 57340 15 56867 59290 62976 15 67396 15 15 15 15 15 15 Sheet1