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YUSI AssignmentModule9

There is a significant positive relationship between collision claim ratings and comprehensive claim ratings for nine makes of midsize cars from 2014-2016. The correlation coefficient (r) between the two variables is 0.938, indicating a very high positive correlation. There is also a significant positive relationship between distribution costs and number of orders for a mail-order catalog company over 12 months. The correlation coefficient between these two variables is 0.861, indicating a high positive correlation. Management should aim to increase the number of orders to better utilize the small handling fee added to each order.

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Reyne Yusi
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© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
33 views

YUSI AssignmentModule9

There is a significant positive relationship between collision claim ratings and comprehensive claim ratings for nine makes of midsize cars from 2014-2016. The correlation coefficient (r) between the two variables is 0.938, indicating a very high positive correlation. There is also a significant positive relationship between distribution costs and number of orders for a mail-order catalog company over 12 months. The correlation coefficient between these two variables is 0.861, indicating a high positive correlation. Management should aim to increase the number of orders to better utilize the small handling fee added to each order.

Uploaded by

Reyne Yusi
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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YUSI, REYNE L.

A-223
1. The Insurance Institute for Highway Safety has listed the following ratings based on collision and
comprehensive claims for nine makes of midsize four-door cars from 2014-2016 model years.
Higher numbers reflect higher claims in the collision and comprehensive categories of
coverage. Describe the direction and degree of relationship; and at a .05 alpha, is there
significant relationship between collision claim rating and comprehensive claim rating?

Claims Collision claim rating (X) Comprehensive claim rating (Y)

1 113 89

2 108 91

3 124 92

4 131 108

5 128 108

6 90 74

7 99 79

8 106 86

9 116 98

Total

Null Hypothesis:
There is no significant relationship between collision claim rating and comprehensive
claim rating.
Alternative Hypothesis:
There is significant relationship between collision claim rating and comprehensive claim
rating.
Level of Significance: 0.05/2 = 0.025
Degree of freedom: n–2=9–2=7
Critical r = ±𝟎. 𝟔𝟔𝟔
Decision Rule:
Reject the null hypothesis if r > 0.666 or r <-0.666; otherwise, do not reject the null
hypothesis.
YUSI, REYNE L.
A-223
Computations:

Collision claim Comprehensive


Claims X*Y X^2 Y^2
rating (X) claim rating (Y)
1 113 89 10,057 12,769 7,921
2 108 91 9,828 11,664 8,281
3 124 92 11,408 15,376 8,464
4 131 108 14,148 17,161 11,664
5 128 108 13,824 16,384 11,664
6 90 74 6,660 8,100 5,476
7 99 79 7,821 9,801 6,241
8 106 86 9,116 11,236 7,396
9 116 98 11,368 13,456 9,604
Total 1,015 825 94,230 115,947 76,711

𝑛(𝛴𝑥𝑦) − (∑𝑥)(𝛴𝑦)
𝑟=
(√𝑛(𝛴𝑥 2 ) − (𝛴𝑥)2 ) (√𝑛(𝛴𝑦 2 ) − (𝛴𝑦)2 )

9(94,230) − (1,015)(825)
𝑟=
(√9(115,947) − (1,015)2 ) (√9(76,711) − (825)2 )

𝑟 = 𝟎. 𝟗𝟑𝟖 Very high positive correlation


𝒓𝟐 = 𝟖𝟖%
Conclusion:
Reject the null hypothesis, 0.938 > 0.666, which means there is significant relationship
between collision claim rating and comprehensive claim rating.
Recommendation:
As stated in the computation, there is a very high positive correlation between the two
factors. Also, as the conclusion stated, there is significant relationship between the collision claim rating
and comprehensive claim rating. To lessen or lower the number of collision and comprehensive claims,
companies should guarantee the quality and durability of their four-door vehicles. This is also to lessen
accidents and traffics on the road.
YUSI, REYNE L.
A-223
2. A mail-order catalog business that sells personal computer supplies, software, and hardware
maintains a centralized warehouse for the distribution of products ordered. Management is
currently examining the process distribution from the warehouse and is interested in studying
the factors that affect warehouse distribution costs. Currently, a small handling fee is added to
the order, regardless of the amount. The table below shows the data (distribution costs in
thousands of dollars and number of orders) collected for the past 12 months. Describe the
direction and degree of relationship of the two variables; and at a .01 alpha, is there significant
relationship between distribution costs and number of orders?

Month Distribution costs Number of orders

1 52.95 4015

2 71.66 3806

3 85.58 5309

4 63.69 4262

5 72.81 4296

6 68.44 4097

7 52.46 3213

8 70.77 4809

9 82.03 5237

10 74.39 4732

11 70.84 4413

12 54.08 2921

Total

Null Hypothesis:
There is no significant relationship between distribution costs and number of orders.
Alternative Hypothesis:
There is significant relationship between distribution costs and number of orders.
YUSI, REYNE L.
A-223
Level of Significance: 0.01/2 = 0.005
Degree of freedom: n – 2 = 12 – 2 = 10
Critical r = ±𝟎. 𝟕𝟎𝟖
Decision Rule:
Reject the null hypothesis if r > 0.708 or r <-0.708; otherwise, do not reject the null
hypothesis.
Computations:

Distribution Number of
Month X*Y X^2 Y^2
costs (X) orders (Y)
1 53 4,015 212,594 2,803.70 16,120,225
2 72 3,806 272,738 5,135.16 14,485,636
3 86 5,309 454,344 7,323.94 28,185,481
4 64 4,262 271,447 4,056.42 18,164,644
5 73 4,296 312,792 5,301.30 18,455,616
6 68 4,097 280,399 4,684.03 16,785,409
7 52 3,213 168,554 2,752.05 10,323,369
8 71 4,809 340,333 5,008.39 23,126,481
9 82 5,237 429,591 6,728.92 27,426,169
10 74 4,732 352,013 5,533.87 22,391,824
11 71 4,413 312,617 5,018.31 19,474,569
12 54 2,921 157,968 2,924.65 8,532,241
Total 820 51,110 3,565,390 57,271 223,471,664
𝑛(𝛴𝑥𝑦) − (∑𝑥)(𝛴𝑦)
𝑟=
(√𝑛(𝛴𝑥 2 ) − (𝛴𝑥)2 ) (√𝑛(𝛴𝑦 2 ) − (𝛴𝑦)2 )

12(3,565,390) − (820)(51,110)
𝑟=
(√12(57,271) − (820)2 ) (√12(223,471,664) − (51,110)2 )

𝑟 = 𝟎. 𝟖𝟔𝟏 high positive correlation


𝒓𝟐 = 𝟕𝟒. 𝟏𝟔%
Conclusion:
Reject the null hypothesis, 0.861 > 0.708, which means there is significant relationship
between distribution cost and number of orders.
Recommendation:
As stated in the computation, there is a high positive correlation between the two factors.
Also, as the conclusion stated, there is significant relationship between the distribution cost and number
of orders. As we observe the table, we can see that if the number of orders is higher, there are chances
that there will be lesser amount of handling fee. So, I can suggest that for the handling fee to be fully
YUSI, REYNE L.
A-223
utilize, the number of orders should be high in amount. Because even if the handling fee is only small,
it can still affect the future expenses of the business.

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