An auto manufacturer leases cars to small businesses for use in visiting clients and other business travel. The contract
Posted: Tue Nov 23, 2021 9:36 am
An auto manufacturer leases cars to small businesses for use in
visiting clients and other business travel. The contracted lease
does not specify a mileage limit and instead includes a
depreciation fee of $0.30 per mile. The contract includes other
origination, maintenance, and damage fees in addition to the fee
that covers the mileage. These leases run for one year. A sample of
150 cars (all were a particular model of four-door sedan) returned
to their dealers early in this program averaged 21,714 miles, with
standard deviation s = 2,352miles. Currently, this manufacturer has
leased approximately 10,000 of these vehicles. When the program was
launched, the planning budget projected that the company would earn
(in depreciation fees) $6,500 on average per car.
Questions: 1. Is the sample size conditions for using a 95%
confidence interval for the mean number of miles driven per year
satisfied?
2. Does the method of sampling raise any concerns?
3. Construct the 95% confidence interval for the number of miles
driven per year on average for leased cars of this type. Interpret
the CI.
4. Construct the 95% confidence interval for the earnings over
the one-year lease, in a form suitable for presentation.
5. Interpret the CI in question 4. What is the implication for
the budget claim?
visiting clients and other business travel. The contracted lease
does not specify a mileage limit and instead includes a
depreciation fee of $0.30 per mile. The contract includes other
origination, maintenance, and damage fees in addition to the fee
that covers the mileage. These leases run for one year. A sample of
150 cars (all were a particular model of four-door sedan) returned
to their dealers early in this program averaged 21,714 miles, with
standard deviation s = 2,352miles. Currently, this manufacturer has
leased approximately 10,000 of these vehicles. When the program was
launched, the planning budget projected that the company would earn
(in depreciation fees) $6,500 on average per car.
Questions: 1. Is the sample size conditions for using a 95%
confidence interval for the mean number of miles driven per year
satisfied?
2. Does the method of sampling raise any concerns?
3. Construct the 95% confidence interval for the number of miles
driven per year on average for leased cars of this type. Interpret
the CI.
4. Construct the 95% confidence interval for the earnings over
the one-year lease, in a form suitable for presentation.
5. Interpret the CI in question 4. What is the implication for
the budget claim?