The inventory manager at a warehouse distributor wants to predict inventory cost (Cost in $) based on order quantity (Quantity in units). She thinks it may be a nonlinear relationship since its two primary components move in opposite directions: (1) order processing
cost (costs of procurement personnel, shipping, transportation), which decreases as order quantity increases (due to fewer orders
needed), and (2) holding cost (costs of capital, facility, warehouse personnel, equipment), which increases as order quantity increases
(due to more inventory held). She has collected monthly inventory costs and order quantities for the past 36 months. A portion of the
data is shown in the accompanying table.
Cost Quantity
544
844
521
503
Scored
Book
555
870
Print
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b. Estimate the linear regression model to predict inventory cost as a function of order quantity. Then estimate the quadratic
regression model to predict inventory cost as a function of order quantity and order quantity Squared (Enter all values rounded to 4
decimal places.)
Cost. 54.4282
Cost. 75. CAD
0.6018
Quantity:
-0.0702 Quantity. 0.0000 Quantity2
1. Evaluate the linear model in terms of variable significance (a +0.05) and adjusted ?
The adjusted p? is negative and the explanatory variable is not significant.
2. Evaluate the quadratic model in terms of variable significance (a = 0.05) and adjusted A2 (Round your answer to 2 decimal
places.)
The adjusted t?is 85.54% and the explanatory variables are significant
d. Use the best fitting model to predict monthly inventory cost for an order quantity of 800 units. (Do not round the estimates or
Intermediate calculations. Round your final answer to 3 decimal places.)