Toms Used Cars

Tom, the owner of Tom's used Mustangs has asked for a performance analysis on the asking price for used Mustangs. He has provided a data file labeled "MUSTANGS" that contain observations on 35 used mustangs and 10 different characteristics. The data was used to produce a management report describing the effects of these options on the asking price of the cars and how the information obtained can be used to determine the best prices on these mustangs. The analysis was performed though hypothesis testing and multiple regression analysis on the current price of the cars. Five independent variables were found to affect the price of used mustangs;

* Convertible or not

* GT or not

* Age of the car in years

* Odometer reading in miles

* Number of cylinders in the engine.

Introduction

In order for a company to make profits, it needs to have reasonable pricing strategies. Not only will it bring customers through the door, but it would also help company profits to soar. Tom has indicated that several of his customers have told him "that his asking price is way out of line with the rest of the market - sometimes too high and sometimes too low, and is never close to the going rate" (Bryant-Smith) . Prices were determined on a "gut" feeling and it has been determined this informal way of pricing has not worked well.

In order to determine the factors that would affect the selling price of used mustangs, nine independent variables were used to determine whether or not there was a relationship with the selling price. The independent variables are:

1. Convertible status

2. Age of car in years

3. Odometer reading in miles

4. Whether the transmission type was automatic or manual

5. Presence air-conditioning

6. Number of cylinders in engine

7. Color

8. GT Model or not

9. Private owner or dealer owner.

Analysis

The analysis was performed on 35 cars. The minimum price charge for a car was $2,488 and the maximum was $14,500. The average price a car was sold for was $$8,194. The average number of miles for the data set was 48, 265.71 miles and an average age of 3.97 years.

Hypothesis testing was conducted to determine and analyze the relationship of each independent variable with the selling price at a .05 significance level. From the various regression model analysis and hypothesis testing, Selling Price was