Answers to Odd-Numbered Problems 7b. Delta’s management will tout city-by-city on-time comparisons. In New
York, its frequency of late flights is: 484/1,987 .24 or 24 percent,
compared to Northwest’s: 120/399 .30 or 30 percent. In Chicago,
Delta’s frequency of late flights is 16 percent, compared to
Northwest’s 20 percent. Finally, in Memphis, Delta’s frequency of late
flights is 12 percent, compared to Northwest’s 13 percent. Delta has
superior on-time performance in all three cities.
c. The disaggregate comparisons provide the more accurate measure of
on-time performance. Here, Delta wins hands down. The overall
record is misleading. Delta’s overall on-time percentage looks worse
because it flies many more flights than Northwest in and out of New
York where poor weather and airport congestion cause frequent
delays. To get an accurate picture, one must control for the
differences in airport delays experienced by different cities.- a. The estimated trend equation is S 95 5.5t, using OLS regression.
b. Although the equation’s R^2 is .69, the t-value on the time trend is only
2.12. With 2 degrees of freedom, the critical value for significance is
4.30. With only four observations, there is not enough data to say
whether there is a true upward trend.
c. Suppose you take the estimated coefficient at face value (even though
it lacks statistical significance.) Then, the forecast for year 5 is 95
(5.5)(5) 122.5 (a slight increase from sales of 120 in year 4). From
the regression output, the standard error of this forecast is 5.81. This
error is so large that sales could well increase or decrease in year 5. - a. Since the scrap used by the company comes from beer and soft-
drink cans, the first step is to forecast the consumption of these
drinks over the next decade. Beer consumption depends on the size
of the population ages 18 to 45; soft-drink consumption depends
on the size of the population ages 10 to 25. Demographers can
supply these population numbers. The next step is to predict trends
in the types of beer and soft-drink containers: (1) the share of
plastic and glass bottles versus cans, and (2) the share of steel cans
versus aluminum cans. The company could forecast trends in these
shares by using information on past shares available in industry
publications.
b. The main demographic factors are the size of the consuming age
groups. These population numbers change slowly and are relatively
easy to forecast. Economic factors include shifts in soft-drink and
beer demands—changes that are harder to predict. For instance,
sports drinks, bottled water, ice teas, and new-age beverages have all
chipped away at soft-drink consumption. Political factors might also
play a role. Bottle bills and recycling programs may have significant
BMAns.qxd 9/26/11 11:18 AM Page 7