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 1. The market research team at AdRight is assigned the task to identify the profile of the typical customer for
each treadmill product offered by CardioGood Fitness. The market research team decides to investigate
whether there are difference across the product lines with respect to customer characteristics. The team
decides to collect data on individuals who purchased a treadmill at a CardioGood Fitness retail store during
the prior three months. The data are stored in the CardioGood Fitness [Link] team identifies the following
customer variables to study; product purchased, gender, age, education, relationship status, annual
household income, average number of times the customer plans to use the treadmill each week; average
number of miles the customer expects to walk/run each week; and self rated fitness on an 1 to 5 ordinal
scale, where 1 is poor shape and 5 is excellent shape.

Write a report to be presented to the management of CardioGood Fitness detailing your findings.

(identify the variables and levels of measurement; diagrammatic representations, descriptive statistics,
correlation if any between variables and based on the findings, summarizes and present a managerial
report)

ANS

1. TM-195

Customer Profile: Treadmill 1

Total sold 80
Males 40
Female 40
Singles 32
Partnered 48
Avg usage 3.05
Avg miles 83
Avg fit rating 3
Avg income $46,418.03
Income median $46,617.00

TM 195 purchased by an equal number of males and females (40each). The average income was about $46,000 of
this group, and most of the people incomes fell between about $37,000 to $55,000. There is no significant variation
between gender and the relationships thereof. TM 195 was sold the most (80) out of the three treadmills evaluated.

The average miles traveled (83) for TM195 indicate that it was the Least Used. Also pointing to this is that most
miles traveled fell between 54 and 112 the least of any treadmill. In short, customers purchased TM195 more than
any other treadmill likely due to its affordability; however, TM195’s expected use was the least by its owners. This
depicts TM195’s meager average fitness rating of three. The results are as shown below for TM 195.

95% of Miles ran on T1 fall between 95% of incomes for T1 fall between
2. TM 498 25 & 140 $ 28,266.46 & $ 64,569.59
Std Dev = 29 Std Dev = 9076

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 Customer Profile: Treadmill 2
Total sold 60
Males 31
Female 29
Singles 24
Partnered 36
Avg usage 3.02
Avg miles 88
Avg fit rating 3
Avg income $48,973.65
Income median $49,459.50

The difference was slight between the number of males and females that purchased TM498. No significant variation
between gender and the relationships. The average income of this group was about $49,000, and most of the people
incomes fell between about $40,000 to $58,000.

The 2nd most sold, and 20% less than TM 195. Improvement of the consumer income from treadmill 1 by about
$3,000. Partnered males bought TM498 the most. TM498 is purchased by 60 people. The average miles
traveled (88), and most miles ran between 55 and 121. TM 498 sold less and expected use was a little more than
TM195. Statistically, it is possible only true because there were less of TM498 sold than TM195.

95% of Miles ran on T2 fall between 95% of incomes for T2 fall between
21 & 154 $ 31,665.67 & $ 66,281.63
3. TM 798 Std Dev = 33 Std Dev = 8654

Customer Profile: Treadmill 3

Total sold 42
Males 33
Female 7
Singles 17
Partnered 23
Avg usage 4.66
Avg miles 167
Avg fit rating 5
Avg income $75,441.58
Income median $76,568.50

Evaluation of TM798 showed that it sold to 40 people and 79% were Males. TM798 sold less number of the
treadmills 50% less than TM 195. However, average income of this group is greater, about $29,000 more than the
mean income of TM 195 customers, and most of the people incomes lies between about $57,000 and $94,000. The

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average expected miles traveled is 167 and most miles expected to be ran/walked lie between 107 and 227, which
tell us that TM798 receives the most expected use after purchase out of the three treadmills.

Average fitness rating given of five. In fact, not a single customer of treadmill three gave themselves a fitness rating
that was below a three. Around 73% of customers gave a fitness rating of 5 to themselves. Which goes to show that
the consumers of treadmill 3 were serious about their use of the machine when making their purchase.

95% of Miles ran on T3 fall between 95% of incomes for T3 fall between
CONCLUSION 47 & 287 $ 38,429.90 & $ 112,453.25
Std Dev = 60 Std Dev = 18,506
The main types of data looked at were the average and majority incomes of the consumers. As well as
the actual uses each treadmill received after purchase. The purpose of focusing on this data was to describe to
Cardio which product reach the most and who its product affects the most. TM 195 is the most purchased and used
the least, and TM 798 is least purchased but used the most.

Information for Management

TM195 being useful for acquiring capital, and TM798 useful for contributing to a fitness mission statement. It
would be beneficial in both aspects of capital and fitness promotion could either

A. Sell more of TM 195

B. Get TM195 to be used more.

A positive TM195 has over TM498 is that there were almost 20% of users, opposed to 13% for treadmill
TM 498, that ran more than 107 miles, which is the bottom half of the majority treadmill 3 users ran. This is
saying that 20% of those that purchased TM195 used it just as much as if it were a TM498.

a. As a company, if we are to change what products we sell we must answer ourselves if we want to
sell low priced quantity of goods which may be the more profitable route
b. Focus our attention on us higher end products who the consumers of use more.

With the latter decision, Cardio Fitness may have the option in the future to promote its goods as showing proven
results to entice more buyers.

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 2. A municipal bond services has three rating categories (A, B, C). Suppose that in the past year, of the
municipal bonds issues throughout the United States, 70% were rated A, 20% were rated B, and 10% were
rated C. Of the municipal bonds rated A, 50% were issued by cities,40% by suburbs, and 10% by rural
areas. Of the municipal bonds rated B, 60% were issued by cities, 20% by suburbs, and 20% by rural
areas. Of the municipal bonds rated C, 90% were issued by cities, 5% by suburbs, and 5% by rural areas

Ans

a. If a new municipal bond is to be issued by a city, what is the probability it will receive an A rating?

Event Symbol Probability Given

City Issuer U
Suburban Issuer S
Rural Issuer R
A Rating A 0.70

B Rating B 0.20

C Rating C 0.10

U given A U|A 0.50

S given A S|A 0.40

R given A R|A 0.10

U given B U|B 0.60

S given B S|B 0.20

R given B R|B 0.20

Using Bayes' Law, we can fill in the following

U given C U|C 0.90
table:

S given C S|C Rat0in.0g5

Issuer A B
CR given C R|C
0.05 0.35 + 0.12 + 0.09 = 0.56
U 0.50*0.70 = 0.35 0.60*0.20 = 0.12 0.90*0.10 = 0.09

S 0.40*0.70 = 0.28 0.20*0.20 = 0.04 0.05*0.10 = 0.005 0.28 + 0.04 + 0.005 = 0.325

R 0.10*0.70 = 0.07 0.20*0.20 = 0.04 0.05*0.10 = 0.005 0.07 + 0.04 + 0.005 = 0.115

0.70 0.20 0.10

Now, if a new municipal bond is to be issued by a city, what is the probability it will receive an A

rating? This is asking for the probability of A , given U.

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 P(
P A( |U = A∩U )
P(U )

0 .35
= 0 .56
=0 . 625
b. What proportion of municipal bonds are issued by cities?

P (U ) =0 . 56
c. What proportion of municipal bonds are issued by suburbs?

P (S ) =0 . 325

3. Toby’s Trucking Company determined that the distance travelled per truck per year is normally distributed, with
a mean of 50 thousand miles and a standard deviation of 12 thousand miles.

a. What proportion of trucks can be expected to travel between 34 and 50 thousand miles in a year?

b. What percentage of trucks can be expected to travel either less than 30 or more than 60 thousand miles in a year?

c. How many miles will be travelled by at least eighty percent of the trucks

Solution

Let X be the distance travelled per truck per year,

Then X∼N (50,144)

(a)

P (34< X <50)

=P(34-50/12< Z <0)

=P(−4/3< Z <0)

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=0.4082

(b)

P(X <30 or X >60)

=P(Z <30−50/12) +P(Z >60−50/12)

=P(Z <−1.670) +P(Z >0.83)

=(1-1.670)+0.2033

=0.0475 +0.2033

= 0.2508

(c.)

Let be the number of miles at least 80% of the trucks will travel.

NORMSINV(0.8)= 0.84

P(X < d) = 20%

P((X−50)/12<(d−50)/12) = 20%

P(Z <d−50/12) = 20%

(d−50)/12 = −0.84

d=50-0.84*12

d= 39.92

4. Zagat’s publishes restaurant ratings for various locations in the US. The file Restaurants contains the Zagat rating
for food, decor, service, and the cost per person for a sample of 100 restaurants located in New York City and in a
suburb of New York city. Develop a regression model to predict the cost per person, based on a variable that
represents the sum of the ratings for food, decor, and service.

a. Construct a scatter plot

b. assuming a linear relationship, use the least squares method of compute the regression coefficients bo and b1.

c. Interpret the meaning of the Y intercept, bo, and the slope, b1 in this problem

d. Predict the mean cost per person for a restaurant with a summated rating of 50.

e. What should you tell the owner of a group of restaurants in this geographical area about the relationship
between the summated rating and the cost of a meal?

a. Construct a scatter plot

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 90

80

70 f(x) = 1.5 x − 46.77

R² = 0.55
60
50

40

30

20

10

0 50 55 60 65 70 75 80
45

b. assuming a linear relationship, use the least squares method of compute the regression coefficients bo
and b1.

The regression equation

Yi = B0+B1Xi

Yi = -46.772+1.4963x

c. Interpret the meaning of the Y intercept, bo, and the slope, b1 in this

( Σx ) ( ∑ y )
problem SSxy = Σϰy−
n
= 299650 – 6257*4685/100

= 6509.55

( Σx )
SSx = Σ 2
ϰ2−
n
= 395851 – (6257*6257)/100

= 4350.51

SSxy
b1=
SSϰ

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 = 6509.55 / 4350.51

= 1.4963

∑y
Y´ = n

= 4685 / 100

= 46.85

∑ϰ
X´ = n

= 6257 / 100

= 62.57

b0 =Y´ −b 1
X´
= 46.85 – 1.4963*62.57

= 46.85 – 93.62

= - 46.77

d. Predict the mean cost per person for a restaurant with a summated rating of 50.

y=b0 +b1 x
= -46.77 + 1.4963 * 50

= -46.77 + 74.815

= 28.045

e. What should you tell the owner of a group of restaurants in this geographical area about the
relationship between the summated rating and the cost of a meal?

ANS- There is positive relation between cost and rating as the slope is positive

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