Statistical Paper on the Selling Price of Mustangs

Data Analysis for Tom’s Mustangs

April 2010

GM533- Applied Managerial Statistics

The executive summary

This short paper is a summary of the data I received from Tom related to asking prices of used Mustangs in the area. I reviewed the data in scatter plot graphs and by running regression analysis to see if there is a correlation in asking price and color and age of Mustangs. Based on the data I was able to see a correlation of higher asking price between, age of car, and if the model is a convertible or GT type. I’d suggest to Tom to use these categories when pricing his Mustangs. Below is more detail along with the graphs and analysis I completed. As stated in the conclusion, I suggested that more data should be collected so Tom could price his Mustangs more relevant to those in the area.

Introduction

Tom has recently opened a used car lot. Although he has very little business experience, his passion has always been for vintage automobiles. Tom has been collecting and repairing old cars since he was a teenager and has lots of technical knowledge about carburetors, shock absorbers, air conditioners, and so forth. Tom has decided to turn his hobby into a money-making venture for himself. Unfortunately, Tom knows almost nothing about advertising, taxes, social security payments for his employees, bookkeeping, or other aspects of the business of selling cars. For this reason, Tom is taking a few business courses at the local community college. (bowermand, O'Connell, J.b.Orris, & Murphree, 2010)

Background on the problem

The car lot has been open for a few months and several of Tom’s customers have told him that his asking prices are way out of line with the rest of the market—sometimes too high and sometimes too low, but never close to the going rate. Tom typically relies on a gut feeling for determining asking prices. For instance, all else the same, he thinks that red cars appear sportier and can be sold at a premium. He knows that older cars sell...