QUANTITATIVE TECHNIQUES

(MANAGEMENT CONSULTANCY)

PROBLEM 1 (PERT/CPM)

The management of SHOPEE COMPANY has approved the nationwide promotion of its new product “ESPRIT” and the
following activity list has been prepared together with prerequisite activities for immediate predecessor(s) and time
estimates.

Activities Prerequisite Time Estimates in Weeks

Symbol Description Activities 𝑡𝑜 𝑡𝑚 𝑡𝑝
A Develop advertising plan - 1 2 3
B Develop the plan for promotion and - 1 2 3
advertising material
C Design training programs for branch - 1 2 3
managers
D Schedule advertisements (radio, TV and A 1 3 5
dailies)
E Develop advertising materials A 1 4 13
F Prepare promotion material for use in in- B 4 7 10
branch promo
G Prepare training materials for branch B 3 6 9
managers
H Conduct pre-introduction campaign to D,E 5 7 9
the media
I Screen and select branch managers to be C 2 4 6
trained
J Conduct Training program G, I 2 3 4
K In-branch introduction of the product F,H,J 1 1 1
‘ESPRIT”

Required:

1. Construct the Pert network of the above activities.

2. Identify the critical path and determine the earliest completion time for the project.
3. Compute the slack time for each activity.

Suggested Solution:

Activities Prerequisite Time Estimates in Weeks

Symbol Description Activities 𝑡𝑜 𝑡𝑚 𝑡𝑝 𝑡𝑒
A Develop advertising plan - 1 2 3 2
B Develop the plan for promotion - 1 2 3 2
and advertising material
C Design training programs for - 1 2 3 2
branch managers
D Schedule advertisements (radio, A 1 3 5 3
TV and dailies)
E Develop advertising materials A 1 4 13 5
F Prepare promotion material for B 4 7 10 7
use in in-branch promo
G Prepare training materials for B 3 6 9 6
branch managers
H Conduct pre-introduction D,E 5 7 9 7
campaign to the media
I Screen and select branch C 2 4 6 4
managers to be trained
J Conduct Training program G, I 2 3 4 3
K In-branch introduction of the F,H,J 1 1 1 1
product ‘ESPRIT”

1. Construct the Pert network of the above activities.

2 5
D 3
4 7 7 14
0 2 H 7
A 2 7 14
2 7
0 2
E 5
2 7

2 9 14 15

START F 7 K 1 FINISH

0 2 7 14 14 15

B 2
3 5 2 8
G 6
5 11
9 12
J 3
11 14
0 2 2 9
C 2 I 7
2 4 4 11

2. Identify the critical path and determine the earliest completion time for the project.
a. Completion Time: 15 Weeks
b. Critical Path: A-E-H-K

2 5
D 3
4 7 7 14
0 2 H 7
A 2 7 14
2 7
0 2
E 5
2 7

2 9 14 15

START F 7 K 1 FINISH

0 2 7 14 14 15

B 2
3 5 2 8
G 6
5 11
9 12
J 3
11 14
0 2 2 9
C 2 I 7
2 4 4 11
 3. Compute the slack time for each activity.

2
2 5
D 3
0
0 4 7 7 14
0 2 H 7
A 2 0 7 14
2 7
0 2
E 5
2 7

5 0
2 9 14 15

START F 7 K 1 FINISH
3
0 2 7 14 14 15

B 2 3
3 5 2 8
G 6
5 11 2
9 12
J 3
2 2 11 14
0 2 2 9
C 2 I 7
2 4 4 11

PROBLEM 2 (PERT/CPM)

The following table contains information related to the major activities of a research project.

Activity Post – Activity Expected Time (Days) Activity Post – Activity Expected Time (Days)
A C,B 5 G H 1
B I 7 H K 2
C D 8 I J 10
D I 2 J END 8
E F 3 K END 17
F J 6

Required:

1. Draw the PERT/CPM network

2. Find the critical path
3. Determine the expected length of the project
Suggested Solution:

1. Draw the PERT/CPM network

5 12 15 25
B 7 I 10
8 15 15 25
0 5
A 5
0 5
5 13 13 15 25 33
C 8 D 2 J 8
5 13 13 15 25 33

START 0 3 3 9 FINISH
E 3 F 6
16 19 19 25

0 1 1 3 3 20
G 1 H 2 K 17
13 14 14 16 16 33

2. Find the critical path

Critical Path: A-C-D-I-J

5 12 15 25
B 7 I 10
8 15 15 25
0 5
A 5
0 5
5 13 13 15 25 33
C 8 D 2 J 8
5 13 13 15 25 33

START 0 3 3 9 FINISH
E 3 F 6
16 19 19 25

0 1 1 3 3 20

G 1 H 2 K 17
13 14 14 16 16 33

3. Determine the expected length of the project

Expected Length of the Project: 33 days

PROBLEM 3 (PERT/CPM)

Following are a set of activities for a project, their predecessor restrictions and the three time estimates of completion
time.

Activity Predecessors Optimistic Most Likely Pessimistic

A None 1 3 5
B None 1 2 3
C None 3 5 7
D A 3 4 5
E B 3 4 5
F B 5 6 13
G C 5 6 13
H D,E 2 8 14
I F,G,H 5 6 13

Required:

1. Construct the PERT network of the above activities.

2. Identify the critical path and determine the earliest completion time for the project.
3. Compute the slack time for each activity.

Suggested Solution:

1. Construct the PERT network of the above activities.

Activity Predecessors Optimistic Most Likely Pessimistic Expected

A None 1 3 5 3
B None 1 2 3 2
C None 3 5 7 5
D A 3 4 5 4
E B 3 4 5 4
F B 5 6 13 7
G C 5 6 13 7
H D,E 2 8 14 8
I F,G,H 5 6 13 7

0 3 3 7
A 3 D 4
0 3 3 7
7 15
H 8
7 15
2 6
E 4
0 2 3 7
B 2
1 3 2 9 15 22
START F 7 I 7 END
8 15 15 22

0 5 5 12
C 5 G 7
8 15
 2. Identify the critical path and determine the earliest completion time for the project.

Critical Path: A-D-H-I

0 3 3 7
A 3 D 4
0 3 3 7
7 15
H 8
7 15
2 6
E 4
0 2 3 7
B 2
1 3 2 9 15 22
START F 7 I 7 END
8 15 15 22

0 5 5 12
C 5 G 7
8 15

Estimated Project Completion Time: 22 Days

3. Compute the slack time for each activity.

0 0
0 3 3 7
A 3 D 4
0 3 3 7 0
7 15
H 8
1 7 15
2 6
E 4
1
0 2 3 7
B 2 0
2 6
1 3 9 15 22
START F 7 I 7 END
8 15 15 22

3 3
0 5 5 12
C 5 G 7
3 8 8 15

PROBLEM 4 (DECISION UNDER UNCERTAINTY)

Abigail Posadas is the principal owner of Brown Oil, Inc. After quitting her university teaching job, Abi has been able to
increase her annual salary by a factor of over 100. At the present time, Abi is forced to consider purchasing some more
equipment for Brown Oil because of competition. Her alternatives are shown in the following table:

Equipment Favorable Market Unfavorable Market

Sub 100 Php 300,000 (Php 200,000)
Oiler J Php 250,000 (Php 100,000)
Texan Php 75,000 (Php 18,000)

Required: Under the following approaches, what would be Abi’s decision?

1. Optimistic Approach
2. Pessimistic Approach
 3. Criterion of Realism (𝛼 = 0.65)
4. Equally Likely
5. Minimax Regret

Suggested Solutions

1. Optimistic Approach

Equipment Favorable Market Unfavorable Market Payoff

Sub 100 PHP 300,000.00 PHP (200,000.00) PHP 300,000.00
Oiler J PHP 250,000.00 PHP (100,000.00) PHP 250,000.00
Texan PHP 75,000.00 PHP (18,000.00) PHP 75,000.00

Choose Sub 100 as it has estimated monetary value of Php 300,000

2. Pessimistic Approach

Equipment Favorable Market Unfavorable Market Payoff

Sub 100 PHP 300,000.00 PHP (200,000.00) PHP (200,000.00)
Oiler J PHP 250,000.00 PHP (100,000.00) PHP (100,000.00)
Texan PHP 75,000.00 PHP (18,000.00) PHP (18,000.00)

Do nothing as the available options will results to net loss

3. Criterion of Realism (𝛼 = 0.65)

Equipment Favorable Market Unfavorable Market Payoff

Sub 100 PHP 300,000.00 PHP (200,000.00) PHP 125,000.00
Oiler J PHP 250,000.00 PHP (100,000.00) PHP 127,500.00
Texan PHP 75,000.00 PHP (18,000.00) PHP 42,450.00

Choose Oiler J because it has highest estimated monetary value of Php 127,500

4. Equally Likely

Equipment Favorable Market Unfavorable Market Payoff

Sub 100 PHP 300,000.00 PHP (200,000.00) PHP 50,000.00
Oiler J PHP 250,000.00 PHP (100,000.00) PHP 75,000.00
Texan PHP 75,000.00 PHP (18,000.00) PHP 28,500.00
 5. Minimax Regret

Payoff Table

Equipment Favorable Market Unfavorable Market

Sub 100 PHP 300,000.00 PHP (200,000.00)
Oiler J PHP 250,000.00 PHP (100,000.00)
Texan PHP 75,000.00 PHP (18,000.00)
Highest Payoff PHP 300,000.00 PHP (18,000.00)

Opportunity Loss Table

Equipment Favorable Market Unfavorable Market Max OL

Sub 100 PHP - PHP 182,000.00 PHP 182,000.00
Oiler J PHP 50,000.00 PHP 82,000.00 PHP 82,000.00
Texan PHP 225,000.00 PHP - PHP 225,000.00

Choose Oiler J because it has the lowest Opportunity Loss of Php 82,000 based on the table.

PROBLEM 5 (DECISION UNDER UNCERTAINTY)

Today’s Electronics specializes in manufacturing modern electronic components. It also builds the equipment that
produces the components. Phyllis Weinberger, who is responsible for advising the president of Today’s Electronics on
electronic manufacturing equipment, has developed the following table concerning a proposed facility:

Facility Strong Market Fair Market Poor Market

Large Php 550,000 Php 110,000 (Php 310,000)
Medium Php 300,000 Php 129,000 (Php 100,000)
Small Php 200,000 Php 100,000 (Php 32,000)
No Facility Php 0 Php 0 Php 0

Required: Under the following approaches, what would be the manager’s decision?

1. Optimistic Approach
2. Pessimistic Approach
3. Criterion of Realism (𝛼 = 0.58)
4. Equally Likely
5. Minimax Regret
Suggested Solutions:

1. Optimistic Approach

Facility Strong Market Fair Market Poor Market Payoff

Large PHP 550,000.00 PHP 110,000.00 PHP (310,000.00) PHP 550,000.00
Medium PHP 300,000.00 PHP 129,000.00 PHP (100,000.00) PHP 300,000.00
Small PHP 200,000.00 PHP 100,000.00 PHP (32,000.00) PHP 200,000.00
No Facility PHP - PHP - PHP - PHP -

Choose to build Large Facility.

2. Pessimistic Approach

Facility Strong Market Fair Market Poor Market Payoff

Large PHP 550,000.00 PHP 110,000.00 PHP (310,000.00) PHP (310,000.00)
Medium PHP 300,000.00 PHP 129,000.00 PHP (100,000.00) PHP (100,000.00)
Small PHP 200,000.00 PHP 100,000.00 PHP (32,000.00) PHP (32,000.00)
No Facility PHP - PHP - PHP - PHP -

Don’t build facility.

3. Criterion of Realism (𝛼 = 0.58)

Facility Strong Market Fair Market Poor Market Payoff

Large PHP 550,000.00 PHP 110,000.00 PHP (310,000.00) PHP 188,800.00
Medium PHP 300,000.00 PHP 129,000.00 PHP (100,000.00) PHP 132,000.00
Small PHP 200,000.00 PHP 100,000.00 PHP (32,000.00) PHP 102,560.00
No Facility PHP - PHP - PHP - PHP -

Choose to build Large Facility.

4. Equally Likely

Facility Strong Market Fair Market Poor Market Payoff

Large PHP 550,000.00 PHP 110,000.00 PHP (310,000.00) PHP 116,666.67
Medium PHP 300,000.00 PHP 129,000.00 PHP (100,000.00) PHP 109,666.67
Small PHP 200,000.00 PHP 100,000.00 PHP (32,000.00) PHP 89,333.33
No Facility PHP - PHP - PHP - PHP -

Choose to build Large Facility.

 5. Minimax Regret

Payoff Table

Facility Strong Market Fair Market Poor Market

Large PHP 550,000.00 PHP 110,000.00 PHP (310,000.00)
Medium PHP 300,000.00 PHP 129,000.00 PHP (100,000.00)
Small PHP 200,000.00 PHP 100,000.00 PHP (32,000.00)
No Facility PHP - PHP - PHP -
Highest Payoff PHP 550,000.00 PHP 129,000.00 PHP -

Opportunity Loss Table

Facility Strong Market Fair Market Poor Market Max OL

Large PHP - PHP 19,000.00 PHP 310,000.00 PHP 310,000.00
Medium PHP 250,000.00 PHP - PHP 100,000.00 PHP 250,000.00
Small PHP 350,000.00 PHP 29,000.00 PHP 32,000.00 PHP 350,000.00
No Facility PHP 550,000.00 PHP 129,000.00 PHP - PHP 550,000.00

Choose to build Medium Facility

PROBLEM 6 (DECISION UNDER RISK)

A group of medical professionals is considering the construction of a private clinic. If the medical demand is high (i.e.,
there is a favorable market for the clinic), the physicians could realize a net profit of Php 10,000,000. If the market is not
favorable, they could lose Php 400,000. Of course, they don’t have to proceed at all, in which case there is no cost. In the
absence of any market data, the best the physicians can guess is that there is a 50–50 chance the clinic will be successful.

Required: Construct a decision tree to help analyze this problem. What should the medical professionals do?

Suggested Solutions:
 Php 0
Do Nothing
EMV = Php 0

Php 10,000,000
Favorable Market (50%)

EMV = Php 10,000,000 x 50% = Php 5,000,000

Construct a Clinic
EMV = Php 4,200,000

Unfavorable Market (50%)

Php (400,000)
EMV = Php (400,000) x 50% = Php (200,000)

Build a clinic as it will give the medical profession an estimated monetary value of Php 4,200,000.

PROBLEM 7 (DECISION UNDER RISK)

The physicians in Problem 6 have been approached by a market research firm that offers to perform a study of the market
at a fee of Php 50,000. The market researchers claim their experience enables them to use Bayes’ theorem to make the
following statements of probability:

Probability Favorable Study Unfavorable Study

Favorable Market 82% 11%
Unfavorable Market 18% 89%

The probability that the outcome of a favorable study is 55%, while unfavorable study would results to 45% probability.
 Php 9,950,000

Favorable Market (82%)

EMV = Php 9,950,000 x 82% = Php 8,159,000

EMV = Php 8,078,000
Build a Clinic

Unfavorable Market (18%)

EMV = Php 8,078,000
Php (450,000)
EMV = Php (450,000) x 18% = Php (81,000)

Do Not Build a Clinic

Php (50,000)
Favorable Survey (55%)

EMV = Php 8,078,000 x 55% = Php 4,447,850

EMV = Php 9,950,000 x 11% = Php 1,094,500
Php 9,950,000

Favorable Market (11%)

EMV = Php 694,000 x 45% = Php 312,300 EMV = Php 694,000

Unfavorable Survey (45%) Build a Clinic
Conduct Market Survey
EMV = Php 4,760,150 Unfavorable Market (89%)
EMV = Php 694,000
Php (450,000)
EMV = Php (450,000) x 89% = Php (400,500)

Do Not Build a Clinic

Php (50,000)

EMV = Php 10,000,000 x 50% = Php 5,000,000

Php 10,000,000

Favorable Market (50%)

Do Not Conduct Market Survey

EMV = Php 4,200,000
EMV = Php 4,200,000
Build a Clinic

Unfavorable Market (50%)

EMV = Php 4,200,000
Php (400,000)
EMV = Php (400,000) x 50% = Php (200,000)
Do Not Build a Clinic

Php 0

The decision should be to conduct a survey and in either results of the survey, build a clinic.
PROBLEM 8 (REGRESSION ANALYSIS)

Vianne Jane Ibarreta runs a florist shop on the Quezon City, specializing in floral arrangements for weddings and other
special events. She advertises weekly in the local newspapers and is considering increasing her advertising budget. Before
doing so, she decides to evaluate the past effectiveness of these ads. Five weeks are sampled, and the advertising peso
and sales volume for each of these is shown in the following table.

Advertising Sales
Php 5,000 Php 11,000
Php 3,000 Php 6,000
Php 7,000 Php 10,000
Php 2,000 Php 6,000
Php 8,000 Php 12,000

Required:

a. Determine the mean of the dependent variable.

b. Determine the mean of the independent variable.
c. Determine the regression line.
d. If Vianne decided to shell out Php 12,000 in advertising expense, what would be her expected sales?
e. If Vianne wants to have sales of Php 15,000, based on the regression line, how much advertising expense should
be budget?

Suggested Solutions:

a. Determine the mean of the dependent variable.

Dependent variable is Sales

b. Determine the mean of the independent variable.

Independent variable is Advertising Expenses

c. Determine the regression line.

𝑿 𝒀 ̅)
(𝑿 − 𝑿 ̅)
(𝒀 − 𝒀 ̅ )𝟐
(𝑿 − 𝑿 ̅ )(𝒀 − 𝒀
(𝑿 − 𝑿 ̅)
5,000 11,000 0 2,000 0 0
3,000 6,000 (2,000) (3,000) 4,000,000 6,000,000
7,000 10,000 2,000 1,000 4,000,000 2,000,000
2,000 6,000 (3,000) (3,000) 9,000,000 9,000,000
8,000 12,000 3,000 3,000 9,000,000 9,000,000
∑𝑋 = 25,000 ∑𝑌 = 45,000 ∑ = 26,000,000 ∑ = 26,000,000
25,000 45,000
𝑋̅ = = 5,000 𝑌̅ = = 9,000
5 5

∑(𝑋 − 𝑋̅)(𝑌 − 𝑌̅) 26,000,000

𝑏1 = = = 1.00 𝑏0 = 𝑌̅ − 𝑏1 𝑋̅ = 9,000 − (1.000)5,000 = 4,000
∑(𝑋 − 𝑋̅)2 26,000,000

̂ = 𝑷𝒉𝒑 𝟒, 𝟎𝟎𝟎 + 𝑿
𝒀

d. If Vianne decided to shell out Php 12,000 in advertising expense, what would be her expected sales?

𝑌̂ = 𝑃ℎ𝑝 4,000 + 𝑋 = 𝑃ℎ𝑝 4,000 + 12,000 = 𝑃ℎ𝑝 4,000 + 𝑃ℎ𝑝 12,000 = 𝑷𝒉𝒑 𝟏𝟔, 𝟎𝟎𝟎
 e. If Vianne wants to have sales of Php 15,000, based on the regression line, how much advertising expense should
be budget?

𝑌̂ = 𝑃ℎ𝑝 4,000 + 𝑋 = 𝑃ℎ𝑝 4,000 + 15,000 = 𝑃ℎ𝑝 4,000 + 𝑃ℎ𝑝 15,000 = 𝑷𝒉𝒑 𝟏𝟗, 𝟎𝟎𝟎

PROBLEM 9 (REGRESSION ANALYSIS)

Chino Pateño is a real estate broker, he was able to gather the following data (selling price, square footage, number of
bedrooms, and age of houses) that have sold in a neighborhood in the past 6 months.

Selling Price Square Foot No. of Bedrooms Age (In Years)

Php 6,400,000 1,670 2 30
Php 5,900,000 1,339 2 25
Php 6,150,000 1,712 3 30
Php 7,900,000 1,840 3 40
Php 8,750,000 2,300 3 18
Php 9,250,000 2,234 3 30
Php 9,500,000 2,311 3 19
Php 11,300,000 2,377 3 7
Php 11,500,000 2,736 4 10
Php 13,800,000 2,500 3 1
Php 14,250,000 2,500 4 3
Php 14,400,000 2,479 3 3
Php 14,500,000 2,400 3 1
Php 14,750,000 3,124 4 0
Php 14,400,000 2,500 3 2
Php 15,550,000 4,062 4 10
Php 16,500,000 2,854 3 3

Required:

1. What is the regression line if you want to determine the sales price using square foot?
2. What is the regression line if you want to determine the sales price using no. of bedrooms?
3. What is the regression line if you want to determine the sales price using age in years?
4. What would be the selling price of a unit with 2,789 square foot?
5. If a client has a budget of Php 10,000,000. What is the average years of the house should Chino suggest?

Suggested Solutions:

1. What is the regression line if you want to determine the sales price using square foot?

𝑿 𝒀 ̅)
(𝑿 − 𝑿 ̅)
(𝒀 − 𝒀 ̅ )𝟐
(𝑿 − 𝑿 ̅ )(𝒀 − 𝒀
(𝑿 − 𝑿 ̅)
1,670 6,400,000 (738.12) (5,058,823.53) 544,817.66 3,734,006,920.42
1,339 5,900,000 (1,069.12) (5,558,823.53) 1,143,012.54 5,943,036,332.18
1,712 6,150,000 (696.12) (5,308,823.53) 484,579.78 3,695,565,743.94
1,840 7,900,000 (568.12) (3,558,823.53) 322,757.66 2,021,830,449.83
2,300 8,750,000 (108.12) (2,708,823.53) 11,689.43 292,871,626.30
2,234 9,250,000 (174.12) (2,208,823.53) 30,316.96 384,595,155.71
2,311 9,500,000 (97.12) (1,958,823.53) 9,431.84 190,236,332.18
2,377 11,300,000 (31.12) (158,823.53) 968.31 4,942,214.53
2,736 11,500,000 327.88 41,176.47 107,506.84 13,501,038.06
2,500 13,800,000 91.88 2,341,176.47 8,442.37 215,112,802.77
2,500 14,250,000 91.88 2,791,176.47 8,442.37 256,459,861.59
 2,479 14,400,000 70.88 2,941,176.47 5,024.31 208,477,508.65
2,400 14,500,000 (8.12) 3,041,176.47 65.90 (24,687,197.23)
3,124 14,750,000 715.88 3,291,176.47 512,487.54 2,356,095,155.71
2,500 14,400,000 91.88 2,941,176.47 8,442.37 270,242,214.53
4,062 15,550,000 1,653.88 4,091,176.47 2,735,326.84 6,766,324,567.47
2,854 16,500,000 445.88 5,041,176.47 198,811.07 2,247,771,626.30
∑𝑋 = 40,938 ∑𝑌 = 194,800,000 ∑ = 6,132,123.76 ∑ = 28,576,382,352.94
40,938 194,800,000
𝑋̅ = 𝑌̅ =
17 17
= 2,408.12 = 11,458,823.53

∑(𝑋 − 𝑋̅)(𝑌 − 𝑌̅) 28,576,382,352.94

𝑏1 = = = 4,660.11
∑(𝑋 − 𝑋̅)2 6,132,123.76

𝑏0 = 𝑌̅ − 𝑏1 𝑋̅ = 11,458,823.53 − (4,660.11)2,408.12 = 236,719.45

̂ = 𝑷𝒉𝒑 𝟐𝟑𝟔, 𝟕𝟏𝟗. 𝟒𝟓 + 𝟒, 𝟔𝟔𝟎. 𝟏𝟏𝑿

𝒀

2. What is the regression line if you want to determine the sales price using no. of bedrooms?

𝑿 𝒀 ̅)
(𝑿 − 𝑿 ̅)
(𝒀 − 𝒀 ̅ )𝟐
(𝑿 − 𝑿 ̅ )(𝒀 − 𝒀
(𝑿 − 𝑿 ̅)
2 6,400,000 (738.12) (5,058,823.53) 1.25 5,653,979.24
2 5,900,000 (1,069.12) (5,558,823.53) 1.25 6,212,802.77
3 6,150,000 (696.12) (5,308,823.53) 0.01 624,567.47
3 7,900,000 (568.12) (3,558,823.53) 0.01 418,685.12
3 8,750,000 (108.12) (2,708,823.53) 0.01 318,685.12
3 9,250,000 (174.12) (2,208,823.53) 0.01 259,861.59
3 9,500,000 (97.12) (1,958,823.53) 0.01 230,449.83
3 11,300,000 (31.12) (158,823.53) 0.01 18,685.12
4 11,500,000 327.88 41,176.47 0.78 36,332.18
3 13,800,000 91.88 2,341,176.47 0.01 (275,432.53)
4 14,250,000 91.88 2,791,176.47 0.78 2,462,802.77
3 14,400,000 70.88 2,941,176.47 0.01 (346,020.76)
3 14,500,000 (8.12) 3,041,176.47 0.01 (357,785.47)
4 14,750,000 715.88 3,291,176.47 0.78 2,903,979.24
3 14,400,000 91.88 2,941,176.47 0.01 (346,020.76)
4 15,550,000 1,653.88 4,091,176.47 0.78 3,609,861.59
3 16,500,000 445.88 5,041,176.47 0.01 (593,079.58)
∑𝑋 = 53 ∑𝑌 = 194,800,000 ∑ = 5,76 ∑ = 20,832,352.94
53 194,800,000
𝑋̅ = 𝑌̅ =
17 17
= 3.12 = 11,458,823.53

∑(𝑋 − 𝑋̅)(𝑌 − 𝑌̅) 20,832,352.94

𝑏1 = = = 3,616,727.94
∑(𝑋 − 𝑋̅)2 5.76

𝑏0 = 𝑌̅ − 𝑏1 𝑋̅ = 11,458,823.53 − (3,616,727.94)3.12 = 174,632.36

̂ = 𝑷𝒉𝒑 𝟏𝟕𝟒, 𝟔𝟑𝟐. 𝟑𝟔 + 𝟑, 𝟔𝟏𝟔, 𝟕𝟐𝟕. 𝟗𝟒𝑿

𝒀
 3. What is the regression line if you want to determine the sales price using age in years?

𝑿 𝒀 ̅)
(𝑿 − 𝑿 ̅)
(𝒀 − 𝒀 ̅ )𝟐
(𝑿 − 𝑿 ̅ )(𝒀 − 𝒀
(𝑿 − 𝑿 ̅)
30 6,400,000 16.35 (5,058,823.53) 267.42 (82,726,643.60)
25 5,900,000 11.35 (5,558,823.53) 128.89 (63,108,996.54)
30 6,150,000 16.35 (5,308,823.53) 267.42 (86,814,878.89)
40 7,900,000 26.35 (3,558,823.53) 694.48 (93,785,467.13)
18 8,750,000 4.35 (2,708,823.53) 18.95 (11,791,349.48)
30 9,250,000 16.35 (2,208,823.53) 267.42 (36,120,761.25)
19 9,500,000 5.35 (1,958,823.53) 28.65 (10,485,467.13)
7 11,300,000 (6.65) (158,823.53) 44.18 1,055,709.34
10 11,500,000 (3.65) 41,176.47 13.30 (150,173.01)
1 13,800,000 (12.65) 2,341,176.47 159.95 (29,608,996.54)
3 14,250,000 (10.65) 2,791,176.47 113.36 (29,717,820.07)
3 14,400,000 (10.65) 2,941,176.47 113.36 (31,314,878.89)
1 14,500,000 (12.65) 3,041,176.47 159.95 (38,461,937.72)
0 14,750,000 (13.65) 3,291,176.47 186.24 (44,914,878.89)
2 14,400,000 (11.65) 2,941,176.47 135.65 (34,256,055.36)
10 15,550,000 (3.65) 4,091,176.47 13.30 (14,920,761.25)
3 16,500,000 (10.65) 5,041,176.47 113.36 (53,673,702.42)
∑𝑋 = 232 ∑𝑌 = 194,800,000 ∑ = 2,725.88 ∑ = (660,797,058.82)
232 194,800,000
𝑋̅ = 𝑌̅ =
17 17
= 13.65 = 11,458,823.53

∑(𝑋 − 𝑋̅)(𝑌 − 𝑌̅) (660,797,058.82)

𝑏1 = = = (242,416.05)
∑(𝑋 − 𝑋̅)2 2,725.88

𝑏0 = 𝑌̅ − 𝑏1 𝑋̅ = 11,458,823.53 − (−242,416.05)13.65 = 14,767,802.61

̂ = 𝑷𝒉𝒑 𝟏𝟒, 𝟕𝟔𝟕, 𝟖𝟎𝟐. 𝟔𝟏 − 𝟐𝟒𝟐, 𝟒𝟏𝟔. 𝟎𝟓𝑿

𝒀

4. What would be the selling price of a unit with 2,789 square foot?

𝑌̂ = 𝑃ℎ𝑝 236,719.45 + 4,660.11𝑋 = 𝑃ℎ𝑝 236,719.45 + (4,660.11)(2,789) = 𝑷𝒉𝒑 𝟏𝟑, 𝟐𝟑𝟑, 𝟕𝟔𝟔. 𝟐𝟒

5. If a client has a budget of 10,000,000. What is the average years of the house should Chino suggest?

𝑃ℎ𝑝 14,767,802.61 − 𝑌̂
𝑌̂ = 𝑃ℎ𝑝 14,767,802.61 − 242,416.05𝑋 → 𝑋 =
242,416.05

14,767,802.61 − 10,000,000 4,767,802.61

𝑋= = = 𝟏𝟗. 𝟔𝟕 𝒀𝑬𝑨𝑹𝑺
242,416.05 242,416.05
PROBLEM 10 (REGRESSION ANALYSIS)

The closing stock price of Globe and PLDT was recorded over a 12-month period in 2017. The closing price for the Philippine
Stocks Exchange Index (PSEi) was also recorded over this same time period. These values are shown in the following table:

Month PSEi Globe (GLO) PLDT (TEL)

January ₱ 7,229.66 ₱ 1,720.00 ₱ 1,470.00
February ₱ 7,212.09 ₱ 1,828.00 ₱ 1,460.00
March ₱ 7,311.72 ₱ 2,032.00 ₱ 1,646.00
April ₱ 7,661.01 ₱ 2,078.00 ₱ 1,770.00
May ₱ 7,837.12 ₱ 2,110.00 ₱ 1,728.00
June ₱ 7,843.16 ₱ 2,048.00 ₱ 1,798.00
July ₱ 8,018.05 ₱ 2,116.00 ₱ 1,637.00
August ₱ 7,958.57 ₱ 2,000.00 ₱ 1,730.00
September ₱ 8,171.43 ₱ 2,050.00 ₱ 1,668.00
October ₱ 8,365.26 ₱ 2,042.00 ₱ 1,710.00
November ₱ 8,254.03 ₱ 1,830.00 ₱ 1,481.00
December ₱ 8,558.42 ₱ 1,900.00 ₱ 1,480.00

Required:

1. Based on the PSEi prices, determine the regression line of GLO stocks.
2. Based on the PSEi prices, determine the regression line of TEL stocks.
3. On January 2018, the closing price of PSEi was at ₱ 8,764.01. Determine the percentage increase or decrease in
GLO stocks from December price.
4. On January 2018, the closing price of PSEi was at ₱ 8,764.01. Determine the percentage increase or decrease in
TEL stocks from December price.
5. By the end of October 2018, the PSEi falls at ₱ 7,140.29. Determine which from the two stocks has the highest
percentage decrease.

Suggested Solutions
1. Based on the PSEi prices, determine the regression line of GLO stocks.

𝑿 𝒀 ̅)
(𝑿 − 𝑿 ̅)
(𝒀 − 𝒀 ̅ )𝟐
(𝑿 − 𝑿 ̅ )(𝒀 − 𝒀
(𝑿 − 𝑿 ̅)
7,229.66 1,720.00 (638.72) (259.50) 407,958.98 165,746.98
7,212.09 1,828.00 (656.29) (151.50) 430,712.19 99,427.43
7,311.72 2,032.00 (556.66) 52.50 309,866.64 (29,224.48)
7,661.01 2,078.00 (207.37) 98.50 43,000.93 (20,425.62)
7,837.12 2,110.00 (31.26) 130.50 976.98 (4,079.00)
7,843.16 2,048.00 (25.22) 68.50 635.88 (1,727.34)
8,018.05 2,116.00 149.67 136.50 22,402.11 20,430.41
7,958.57 2,000.00 90.19 20.50 8,134.84 1,848.96
8,171.43 2,050.00 303.05 70.50 91,841.32 21,365.26
8,365.26 2,042.00 496.88 62.50 246,893.05 31,055.21
8,254.03 1,830.00 385.65 (149.50) 148,728.49 (57,655.17)
8,558.42 1,900.00 690.04 (79.50) 476,159.80 (54,858.45)
∑𝑋 = 94,420.52 ∑𝑌 = 23,754.00 ∑ = 2,187,311.22 ∑ = 171,904.20
94,420.52 23,754.00
𝑋̅ = 𝑌̅ =
12 12
= 7,868.38 = 1,979.50
 ∑(𝑋 − 𝑋̅)(𝑌 − 𝑌̅) 171,904.20
𝑏1 = = = 0.0786
∑(𝑋 − 𝑋̅) 2 2,187,311.22

𝑏0 = 𝑌̅ − 𝑏1 𝑋̅ = 1,979.50 − (0.0786)7,868.38 = 1,361.05

̂ = 𝑷𝒉𝒑 𝟏, 𝟑𝟔𝟏. 𝟎𝟓 + 𝟎. 𝟎𝟕𝟖𝟔𝑿

𝒀

2. Based on the PSEi prices, determine the regression line of TEL stocks.

𝑿 𝒀 ̅)
(𝑿 − 𝑿 ̅)
(𝒀 − 𝒀 ̅ )𝟐
(𝑿 − 𝑿 ̅ )(𝒀 − 𝒀
(𝑿 − 𝑿 ̅)
7,229.66 1,470.00 (638.72) (161.50) 26,082.25 103,152.74
7,212.09 1,460.00 (656.29) (171.50) 29,412.25 112,553.16
7,311.72 1,646.00 (556.66) 14.50 210.25 (8,071.52)
7,661.01 1,770.00 (207.37) 138.50 19,182.25 (28,720.28)
7,837.12 1,728.00 (31.26) 96.50 9,312.25 (3,016.27)
7,843.16 1,798.00 (25.22) 166.50 27,722.25 (4,198.58)
8,018.05 1,637.00 149.67 5.50 30.25 823.20
7,958.57 1,730.00 90.19 98.50 9,702.25 8,884.04
8,171.43 1,668.00 303.05 36.50 1,332.25 11,061.45
8,365.26 1,710.00 496.88 78.50 6,162.25 39,005.34
8,254.03 1,481.00 385.65 (150.50) 22,650.25 (58,040.83)
8,558.42 1,480.00 690.04 (151.50) 22,952.25 (104,541.57)
∑𝑋 = 94,420.52 ∑𝑌 = 19,578.00 ∑ = 2,187,311.22 ∑ = 68,890.90
94,420.52 19,578.00
𝑋̅ = 𝑌̅ =
12 12
= 7,868.38 = 1,631.50

∑(𝑋 − 𝑋̅)(𝑌 − 𝑌̅) 68,890.90

𝑏1 = = = 0.0315
∑(𝑋 − 𝑋̅) 2 2,187,311.22

𝑏0 = 𝑌̅ − 𝑏1 𝑋̅ = 1,631.50 − (0.0315)7,868.38 = 1,383.65

̂ = 𝑷𝒉𝒑 𝟏, 𝟑𝟖𝟑. 𝟔𝟓 + 𝟎. 𝟎𝟑𝟏𝟓𝑿

𝒀

3. On January 2018, the closing price of PSEi was at ₱ 8,764.01. Determine the percentage increase or decrease in
GLO stocks from December price.

𝑌̂ = 𝑃ℎ𝑝 1,361.05 + 0.0786𝑋 = 𝑃ℎ𝑝 1,361.05 + (0.0786 𝑥 8.764.01) = 𝑃ℎ𝑝 2,049.90

𝑃𝑟𝑖𝑐𝑒𝐽𝑎𝑛 − 𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 (𝑃ℎ𝑝 2,049.90 − 𝑃ℎ𝑝 1,900.00) 𝑃ℎ𝑝 149.90

∆%= = = = 𝟕. 𝟖𝟗%
𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 𝑃ℎ𝑝 1,900.00 𝑃ℎ𝑝 1,900.00

4. On January 2018, the closing price of PSEi was at ₱ 8,764.01. Determine the percentage increase or decrease in
TEL stocks from December price.

𝑌̂ = 𝑃ℎ𝑝 1,383.65 + 0.0315𝑋 = 𝑃ℎ𝑝 1,383.65 + (0.0315 𝑥 8.764.01) = 𝑃ℎ𝑝 1,659.72

𝑃𝑟𝑖𝑐𝑒𝐽𝑎𝑛 − 𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 (𝑃ℎ𝑝 1,659.72 − 𝑃ℎ𝑝 1,480.00) 𝑃ℎ𝑝 179.90

∆%= = = = 𝟏𝟐. 𝟏𝟓%
𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 𝑃ℎ𝑝 1,480.00 𝑃ℎ𝑝 1,480.00
5. By the end of October 2018, the PSEi falls at ₱ 7,140.29. Determine which from the two stocks has the highest
percentage decrease (based on December last year prices).

𝑌̂ = 𝑃ℎ𝑝 1,361.05 + 0.0786𝑋 = 𝑃ℎ𝑝 1,361.05 + (0.0786 𝑥 7,140.29) = 𝑃ℎ𝑝 1,922.28

𝑃𝑟𝑖𝑐𝑒𝑂𝑐𝑡 − 𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 (𝑃ℎ𝑝 1,922.28 − 𝑃ℎ𝑝 1,900.00) 𝑃ℎ𝑝 22.28

∆%= = = = 1.17%
𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 𝑃ℎ𝑝 1,900.00 𝑃ℎ𝑝 1,900.00

𝑌̂ = 𝑃ℎ𝑝 1,383.65 + 0.0315𝑋 = 𝑃ℎ𝑝 1,383.65 + (0.0315 𝑥 7,140.29) = 𝑃ℎ𝑝 1,608.57

𝑃𝑟𝑖𝑐𝑒𝑂𝑐𝑡 − 𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 (𝑃ℎ𝑝 1,608.57 − 𝑃ℎ𝑝 1,480.00) 𝑃ℎ𝑝 128.57

∆%= = = = 8.69%
𝑃𝑟𝑖𝑐𝑒𝐷𝑒𝑐 𝑃ℎ𝑝 1,480.00 𝑃ℎ𝑝 1,480.00

PLDT Stocks (TEL) will yield highest increase with 8.69% against Globe Stocks (GLO) with 1.17%