Computing a linear regression equation

Assignment Help Basic Statistics
Reference no: EM1313948

Estimating a linear regression equation to predict the future values of the dependent variable Y.

A CEO of a large pharmaceutical company would like to determine if he should be placing more money allotted in the budget next year for television advertising of a new drug marketed for controlling asthma. He wonders whether there is a strong relationship between the amount of money spent on television advertising for this new drug called XBC and the number of orders received. The manufacturing process of this drug is very difficult and requires stability so the CEO would prefer to generate a stable number of orders. The cost of advertising is always an important consideration in the phase I roll-out of a new drug. Data that have been collected over the past 20 months indicate the amount of money spent of television advertising and the number of orders received.

The use of linear regression is a critical tool for a manager's decision-making ability. Please carefully read the example below and try to answer the questions in terms of the problem context. The results are as follows:

Month

Advertising Cost (thousands of dollars)

Number of Orders

1

$58.93

4,102,000

2

70.62

3,893,000

3

79.58

5,299,000

4

58.67

4,130,000

5

69.18

4,367,000

6

70.14

4,111,000

7

73.37

3,923,000

8

68.88

4,935,000

9

82.99

5,276,000

10

75.23

4,654,000

11

81.38

4,398,000

12

52.90

2,967,000

13

61.27

3,999,000

14

79.19

4,345,000

15

60.03

3,934,000

16

78.21

4,653,000

17

83.77

5,625,000

18

62.53

3,978,000

19

88.76

4,999,000

20

72.64

5,834,000

a. Set up a scatter diagram and calculate the associated correlation coefficient. Discuss how strong you think the relationship is between the amounts of money spent on television advertising and the number of orders received. Please use the Correlation procedures within Excel under Tools > Data Analysis.The

NOTE: If you do not have the Data Analysis option under Tools you must install it. You need to go to Tools select Add-ins and then choose the 2 data toolpak options. The original Excel CD will be required for this installation. It should take about a minute.

b. Assuming there is a statistically significant relationship, use the least squares method to find the regression equation to predict the advertising costs based on the number of orders received. Please use the regression procedure within Excel under Tools > Data Analysis to construct this equation.

c. Interpret the meaning of the slope, b1, in the regression equation.

d. Predict the monthly advertising cost when the number of orders is 4,999,000. (Hint: Be very careful with assigning the dependent variable for this problem)

e. Compute the coefficient of determination, r2, and interpret its meaning.

Reference no: EM1313948

Questions Cloud

What happens to velocity if the average price level falls : the average price level is $4 per unit also the quantity of money. Illustrate what happens to velocity if the average price level falls to $2 per unit, the money delivery is $2000 also real GDP is 4,000 units.
Explain capital budgeting decision for purchase of computers : Explain Capital Budgeting decision for purchase of computers based on present value of costs
Find the return on equity from the data : Find the return on equity from the data given and Henry's return on common stockholder's equity, rounded to the nearest percentage point,for 2007
Computation of the value of the annuity payment : Computation of the value of the annuity payment and would you have to deposit each year if your first deposit is made now and the final deposit is made one year
Computing a linear regression equation : Estimating a linear regression equation to predict the future values of the dependent variable Y.
Deadweight loss created by this monopoly : Illustrate what is the value of consumer surplus. Illustrate what is the value of the deadweight loss created by this monopoly.
Finding f test for significance of straight line regression : Carry out F test for significance of straight line regression of Y on X and interpret your results.
Calculate the return on equity from the data : Calculate the return on equity from the data and Henry's return on common stockholder's equity, rounded to the nearest percentage point
Computation of the value of the annuity payment : Computation of the value of the annuity payment and how much will you have to deposit each year if your first deposit

Reviews

Write a Review

 

Basic Statistics Questions & Answers

  Computing probability-values

A committee of three is selected at random from a set consisting of five Democrats, eight Republicans, and two Independents.

  Poisson distribution-plausible model

Assuming that the Poisson distribution is a plausible model in describing variability of asbestos fiber counts in filters; derive a 95% confidence interval indicating the variability in the average number in asbestos fibers.

  Finding degree of confidence for interval

Use value you found in part a to find out degree of confidence for interval 65.65

  One-way analysis of variance

A human factors psychologist studied three computer keyboard designs.

  The standard error of the difference in sample means

Find the standard error of the difference in sample means,

  Hypothesis test for one sample mean

Suppose you found that in doing the hypothesis test, you were able to reject the null hypothesis. What is the most appropriate conclusion to draw?

  Evaluate the standard error for the sample

The standard deviation of grade points was 0.65 and the mean was 2.89. The standard error for the sample was

  Sampling technique for study

Explain why random samples are preferred to nonrandom samples.

  Contingency table or cross table

What is the probability that a cereal would be high calorie, given that is low fiber? In other words, what is P (high calorie, given low fiber)?

  Determine the effects of three different pesticides

An experiment was conducted to determine the effects of three different pesticides (P1,P2,P3) on the yield of three different varieties of citrus tree (V1,V2,V3).

  Find the sampling distribution

Let be the average of the pay you receive for the first and second week. Find the sampling distribution

  Evaluate the binomial distribution

Let X be the number of correct guesses by your friend in the 100 trials and Use the Normal approximation with the continuity correction - Which of the following might be reasonably modeled by the binomial distribution

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd