Simple Re
g
ression in a spread sheet!!
A
boss of a big
company would liketo dete
r
m
ine ifhe shou
l
d be placing
m
ore
m
oney a
l
lo
t
tedin
t
hebudget n
e
xtyear
f
or
t
e
levision ad
v
ertis
i
ng ofa
widget
. She wonders whether th
e
re
i
sa s
t
rong relations
h
ipbetween thea
m
ount ofmoney
s
pent on tel
ev
is
i
onadve
r
tising
f
or
t
his new widget and t
h
e
n
u
m
ber of orders receiv
e
d. The
m
an
u
facturing p
r
ocess of this widget is very dif
f
icult andrequ
i
resadvanc
e
d quality controlsothe
y
wouldprefer to gene
r
a
te a
s
table nu
m
ber of orders. The costof a
d
vertisingis always an
i
m
por
t
a
n
t conside
r
a
t
i
on in
t
he first
r
o
l
l
-o
u
t of a new widget. Data that ha
v
e been collectedover the
p
ast 20 months indicatethe a
m
o
unt of
m
oney spent of television ad
v
ertising and the nu
m
ber of orders received.
The use of linear regres
s
i
o
n is acri
t
ical to
o
l for a
m
anager
'
s
d
ec
i
s
io
n
-
m
aking abili
t
y.Please ca
r
efullyre
a
d the exa
m
ple below andt
r
y toanswer the q
u
est
i
ons in ter
m
sof the problem context. Theresults are
a
s follows:
Month
AdvertisingCost
Nu
m
ber of Orders
1
$77,430.00
2,902,000
2
62,620
1,800,000
3
69,580
1,299,000
4
50,670
1,430,000
5
69,180
1,367,000
6
73,140
2,011,000
7
83,370
3,888,000
8
78,880
2,935,000
9
64,990
1,555,000
10
77,230
3,654,000
11
61,380
1,598,000
12
62,900
1,967,000
13
63,270
1,899,000
14
89,190
3,245,000
15
60,030
1,934,000
16
79,210
2,853,000
17
65,770
1,625,000
18
84,530
3,778,000
19
79,760
2,999,000
20
82,640
3,834,000
a. Set up a scatter diagramand ca
l
culate
t
h
e associatedcorrel
a
t
i
on
coef
f
icient.Discuss how st
r
ong you think the relationsh
i
pis between the a
m
ount ofmoney
s
pent on tel
e
v
is
i
onadve
r
tisingand the number of orders received. P
l
ease usetheCorrelation p
r
ocedureswith
i
n Exc
e
lunder
Tools
> Data Analys
i
s.
The S
c
atterpl
o
t c
a
n
m
ore easilybe generat
e
d using the
Chart proc
e
dure.
NOT
E
:
If
y
ou do not have the Data Analys
i
s option under
T
ools you
m
u
st
i
n
s
tall
i
t.You need to go to Toolsse
l
ect Add-i
n
s and
t
henchoose
t
he 2data to
o
lpak options. Itshould ta
k
eabout a
m
inu
t
e.
b. Ass
u
m
ing
t
hereis a
s
tatisticallysigni
f
icantrelations
h
ip, use the least
s
quares
m
ethod to find the re
g
res
s
i
o
n equa
t
ionto
predict
t
h
e adver
t
isi
n
g cos
t
s
ba
se
d on the n
u
mber oforders rec
e
i
v
ed. Please uset
h
e regressi
o
n procedurewith
i
n Exc
e
lunder
Tools> Data Analysis
to con
s
t
r
u
c
t
t
h
i
s equa
t
ion.
c. Interpret the
m
ean
i
ng ofthe slop
e
,
b
1
,in
t
heregressioneq
u
ation.
d. Pred
i
c
t
t
h
e
m
onth
l
y adve
r
tising cost when the nu
m
ber of o
r
dersis1,
8
00,000. (Hin
t
: Be ve
r
y ca
r
eful with assign
i
ngt
h
e dependentvaria
b
le
f
orth
i
s pro
b
le
m
)
e. C
o
m
pute the coef
f
icient ofdeter
m
ination,
r
2
,
a
nd in
t
e
rp
r
e
ti
t
s
m
ean
i
ng. f.
C
o
mpute the standarderrorof e
s
ti
m
ate, and
i
nterpret its
m
e.
Measures of Dispersion and Variability: Range, QD, AD and SD
Simple Regression in a spread sheet!!A boss of a big c.docx
1. Simple Re
g
ression in a spread sheet!!
A
boss of a big
company would liketo dete
r
m
ine ifhe shou
l
d be placing
m
ore
m
oney a
l
lo
t
tedin
t
hebudget n
e
xtyear
f
or
t
e
levision ad
v
ertis
i
ng ofa
widget
2. . She wonders whether th
e
re
i
sa s
t
rong relations
h
ipbetween thea
m
ount ofmoney
s
pent on tel
ev
is
i
onadve
r
tising
f
or
t
his new widget and t
h
e
n
u
m
ber of orders receiv
e
d. The
m
an
u
facturing p
r
3. ocess of this widget is very dif
f
icult andrequ
i
resadvanc
e
d quality controlsothe
y
wouldprefer to gene
r
a
te a
s
table nu
m
ber of orders. The costof a
d
vertisingis always an
i
m
por
t
a
n
t conside
r
a
t
i
on in
t
he first
r
o
l
l
4. -o
u
t of a new widget. Data that ha
v
e been collectedover the
p
ast 20 months indicatethe a
m
o
unt of
m
oney spent of television ad
v
ertising and the nu
m
ber of orders received.
The use of linear regres
s
i
o
n is acri
t
ical to
o
l for a
m
anager
'
s
d
ec
i
s
io
n
-
5. m
aking abili
t
y.Please ca
r
efullyre
a
d the exa
m
ple below andt
r
y toanswer the q
u
est
i
ons in ter
m
sof the problem context. Theresults are
a
s follows:
Month
AdvertisingCost
Nu
m
ber of Orders
1
$77,430.00
2,902,000
2
62,620
1,800,000
3
8. m
ount ofmoney
s
pent on tel
e
v
is
i
onadve
r
tisingand the number of orders received. P
l
ease usetheCorrelation p
r
ocedureswith
i
n Exc
e
lunder
Tools
> Data Analys
i
s.
The S
c
atterpl
o
t c
a
n
m
ore easilybe generat
e
d using the
Chart proc
e
9. dure.
NOT
E
:
If
y
ou do not have the Data Analys
i
s option under
T
ools you
m
u
st
i
n
s
tall
i
t.You need to go to Toolsse
l
ect Add-i
n
s and
t
henchoose
t
he 2data to
o
lpak options. Itshould ta
k
eabout a
m
inu
t
e.
11. d on the n
u
mber oforders rec
e
i
v
ed. Please uset
h
e regressi
o
n procedurewith
i
n Exc
e
lunder
Tools> Data Analysis
to con
s
t
r
u
c
t
t
h
i
s equa
t
ion.
c. Interpret the
m
ean
i
ng ofthe slop
e
14. i
ng. f.
C
o
mpute the standarderrorof e
s
ti
m
ate, and
i
nterpret its
m
ean
i
ng.
g. Do you think
t
h
a
ttheco
m
pany s
h
ould use t
he
se
r
esults fr
o
m the regre
s
sion
t
o ba
s
eany
