Ziba, Inc. has provided the following information regarding their sales for January through December of 2015. (Part of the data file is shown below.)
Year 2015Sales(y in $100,000)
Advertising cost(x1in $10,000)
Time(x2)
January………….
………….
1
February………….
………….
2
………….………….
…………..
……….
………….………….
…………..
……….
November36
26
11
December37
28
12
?
The results of the regression analysis relating these variables are shown below.
?
Coefficients
Standard Error
t Stat
P-value
Intercept13.01
0.6334
20.5379
0.0000
Advertising cost (x1in $10,000)0.31
0.1293
2.3784
0.0413
Time (x2)1.39
0.2863
4.8390
0.0009
?
a.The company is planning to increase their advertising cost by 5% per month for the months of January and February of 2016. What would be the advertising cost for January and February of 2016? Give your answers in dollars.b.Use the regression model that is provided above and forecast sales for January and February of 2016, assuming the company increases their advertising cost by 5% per month for the months of January and February of 2016. Show your computations and write your answers in dollars.
What will be an ideal response?
| a. | Advertising Cost:January 2016 - $294,000 February 2016 - $308,700 |
| b. | Forecast of Sales:For January 2016 = 13.01 + .31(29.4) + 1.39(13) = 40.194, or $4,019,400.00 For February 2016 = 13.01 + .31(30.87) + 1.39(14) = 42.0397, or $4,203,970.00 |
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