The following regression model was developed by a professor to help the owner of
ID: 354556 • Letter: T
Question
The following regression model was developed by a professor to help the owner of a restaurant predict sales:
Sales = 70+46.5X1 + 208.5X2
Where sales = $sales per month, X1 = Advertising expenditure per month, and X2 = $ value of coupon.
a. Forecast sales if the owner decides to spend $500 on advertising and offers a couppn for $5 off one meal for parties of two or more in a month.
b. Forecast sales if the owner decide to spend $400 on advertising and offers a coupon for $10 off one meal for parties of two or more in a month.
Explanation / Answer
The regression model is
Sales = 70+46.5X1 + 208.5X2
a) If X1 = $500 and X2 = $5
Forecasted sales = 70+46.5X1 + 208.5X2
= 70 + (46.5 x 500) + (208.5 x 5)
= 70 + 23250 + 1042.5
= $24362.5
b) If X1 = $400 and X2 = $10
Forecasted sales = 70 +46.5X1 + 208.5X2
= 70 + (46.5 x 400) + (208.5 x 10)
= 70 + 18600 + 2085
= $20755