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Data on advertising expenditures and revenue in thousands of dollars

Data on advertising expenditures and revenue (in thousands of dollars) for the Four Sea-sons Restaurant follow.

Advertising Expenditures Revenue

1 .................. 19

2 .................. 32

4 .................. 44

6 .................. 40

10 ................ 52

14 ................ 53

20 ................ 54

a. Let x equal advertising expenditures and y equal revenue. Use the method of least squares to develop a straight line approximation of the relationship between the two variables.

b. Test whether revenue and advertising expenditures are related at a .05 level of significance.

c. Prepare a residual plot of y â€“ y versus y. Use the result from part (a) to obtain the values of y.

d. What conclusions can you draw from residual analysis? Should this model be used, or should we look for a better one?

Advertising Expenditures Revenue

1 .................. 19

2 .................. 32

4 .................. 44

6 .................. 40

10 ................ 52

14 ................ 53

20 ................ 54

a. Let x equal advertising expenditures and y equal revenue. Use the method of least squares to develop a straight line approximation of the relationship between the two variables.

b. Test whether revenue and advertising expenditures are related at a .05 level of significance.

c. Prepare a residual plot of y â€“ y versus y. Use the result from part (a) to obtain the values of y.

d. What conclusions can you draw from residual analysis? Should this model be used, or should we look for a better one?

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