# Question: Luxury Cruise Lines has a fleet of ships that travel

Luxury Cruise Lines has a fleet of ships that travel to Alaska repeatedly every summer (and elsewhere during other times of the year). A considerable amount of advertising is done each winter to help generate enough passenger business for that summer. With the coming of a new winter, a decision needs to be made about how much advertising to do this year.

The following table shows the amount of advertising (in thousands of dollars) and the resulting sales (in thousands of passengers booked for a cruise) for each of the past five years.

(a) To use causal forecasting to forecast sales for a given amount of advertising, what needs to be the dependent variable and the independent variable?

(b) Plot the data on a graph.

T (c) Find the formula for the linear regression line that fits these data. Then plot this line on the graph constructed in part (b).

(d) Forecast the sales that would be attained by expending $300,000 on advertising.

(e) Estimate the amount of advertising that would need to be done to attain a booking of 22,000 passengers.

(f) According to the linear regression line, about how much increase in sales can be attained on the average per $1,000 increase in the amount of advertising?

The following table shows the amount of advertising (in thousands of dollars) and the resulting sales (in thousands of passengers booked for a cruise) for each of the past five years.

(a) To use causal forecasting to forecast sales for a given amount of advertising, what needs to be the dependent variable and the independent variable?

(b) Plot the data on a graph.

T (c) Find the formula for the linear regression line that fits these data. Then plot this line on the graph constructed in part (b).

(d) Forecast the sales that would be attained by expending $300,000 on advertising.

(e) Estimate the amount of advertising that would need to be done to attain a booking of 22,000 passengers.

(f) According to the linear regression line, about how much increase in sales can be attained on the average per $1,000 increase in the amount of advertising?

## Answer to relevant Questions

Reconsider Prob. 27.9-4. Use the linear regression procedure in the forecasting area of your IOR Tutorial to generate the linear regression line. On the resulting graph that shows this line and the five data points (as blue ...The following data are observations y on a dependent random variable Y taken at various levels of an independent variable x. [It is assumed that E(Yi׀xi) = A + Bxi, and the Yi are independent normal random variables with ...A company uses exponential smoothing with α = ½ to forecast demand for a product. For each month, the company keeps a record of the forecast demand (made at the end of the preceding month) and the actual demand. Some of ...Susan is a ticket scalper. She buys tickets for Los Angeles Lakers games before the beginning of the season for $100 each. Since the games all sell out, Susan is able to sell the tickets for $150 on game day. Tickets that ...In the last subsection of Sec. 29.5, the (long-run) expected average cost per week (based on just ordering costs and unsatisfied demand costs) is calculated for the inventory example of Sec. 29.1. Suppose now that the ...Post your question