PROBLEM 4-15. Regression Analysis (see Appendix), Profit Equation Bob Walker is a vice president of finance for Casper's Seafood, a chain of 12 restaurants on the East coast including five restaurants in Florida. The company is considering a plan whereby customers will be mailed coupons, in the month of their birthday, entitling them to 20 percent off of their total bill. The cost of the mailing (printing, paper, postage, etc.) is estimated to be $400,000. Bob estimates that the campaign will result in an annual increase in sales of $2,500,000 at normal prices ($2,000,000 after the 20 percent discount).

As part of his analysis of the financial impact of the plan Bob ran a regression of total monthly operating costs on sales using data from the past year. The results of this analysis are indicated in the Summary Output table:

Operating costs Sales January $ 3,366,650 $ 3,641,000 February 3,352,250 3,565,000 March 3,541,500 3,910,000 April 3,566,625 4,002,500 May 3,502,500 4,250,000 June 3,793,800 4,352,000 July 3,912,000 4,380,000 August 3,760,550 4,247,000 September 3,633,250 4,125,000 October 3,589,600 3,984,000 November 3,375,250 3,765,000 December 3,682,250 4,165,000

$43,076,225 $48,386,500