The Smithfield Organic Milk Company recently studied a random sample of 30 of its distributors and found the correlation between sales and advertising dollars to be 0.67.
a. Is there a significant linear relationship between sales and advertising? If so, is it fair to conclude that advertising causes sales to increase?
b. If a regression model were developed using sales as the dependent variable and advertising as the independent variable, determine the proportion of the variation in sales that would be explained by its relationship to advertising. Discuss what this says about the usefulness of using advertising to predict sales.