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Calculating Regression line

A company's sales (in million units), selling expenses (in $million), and price (in $/unit) data are provided in the table below.

(A) Calculate the sample regression line, where sales is the dependent variable and selling expenses and price are the independent variable

(B) Forecast the company's sales if the company increases its selling expenses to $10 million and its price to $8.5/unit

(C) If the company's objective is maximizing net revenue (total revenue minus selling expenses), which of the three following options should be accepted: (1) increase selling expenses to $10 million and price to $8.5/unit, (2) increase selling expenses to $10 million and price to $9.0/unit, and (3) increase selling expenses to $11 million and price to $8.5/unit

Million of Units $ Million $
Y X1 X2
Sales Selling Expanse Price
6.000 2.000 0.00
4.000 1.000 1.00
16.000 8.000 2.00
10.000 5.000 3.00
12.000 6.000 4.00
8.000 4.000 5.00
12.000 7.000 6.00
16.000 9.000 7.00
14.000 8.000 8.00

Attachments

Solution Preview

Please refer attached MS Excel file for regression results.

(A) Calculate the sample regression line, where sales is the dependent variable and selling expenses and price are the independent variable
Refer to attached Excel File, we get
Y=2.529+1.758X1-0.352X2

Where Y= Sales in millions of units
X1=Selling expenditure in $ million
X2=Price $/unit

(B) ...

Solution Summary

Solution calculates regression line using MS Excel. It also makes predictions with the help of results obtained.

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