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Correlation and Regression Analysis

The owner of a retail store randomly selected the following weekly data on profits and advertising cost.

Week Advertising Cost ($) Profit ($)
1 0 200
2 50 270
3 250 420
4 150 300
5 125 325

1. Compute the least squares estimated line and predict profits for an advertising cost of $200.

2. Develop a scatter diagram and compute both the correlation coefficient and the coefficient of determination.

3. Using a 0.05 level of significance, determine if there is a significant relationship between weekly advertising cost and profits. Conduct both a t test and an F test (perform all six steps of hypothesis testing and show the ANOVA table).

Solution Summary

This solution is comprised of a detailed explanation of various aspects of Regression Analysis and Hypothesis Test as it pertains to the given problem. Supplemented with Interactive EXCEL sheet, this step-by-step explanation of this complicated topic provides students with a clear perspective of Regression Analysis.