In exercise 4 the following estimated regression equation re

In exercise 4, the following estimated regression equation relating sales to inventory investment and advertising expenditures was given.
y = 25 + 10x1 + 8x2
The data used to develop the model came from a survey of 10 stores; for these data SST = 16,000 and SSR = 12,000.
a. Compute SSE, MSE, and MSR.
b. Use an F test and a .05 level of significance to determine whether there is a relationship among the variables.

Solution

a) SSe=SST-SSR=4000

df of error= n-3=7

MSE=4000/7=571.4286

df of regression=2

MSR=12000/2=6000

b) F=MSR/MSE=10.5

p=0.00781

Hence the relation is not significant.