The manager of a furniture company has collected data on the

The manager of a furniture company has collected data on the amount of money spent on advertising and sales revenue for the last ten months. The data is as follows:

Advertising

Sales Revenue

Month

Expense

($Millions)

($ Billions)

1

14

24

2

12

14

3

20

28

4

16

30

5

46

80

6

23

30

7

48

90

8

50

85

9

55

120

10

50

110

                                    

Determine the regression equation.(use the formulas in the text).

b)    In the context of this problem, interpret the values of b0 and b1.

Compute SST,SSR and SSE.

Compute the coefficient of determination and interpret its meaning.

Compute the correlation coefficient and interpret its meaning.

	Advertising	Sales Revenue
Month	Expense ($Millions)	($ Billions)
1	14	24
2	12	14
3	20	28
4	16	30
5	46	80
6	23	30
7	48	90
8	50	85
9	55	120
10	50	110

Solution

The scatter plot is as this

For coefficient of determination first find correlation coefficient r.

X=334 , Y=611 , XY=26584 , X2=13970 , Y2=51581

r=0.9754

r = 0.9754 is near 1 and positive.

This implies there is strong positive correlation between x and y

r^2 = 0.9514

Coefficient of determination explains the variation of dependent variable for indepependent variable.

Month	Expense	($ Billions)
($Millions)
14	24	336	196
12	14	168	144
20	28	560	400
16	30	480	256
46	80	3680	2116
23	30	690	529
48	90	4320	2304
50	85	4250	2500
55	120	6600	3025
50	110	5500	2500
334	611	26584	13970
a	-12.201	b	2.195