Berrian, sales manager of Allmond Arenas, is checking to see if there is any relationship between promotional costs and ticket revenues at the sports stadium. She obtains the following data for the past 9 months:
|
Month |
Ticket Revenues |
Promotional Costs |
|---|---|---|
|
April |
$250,000 |
$56,000 |
|
May |
320,000 |
69,000 |
|
June |
370,000 |
84,000 |
|
July |
530,000 |
94,000 |
|
August |
480,000 |
104,000 |
|
September |
500,000 |
114,000 |
|
October |
590,000 |
124,000 |
|
November |
720,000 |
184,000 |
|
December |
815,500 |
201,000 |
She estimates the following regression equation:
Ticket revenues = $43,814 + ($2.80 × Promotional costs)
|
1. |
Draw the regression line and evaluate it using the criteria of economic plausibility, the goodness of fit, and the slope of the regression line. |
|
2. |
Use the high-low method to compute the function relating to promotional costs and revenues. |
|
3. |
Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $10,000 spent on promotional within the relevant range? Which method should
Kathy use to predict the effect of promotional costs on revenues? Explain briefly. |
