Question

4, A random sample of 40 companies on the Forbes 500 list was selected and the relationship between sales (in hundreds of thousands of dollars) and profits (in hundreds of thousands of dollars) Was investigated using regression. A least-squares regression line was fitted to the data using statistical sofware, with sales as the explanatory variable and profits as the response variable. Here is the output from the software: Dependent variable is Profits R-squared 66.2% s 466.2 with 40-2-38 degrees of freedom Variable Coefficient s.e. of Coefficient P-value Constant 176.644 Sales 0.092498 61.16 0.0106 0.0050 S0.0001 Which of the following is an appropriate interpretation of the number 0.092498? An increase in profits of $100,000 increases predicted sales by $9,249.80, on average. (b) An increase in sales of $100,000 increases predicted profits by $9,249.80, on average. c) Sales of $100,000 correspond to predicted average profits of $9,249.80 d) The ratio of predicted profit to observed profit is, on average, 0.092498. e) The ratio of predicted profits to observed sales is, on average, 0.092498.

help please and explain

Answer 1

Here the independent variable is "Sales" and dependent variable is "Profit".

The required regression equation is

Profit=-176.644+0.092498*Sales

For increase in sales of $100000 the predicted profit will increase by $(100,000*0.092498)=$9248.8

Hence option (b) is correct

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