Question

A sales manager collected the following data on x = years of experience and y = annual sales ($1,000s). The estimated regression equation for these data is ý = 80 + 4x. Salesperson Years of Experience Annual Sales ($1,000s) 1 1 80 2 3 97 3 4 92 4 4 102 5 6 103 6 8 111 7 10 119 8 10 123 9 11 117 10 13 136 (a) Compute the residuals. Years of Experience Annual Sales ($1,000s) Residuals 1 80 3 97 4 92 4 102 6 103 8 111 10 119 10 123 11 117 13 136

Answer 1

a)

since residual =actual -predicted value

or e =y-y^

X Y 1 3 80 97 92 4 e=(y-) -4.0000 5.00 -4.00 6.00 -1.00 -1.00 4 102 103 6 8 111 119 10 123 10 11 -1.00 3.00 -7.00 4.00 117 13 136

161 12+ 8 Residuals -8 -12 -161 10 12 14 Years of Experience 0

b)

The plot suggests a generally horizontal band of residual points indicating that the error term assumptions appear reasonable.