Question

You work for a company in the marketing department. Your manager has tasked you with forecasting sales by month for the next year. You notice that over the past 12 months sales have consistently gone up in a linear fashion, so you decide to run a regression the company's sales history. You find that the regression equation for the data is (sales) = 146.97*(time) + 171.669. In August (time = 8) you see the actual sales quantity was 347.043. The residual is -1000.386. Interpret this residual in terms of the problem.

Question 5 options:

	1) The sales is 1000.386 units greater than what we would expect.
	2) The month is 1000.386 months less than what we would expect.
	3) The month is 1000.386 months larger than what we would expect.
	4) The sales is 1000.386 units less than what we would expect.
	5) The sales is 347.043 units less than what we would expect.

Answer 1

4)	The sales is 1000.386 units less than what we would expect.

Explanation:

The expected quantity would be 146.97*8+171.669 = 1347.429.

The actual is 347.043, the shortfall being 1000.386