Question

Brewsky's is a chain of micro-breweries. Managers are interested in the costs of the stores and believe that the costs can be explained in large part by the number of customers patron­izing the stores. Monthly data regarding customer visits and costs for the preceding year for one of the stores have been entered into the regression analysis and the analysis is as follows:

Average monthly customer visits		1,462
Average monthly total costs	$	4,629
Regression Results
Intercept	$	1,496
b coefficient	$	2.08
R2		0.86814

In a regression equation expressed as y = a + bx, how is the letter b best described? (CMA adapted)

• The proximity of the data points to the regression line.

• An estimate of the probability of return customers.

• The fixed costs per customer visit.

• The estimate of the cost for an additional customer visit.

Answer 1

Here the starting agenda was to find out how the cost is dependent on the customers visits. So in the equation y is the dependent variable which is the cost here. The hypothesis is the customer visits impacts the cost and to find out by how much regression was done. A is the intercept which means even if no customer visits then this is the minimum cost which will be incurred. X is the number of customers visits. And finally b is the estimate of the cost for an additional customer visit.