Question

1. Suppose a manager wants to predict Sales from Number of Sales people working.

Sales (in 1000)	Number of Sales People Working
10 11 13 14 18 20 20 22 22 26	2 3 7 9 10 10 12 15 16 20

a) Is this simple or multiple linear regression? Explain. Identify the independent and dependent variable(s).

b) State the least squares regression line for this data.

c) Interpret the intercept and slope in the regression model.

d) If 18 people are working, what Sales do you predict?

e) By looking at your answer in part (d) above, what is the value of the residual, if sales are actually 25,000? Does the predicted value over-estimates or underestimates the sales? Explain.

Answer 1

a. Independent Variable: Number of Sales People Working

Dependent variable: Sales (in 1000)

It is simple linear regression.

b.

The regression equation is
Sales (in 1000) = 8.101 + 0.91341 Number of Sales People Working

c.

When Number of Sales people working=0, even then Sales are 8101. When we increase 1 unit of number of sales people working then sales are increased by 913.

d. Predicted Sale=(8.101 + 0.91341*18)*1000=24542.38

e. Residual=25000-24542.38=457.62

The predicted value underestimates the sales.