Answer to Question #193512 in Management for ram

Question

Nemi’s problem is to analyze the effect of Advertisement on sales. Firstly, He wants to understand the presence of a linear relationship between the sales and ‘amount spent in advertisement’. He also wants to run a correlation and regression to know whether he should keep spending money on Advertisements or not. If sales figures are not affected by advertisement, he should not spend money on it. So, take the EXCEL output of the following and write the interpretation.  Appropriate type of Graph which can exhibit the linear relation b/w variables.  Karl Pearson’s Correlation Coefficient  Regression Analysis  Graph that shows predicted v/s actual sales figures. Region code Sales (INR 000s) Advertising (TV spots per month) (in INR, 000s) 1 260.3 5 2 286.1 7 3 279.4 6 4 410.8 9 5 438.2 12 6 315.3 8 7 565.1 11 8 570.0 16 9 426.1 13 10 315.0 7 11 403.6 10 12 220.5 4 13 343.6 9 14 644.6 17 15 520.4 19 16 329.5 9 17 426.0 11 18 343.2 8 19 450.4 13 20 421.8 14 

Answer 1

appropriate type of Graph which can exhibit the linear relation b/w variables.

 

The appropriate graph is the Scatter plot which will give a trend and pattern of the points. The graph is given below:

 

 

From the graph, we could observe that the points are forming an upward trend and are lying closer to an imaginary straight line.

 

Karl Pearson's Correlation Coefficient

 

The correlation coefficient is given by running the command

 

=CORREL(B1:B21,C1:C21) which is 0.8878.

 

The correlation is positive and is more than 0.75. The critical value of correlation for n=20 at 5% level is 0.4438 and since our correlation 0.8878>0.04438, we conclude that the correlation coefficient is significant at 5% level of significance.

 

Regression analysis

out put from excel

The estimated linear equation is

Sales = 140.3224 + 24.8243 * Adut.

The intercept is 140.3224 which the sales(in

INR '000) when there is no spending on Advertising. The slope is 24.8243 which shows that the sales increased by INT 24824.3 for every INR 1000 spending on advertisements

Graph that shows predicted v/s actual sales figures