Exam Question 3 – Statistics
The data below are weekly figures from Herbert Hooley’s Happy House (except for the quarterly error figures). They sell radios, TVs, and VCRs in their electronics department. He needs you to help him with a few things, which he will indicate to you.
Profit
Revenue
Radios
TVs
VCRs
Quarter
Errors
6318.96
8395.91
36
65
48
4721.57
6300.28
26
48
39
5049.16
6747.55
33
51
40
2000 – 3
32
5249.44
7028.56
29
53
45
4
46
5290.08
7116.41
32
52
49
2001 – 1
19
5924.41
7951.00
41
58
52
2
23
5251.97
7031.09
36
52
44
3
34
4805.72
6462.88
31
47
44
4
49
5278.60
7162.42
46
49
51
2002 – 1
22
5301.77
7136.35
43
51
46
2
20
6121.98
8249.84
45
59
56
3
31
5416.63
7244.79
29
55
46
4
51
6552.89
8718.21
43
67
48
2003 – 1
16
6352.93
8494.02
46
63
51
2
26
6693.01
8881.75
55
68
43
3
37
5761.97
7669.10
48
58
39
4
48
5419.50
7265.38
33
54
47
2004 -1
22
5474.64
7302.97
35
55
44
2
24
4650.87
6335.89
41
42
49
4781.91
6438.23
48
45
39
“Doug, I could surely use some help. I would like to find a useful profit formula for my department. Please let me know if it is a good model, and if there are any potential issues I should consider.” Note that the numbers of radios, TVs, and VCRs represent the number held on hand for the week. Please find the best model for Herb.
Discuss the model.
Are there other issues to consider here? Explain.
What is your recommendation regarding use of this model? Explain.
Solution Preview
3.a The best fit for the herb will be;
Profit = 0.7717revenue – 186.8275
b. This is a simple linear regression model where the fixed cost is -186.8275, and this output means that for each unit increase in revenue leads to a change in increase of 0.7717 in profit.
(120 words)