5) Draw the trend analysis based on following sales data for four years and analyse the...

5) Draw the trend analysis based on following sales data for four years and analyse the fifth-year projected sales. Mention the possible relationship between the sales and the year on the basis of linear regression. Also mention the R-square value and its interpretation.

Year	Sales
1	900
2	1100
3	1200
4	1450
5

Expert Solution

Excel regression summary output as follows.

SUMMARY OUTPUT

Regression Statistics
Multiple R	0.9880
R Square	0.9761
Adjusted R Square	0.9641
Standard Error	43.3013
Observations	4

ANOVA
	df	SS	MS	F	Significance F
Regression	1	153125	153125	81.6667	0.0120
Residual	2	3750	1875
Total	3	156875

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%
Intercept	725	53.0330	13.6707	0.0053	496.8174	953.1826
Year	175	19.3649	9.0370	0.0120	91.6795	258.3205

Estimated linear trend equation: Sales = 725 + 175 x Year

When Year = 5, Trend value of sales = 725 + 175 x 5 = 725 + 875 = 1600

R² measures the proportion of variation of Sales, that is explained by the independent variable Year, using the regression model. Since R² is 0.9761, it means that 97.61% of the variation in sales is explained by the model, which is considered a good fit.

Rahul Sunny answered 1 year ago

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