Question

Salesperson	Years of Experience	Annual Sales ($1000s)
1	3	79
2	4	92
3	4	91
4	4	106
5	7	102
6	9	112
7	10	120
8	11	117
9	11	114
10	13	135

A sales manager collected data on annual sales for new customer accounts and the number of years of experience for a sample of 10 salespersons. In the Microsoft Excel Online file below you will find a sample of data on years of experience of the salesperson and annual sales. Conduct a regression analysis to explore the relationship between these two variables and then answer the following questions.

Open spreadsheet

1. Compute b₁ and b₀ (to 1 decimal).

   b₁ =

   b₀ =

   Complete the estimated regression equation (to 1 decimal).

   =  + x

2. According to this model, what is the change in annual sales ($1000s) for every year of experience (to 1 decimal)?

3. Compute the coefficient of determination (to 3 decimals). Note: report r² between 0 and 1.

   r² =

   What percentage of the variation in annual sales ($1000s) can be explained by the years of experience of the salesperson (to 1 decimal)?

   %

4. A new salesperson joins the team with 8 years of experience. What is the estimated annual sales ($1000s) for the new salesperson (to the nearest whole number)?

   $

Answer 1

The statistical software output for this problem is:

Hence,

a) b1 = 4.1

b0 = 75.6

Regression equation:

y = 75.6 + 4.1 x

b) Change in annual sales = 4.1

c) r2 = 0.839

Percent of variation explained = 83.9 %

d) Predicted sales = $ 108