You work for SneauxCeauxne, the Cajun-inspired crushed-ice dessert company. You’ve collected data on monthly sales (S,...

You work for SneauxCeauxne, the Cajun-inspired crushed-ice dessert company. You’ve collected data on monthly sales (S, number of snow-cones per month) and the price of your regular-size snow-cone (P, in dollars), as well as the daily average summer temperature in your most popular market (T, in degrees Fahrenheit). You estimate the following regression model: S = a + bP + cT. In your regressions, you usually look for a 10%-or-better level of confidence.

a. What signs do you expect for a, b, and c?

b. Your regression yields the following results:

Adjusted R Square	0.883
Independent Variables	Coefficients	Standard Error	t Stat	P-value
Intercept	2718	598	4.544	0.00615
P	-641.62	90.23	-7.111	0.00085
T	10.32	6.36	1.623	0.16562

Interpret what these coefficients mean.

c. Does price have a statistically significant effect on sales?

d. Does average temperature have a statistically significant effect on sales?

e. What portion of the total variation in sales remains unexplained?

f. SneauxCeauxne is considering selling in a new city, where the average daily summer temperature is 83°, for a price of its regular size snow-cone of $4.10. What level of sales would you expect in this new city (rounded to the nearest dollar)?

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Expert Solution

Rahul Sunny answered 3 months ago

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