Question

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)?

Answer 1