In a recent survey concerning company sales and net earnings, 15 companies responded with the following...

In a recent survey concerning company sales and net earnings, 15 companies responded with the following information.

Company	Sales ($ thousands)	Net Earnings ($ thousands)
The Party Place	53.3	4.0
JenStar	39.5	3.3
Universal Maintenance Co.	47.9	4.0
JenCo	27.7	1.6
The Grayson Group	48.8	4.0
Apex Consulting	47.2	3.5
XYZ Co.	23.7	1.3
SouthCo	40.4	2.8
Southwest Consulting	59.8	3.9
Biotech Co	43.4	3.5
NorthCo	20.0	1.9
EastCo	53.9	3.5
Cantu Excavating	29.0	1.8
Classic Coverings	42.5	2.6
Second Time Around Clothing	49.0	3.8

a) Using a statistical computing tool, find the equation of the regression line.
For full marks your answer should be accurate to at least three decimal places.

ŷ = ? + ?x

b) Use the regression line from part a to estimate the net earnings for a company with sales of $21.6 thousand.
For full marks your answer should be accurate to at least one decimal place.

Earnings: $? thousand

Given the regression equation from part a, which of the following statements is most appropriate regarding company sales and earnings?

	Positive sales means positive net earnings for any business.
	Sales have no effect on net revenues.
	Insufficient sales can lead to net losses for some businesses.
	After a certain level of sales has been reached, net earnings stop growing entirely.

Solutions

Expert Solution

The statistical software output for this problem is:

Hence,

a) y = -0.083 + 0.075 x

b) Predicted earnings = 1.5

c) Positive sales means positive net earnings for any business.

orchestra answered 1 year ago

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