The Skelton Manufacturing Company recently did a study of its customers. A rando

Question

The Skelton Manufacturing Company recently did a study of its customers. A random sample of 25 customer accounts was pulled from the computer records. Two variables were observed: y-Total dollar value of business this year x- Miles customer is from corporate headquarters The following statistics were computed: y = 2.14023 - 10.12x s_b = 3.12 a. Interpret the regression slope coefficient. b. Using a significance level of 0.01, test to determine whether it is true that the farther away a customer is from the corporate headquarters, the smaller the total dollar volume of business. Make sure to state the null and the alternate hypothesis and the decision rule.

Explanation / Answer

a) Regression Coefficient b1 = -10.12. There exist negative relation ship between the total dollar value and miles customer.

Suppose 1 miles is increased from corporate headquarters then the total dollar value decreased $10.12

b)

H0: The farther away a customer is from the corporate headquarters, the not smaller the total dollar volume of business.

H1: The farther away a customer is from the corporate headquarters, the smaller the total dollar volume of business.

Given the los be alpha = 0.01

Test Statistic t = b / sb   = -10.12/3.12 = 3.24

The critical value of the test t0 = 2.499 at 1% los and 25-2 =23 df

Here t value > t0 value, we reject H0.

Thus, The farther away a customer is from the corporate headquarters, the smaller the total dollar volume of business.

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