The following regression model was developed by a professor to help the owner of

ID: 354556 • Letter: T

Question

The following regression model was developed by a professor to help the owner of a restaurant predict sales:

Sales = 70+46.5X1 + 208.5X2

Where sales = $sales per month, X1 = Advertising expenditure per month, and X2 = $ value of coupon.

a. Forecast sales if the owner decides to spend $500 on advertising and offers a couppn for $5 off one meal for parties of two or more in a month.

b. Forecast sales if the owner decide to spend $400 on advertising and offers a coupon for $10 off one meal for parties of two or more in a month.

The regression model is

Sales = 70+46.5X1 + 208.5X2

a) If X1 = $500 and X2 = $5

Forecasted sales = 70+46.5X1 + 208.5X2

= 70 + (46.5 x 500) + (208.5 x 5)

= 70 + 23250 + 1042.5

= $24362.5

b) If X1 = $400 and X2 = $10

Forecasted sales = 70 +46.5X1 + 208.5X2

= 70 + (46.5 x 400) + (208.5 x 10)

= 70 + 18600 + 2085

= $20755

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