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A household appliance manufacturer wants to analyze the relationship between total sales and the company's three primary means of advertising (television, magazines, and radio).
A household appliance manufacturer wants to analyze the relationship between total sales and the company's three primary means of advertising (television, magazines, and radio). All values were in millions of dollars, and the company spends significant amounts on all three forms of advertising. They found the following regression equation. Sales 250+6.75 TV+ 3.5 Radio + 2.3 Magazine One of the following interpretations is correct. Which is it? Explain what's wrong with the others. a) If they did no advertising, their income would be $250 million. A. This interpretation has the wrong income. It should be $262.55 million. B. This interpretation extrapolates to a point outside the sample data, so it is not correct. C. This interpretation has the wrong income. It should be $237.45 million. D. This interpretation is correct. b) Every million dollars spent on radio makes sales increase $3.5 million, all other things being equal. A. This interpretation has the wrong income increase. It should be $250 million. B. This interpretation has the wrong relationship. It should be a million dollar increase in sales for every $3.5 million increase in radio spending. C. This interpretation suggests a perfect relationship, so it is incorrect. OD. This interpretation is correct. c) Every million dollars spent on magazines increases TV spending $2.3 million. A. This interpretation has the wrong relationship. It should be a million dollar increase in TV spending for every $2.3 million increase in magazine spending. B. This interpretation has the wrong TV spending increase. It should be $6.75 million. O C. Changes in magazine spending cannot be used to predict changes in TV spending. D. This interpretation is correct. d) Sales increase on average about $6.75 million for each million spent on TV, after allowing for the effects of the other kinds of advertising. A. This interpretation has the wrong relationship. It should be a million dollar increase in sales on average for every $6.75 million spent on TV. B. This interpretation accounts for other advertising incorrectly. It should include a $3.5 million increase in radio spending and a $2.3 million increase in magazine spending. C. This interpretation accounts for other advertising incorrectly. It should include a $1 million increase in radio spending and a $1 million increase in magazine spending. D. This interpretation is correct.
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