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5. Stephanie Gostkowski wes manager of Wilmot Arenas, is checking to set there is any relationship between promotional costs and ticket revenues at the sports stadium. She obtains the following data for the past 9 months (Click the icon to view the data) She estimates the following regression equation Ticket revenues $34.500 ($3.40 x Promotional costs) Read the requirements Click the icon to see the Worked Solution. Requirement 1. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of it, and slope of the regression line Begin by plotting the regression line using April and December's advertising cost levels, then round the monthly revenues to the nearest Increment of $100 (Enlarge the graph and use the line button displayed below to draw the graph.) $40.00 O .000 s aad Costs Promo Evaluate the regression line using the criteria of economic plausibility, goodness of it, and slope of the regression line by choosing the correct statement to go with each of the evaluation criteria listed below. Economic plausibility: O Promotional costs appear to not be a plausible cost driver of ticket revenues. Sporting events tend to rely on word of mouth to promote business (and thus revenues) and loss on promotions Promotional costs appear to be a plausible cost driver of ticket revenues. Sporting events frequently use promotional items to promote attendance and increase their patronage. Goodness of fit: The vertical differences between actual and predicted revenues appears to be quite large. This indicates that promotional costs are not related to ticket revenues. The vertical differences between actual and predicted revenues appears to be reasonably small This indicates that promotional costs are related to ticket revenues. Slope of regression line: The slope of the regression line appears to be relatively steep indicating that, on average ticket revenues increase with spending on promotions The slope of the regression line appears to be almost fat indicating that, on average, Sicket revenues do not vary with spending on promotions Requirement 2. Use the high low method to compute the function relating promotional costs and revenues (Complete all answer boxes.) Requirement 3. Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $10,000 spent on promotional within the relevant range? Which method should Stephanie use to predict the effect of promotional costs on revenues? Explain briefly. (Round your answers to the nearest whole dollar) The increase in revenues for each $10,000 spent on promotional costs within the relevant range using (a), the regression equation is $ : and using (b), the high-low equation, is 5 Which method should Stephanie use to predict the effect of advertising costs on revenues? Explain briefly. Stephanie should use the (5) because it uses information from (5) - - and is more reliable 2: Data Table Month April May June July August September October November December Ticket Revenues 240,000 310,000 360,000 520,000 470.000 490,000 580,000 710,000 747,500 Promotional Costs $ 57,000 70,000 85,000 95,000 105,000 115,000 125,000 185.000 202.000 1. Draw the regression line and evaluate tuning the criteria of economic goodness of land slope of the regression line 2. Use the high-low method to compute the function relating promotional costs and revenues 3. Using (a) the regression equation and (b) the high low equation what is the increase in revenues for each $10.000 spent on promotional within the relevant range? Which method should Stephanie use to predict the chest of promotional costs on revenues? Explainbrity 4: Definition When plotting the line, be sure to double-check that the points on the line are correct after they are drawn. If you need to adjust the points, dick once on the point then use your arrow keys to move the point to the correct (xy) coordinates O Promotional costs Revenues Promotional costs Revenues (1) O O $3.50 O $2.17 $3.84 O $4.64 O $142,500 O $102,500 O $40,500 (2) O O $3.50 O $2.17 $3.84 O $4.64 O $142,500 O $102,500 O $40,500 (4) Promotional costs Revenues Promotional costs Revenues (3) O O $3.50 O $2.17 O $3.84 OOO OOOO (5) O O O $4.64 O $142,500 O $102,500 $40,500 high-low equation regression equation $3.50 $2.17 $3.84 $4.64 O $142,500 O $102,500 $40,500 (6) O O a limited number of observations all observations 5. Stephanie Gostkowski wes manager of Wilmot Arenas, is checking to set there is any relationship between promotional costs and ticket revenues at the sports stadium. She obtains the following data for the past 9 months (Click the icon to view the data) She estimates the following regression equation Ticket revenues $34.500 ($3.40 x Promotional costs) Read the requirements Click the icon to see the Worked Solution. Requirement 1. Draw the regression line and evaluate it using the criteria of economic plausibility, goodness of it, and slope of the regression line Begin by plotting the regression line using April and December's advertising cost levels, then round the monthly revenues to the nearest Increment of $100 (Enlarge the graph and use the line button displayed below to draw the graph.) $40.00 O .000 s aad Costs Promo Evaluate the regression line using the criteria of economic plausibility, goodness of it, and slope of the regression line by choosing the correct statement to go with each of the evaluation criteria listed below. Economic plausibility: O Promotional costs appear to not be a plausible cost driver of ticket revenues. Sporting events tend to rely on word of mouth to promote business (and thus revenues) and loss on promotions Promotional costs appear to be a plausible cost driver of ticket revenues. Sporting events frequently use promotional items to promote attendance and increase their patronage. Goodness of fit: The vertical differences between actual and predicted revenues appears to be quite large. This indicates that promotional costs are not related to ticket revenues. The vertical differences between actual and predicted revenues appears to be reasonably small This indicates that promotional costs are related to ticket revenues. Slope of regression line: The slope of the regression line appears to be relatively steep indicating that, on average ticket revenues increase with spending on promotions The slope of the regression line appears to be almost fat indicating that, on average, Sicket revenues do not vary with spending on promotions Requirement 2. Use the high low method to compute the function relating promotional costs and revenues (Complete all answer boxes.) Requirement 3. Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $10,000 spent on promotional within the relevant range? Which method should Stephanie use to predict the effect of promotional costs on revenues? Explain briefly. (Round your answers to the nearest whole dollar) The increase in revenues for each $10,000 spent on promotional costs within the relevant range using (a), the regression equation is $ : and using (b), the high-low equation, is 5 Which method should Stephanie use to predict the effect of advertising costs on revenues? Explain briefly. Stephanie should use the (5) because it uses information from (5) - - and is more reliable 2: Data Table Month April May June July August September October November December Ticket Revenues 240,000 310,000 360,000 520,000 470.000 490,000 580,000 710,000 747,500 Promotional Costs $ 57,000 70,000 85,000 95,000 105,000 115,000 125,000 185.000 202.000 1. Draw the regression line and evaluate tuning the criteria of economic goodness of land slope of the regression line 2. Use the high-low method to compute the function relating promotional costs and revenues 3. Using (a) the regression equation and (b) the high low equation what is the increase in revenues for each $10.000 spent on promotional within the relevant range? Which method should Stephanie use to predict the chest of promotional costs on revenues? Explainbrity 4: Definition When plotting the line, be sure to double-check that the points on the line are correct after they are drawn. If you need to adjust the points, dick once on the point then use your arrow keys to move the point to the correct (xy) coordinates O Promotional costs Revenues Promotional costs Revenues (1) O O $3.50 O $2.17 $3.84 O $4.64 O $142,500 O $102,500 O $40,500 (2) O O $3.50 O $2.17 $3.84 O $4.64 O $142,500 O $102,500 O $40,500 (4) Promotional costs Revenues Promotional costs Revenues (3) O O $3.50 O $2.17 O $3.84 OOO OOOO (5) O O O $4.64 O $142,500 O $102,500 $40,500 high-low equation regression equation $3.50 $2.17 $3.84 $4.64 O $142,500 O $102,500 $40,500 (6) O O a limited number of observations all observations
