Mark Price, the new productions manager for Speakers and Company, needs to find out which variable most affects the demand for their line of stereo speakers. He is uncertain whether the unit price of the product or the effects of increased marketing are the main drivers in sales and wants to use regression analysis to figure out which factor drives more demand for its particular market. Pertinent information was collected by an extensive marketing project that lasted over the past 12 years (year 1 is data from 12 years ago) and was reduced to the data that follow.

Year Sales/Unit (thousands) Price/Unit Advertising ($000)

1 400 280 600 2 700 215 835 3 900 211 1,100 4 1,300 210 1,400 5 1,150 215 1,200 6 1,200 200 1,300 7 900 225 900 8 1,100 207 1,100 9 980 220 700 10 1,234 211 900 11 925 227 700 12 800 245 690

a. Perform a regression analysis based on these data using Excel. Answer the following questions based on your results.

b. Which variable, price or advertising, has a larger effect on sales and how do you know?

c. Predict average yearly speaker sales for Speakers and Company based on the regression results if the price was $300 per unit and the amount spent on advertising (in thousands) was $900.

TW-111