Kramer Smith owns a dry-cleaning service and is thinking about changing his advertising expenditures for the year. He hires you as a consultant to determine the relationship between sales, consumer incomes, and advertising by means of multiple regression analysis. Smith has gathered the sales, income, and advertising data for the last year, as shown in Table 1.
The Sales and Advertising Data (2009)
Table 1 Month Sales (y) Advertising (x1) Consumer Income (x2)
January 43,000 10,000 41,000
February 40,500 9,000 43,000
March 41,000 11,000 45,000
April 45,900 12,000 47,000
May 47,000 11,000 49,000
June 51,000 12,000 51,000
July 54,000 13,000 53,000
August 57,000 13,000 55,000
September 56,000 14,000 57,000
October 60,000 15,000 58,000
November 61,000 15,800 59,000
December 63,000 16,700 61,000
Using multiple regression, conduct an analysis of the firm’s sales revenue, consumer incomes, and advertising. Describe how you would explain your results to Smith and what recommendations you would suggest. Summarize your recommendations or advice to Smith concerning the relationship between sales, income, and advertising.
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