The Natural Drink Company Has Developed a Regression Model Relating $\alpha$

question 45

Essay

The Natural Drink Company has developed a regression model relating its sales (y in $10,000s) with four independent variables. The four independent variables are price per unit (PRICE, in dollars), competitor's price (COMPRICE, in dollars), advertising (ADV, in $1,000s) and type of container used (CONTAIN; 1 = Cans and 0 = Bottles). Part of the regression results is shown below. (Assume n = 25)
a.If the manufacturer uses can containers, his price is $1.25, advertising $200,000, and his competitor's price is $1.50, what is your estimate of his sales? Give your answer in dollars.
b.Test to see if there is a significant relationship between sales and unit price. Let $\alpha$ = 0.05.
c.Test to see if there is a significant relationship between sales and advertising. Let $\alpha$ = 0.05.
d.Is the type of container a significant variable? Let $\alpha$ = 0.05.
e.Test to see if there is a significant relationship between sales and competitor's price. Let $\alpha$ = 0.05.

---

Definitions:

Materials Cost

The cost of the raw materials used in the production of goods.

Weighted-Average Method

An inventory costing method where costs of goods sold and ending inventory consist of a weighted average of all purchases and manufactured goods during the period.

Cost Reconciliation Report

A financial report that explains the differences or reconciles the variations between the cost of beginning inventory plus purchases and the cost of goods sold.

Equivalent Units

A concept used in cost accounting to express the amount of work done on incomplete products in terms of fully completed units of output.