Question

The director of marketing at a large company wants to determine if the amount of money spent on internet marketing is a good predictor of company profit. She fits a least-squares regression line to 20 months of data and computes the following regression line:

Profit = 372.6 + 17.2(advertising dollars)

What is the value of the residual for advertising dollars spent equal to $1,020 and Profit equal to $17,500? Round to the nearest integer.

Answer 1

Given:
Profit = 17,500
advertising dollar = 1,020

regression line:

Profit = 372.60 + 17.2(advertising dollar)
17,500 = 372.60 + 17.2(1020)
17,500 = 372.60 + 17,544
17,500 = 17,916.60

There is a residual value of 416.60.

17,916.60 - 17,500 = 416.60