Question

Suppose that a company wishes to predict sales volume based on the amount of advertising expenditures. The sales manager thinks that sales volume and advertising expenditures are modeled according to the following linear equation. Both sales volume and advertising expenditures are in thousands of dollars.

Estimated Sales Volume =46.63+0.47(Advertising Expenditures)
If the company has a target sales volume of $275,000, how much should the sales manager allocate for advertising in the budget?

Answer 1

$485890

Explanation:

Given

Estimated Sales Volume =46.63+0.47(Advertising Expenditures)

Required

Find the allocated amount for advertising expenditure when target sales is $275000

Represent the sales volume with V and The advertising expenditure with a.

So, the expression is:

`V = 46.63 + 0.47A`

Since the expression is in thousands, substitute 275 for V

`275 = 46.63 + 0.47A`

Collect Like Terms

`275 - 46.63 = 0.47A`

`228.37= 0.47A`

Make A the subject

`A = (228.37)/(0.47)`

`A = 485.89`

Hence, $485890 should be allocated for advertising