COMPNAY 8 QUARTER 11

Tools used – Regression analysis

Model -Scatter diagram

Method

Example: Market 3 & product 1

First we have done scattered diagram plot with price on ‘Y’ and units sold on ‘X’ axis. After that we have
plotted a linear trend line and from there we got the R 2 and regression equation.

y = -0.004x + 179.2…………………. (1)

Here ‘X’ is units sold and ‘Y’ is price.

R² = 0.9603

R2 shows the coefficient of determination and also the degree of fitness of the linear trend line with the
scattered diagram plot. In the above equation the degree of fitness is 96.03 %.

Secondly we have done a scattered diagram plot with quarter on ‘Y’ axis and units sold on ‘X’ axis. After
that we have plotted a linear trend line and from there we got R 2 and regression equation.

y = -0.0018x + 31.559…………………… (2)

Putting ‘Y’ as 11 we have got the value of ‘X’ as estimated units of sale in 11 quarter.

Now after getting the value of ‘X’ form equation 2, we have substituted ‘X’ in the equation 1 with it and
from that we got required price of each unit.

R² = 0.9555

R2 shows the coefficient of determination also the degree of fitness of the linear trend line with the
scattered diagram plot. In the above equation the degree of fitness is 95.55 %.

In the above method of regression analysis we have taken sales unit as independent variable and price
as dependent variable

Price we have kept same as what we got for the above equation with little variation.

We applied same method for each product and market.

Since we where the market leaders in every market (here we exists) we for 11 th quarter decided to be in
the same market and with same product category.
COMPNAY 8 QUARTER 11

Assumption:

In this quarter we have taken

1. While manufacturing the product we have decided to produce 500 units more than the
estimated demand
2. Quantity offered for sale is 350 units more than the estimated demand
3. Inventory brought forward in this quarter has been assumed to be zero.
4. Marketing expenditure as the average of the last 10 quarter.
5. R&D expenditure as the average of the last 10 quarter.