Faculty of Management Studies, University of Delhi

MBA (PT) I yr, Semester I, 2016-2017 8102: Quantitative Methods for Management
Assignment – VII – Linear Regression – Triangle Mall Management Case
Submitted By:
Shakher saini, Roll no: S070, South Campus

From the given data 1st we will prepare a Scatter plot & then find out the regression summary to answer our
questions.

Given Data For Sunflowers Stores

Stor Annual Scatter Plot
e Avg Income (in $000) Sales
14
1 22.3 3.7 12
2 36.6 3.9 10

Annual Sales
8 f(x) = 0.19 x − 1.94
3 55.5 6.7
6 R² = 0.49
4 46.7 9.5 Annual Sales
4
5 32.4 3.4 2 Linear (Annual
Sales)
6 31.7 5.6 0
15 20 25 30 35 40 45 50 55 60
7 41.6 3.7
Income
8 21.4 2.7
9 44.4 5.5
10 34.1 2.9
11 51.8 10.7
12 45.1 7.6
13 52 11.8
14 49.2 4.1

Regression Statistics Income Line Fit Plot

14
12
Multiple R 0.698
10
8 Sales
Sales

R Square 0.488 6 Predicted Sales

4
2
Adj R Square 0.445 0
15 20 25 30 35 40 45 50 55 60
Standard Error 2.235 Income

Observations 14

ANOVA
1
   df SS MS F Significance F  
57.01
Regression 1 57.019 9 11.416 0.005  
Residual 12 59.935 4.995      
Total 13 116.954        
 
Std P-
  Coefficients Error t Stat value Lower 95% Upper 95%
Intercept -1.941 2.380 -0.816 0.431 -7.127 3.244
Income 0.193 0.057 3.379 0.005 0.069 0.317

Q 1. Should the mean disposable income be used to predict sales based on the sample of 14 sunflowers stores?
Ans : In economics we say “The higher the income the higher the consumption is”. So Consumption has a positive
relation with disposable income.
From the scatter diagram made by the given data, we got a linear line explaining that as the disposable income increases
the annual sales also increases. We also know that the coefficient correlation is  = 0.70
Therefore, there is a strong positive correlation between the disposable income and the annual sales.
The regression coefficient is 0.193 (positive) .That means sales will increase if the disposable income increases.

So Based on above mentioned points we can conclude that, the average disposable income should be used to predict
sales based on the sample of 14 sunflowers stores.

Q 2. Should the management of Sunflower accept the claims of Triangle’s leasing agent? Why or why not?
Ans : The management should accept the claims of Triangle leasing agents because there is a strong positive correlation
between the disposable income and sales, so it is easily predictable that there is a direct relationship between these two
variables.
Value of the coefficient of correlation is 0.70 and it is near to 1.00. That is if one variable, the disposal income increases,
another variable, the annual sales will also increase. The regression coefficient is 0.193. So, if the average disposable
income increases by $1, annual sales will increase by $0.193

Q 3. Is it possible that the mean disposable income for surrounding areas is not an important factor in leasing new
location? Explain.
Ans: Disposable income is an important factor in leasing new location as value of correlation coefficient is closer to 1
indicating strong linear relationship of sales to income, so sales as well as income can’t be ignored at all.

Q 4. Are there any other factors not mentioned by the leasing agents that might be relevant to the store leasing
decision?
Ans : R-squared is a statistical measure of how close the data are to the fitted regression line. It is also known as the
coefficient of determination. In general, the higher the R-squared, the better the model fits your data.
In this case the value of R-Squared is 48.8 %.

RESIDUAL OUTPUT
     
Observatio Residual
n Predicted Sales s
1 2.362 1.338
2 5.121 -1.221
3 8.767 -2.067

2
 4 7.069 2.431
5 4.310 -0.910
6 4.175 1.425
7 6.085 -2.385
8 2.188 0.512
9 6.626 -1.126
10 4.638 -1.738
11 8.053 2.647
12 6.761 0.839
13 8.092 3.708
14 7.552 -3.452