Regression

The managing director of the Star Tech BD, (The company you guys dealt with in the Mid 2) thinks
that it is not only the months of warranty that affect Sales, but also the number of leaflets
distributed (advertising). So he collects the leaflet distribution data over the last seven months, and
the following data looks like this

Months of Warranty Leaflets Distributed Sales

6 63 183
4 42 162
8 81 190
4 47 170
6 66 189
8 79 198
10 105 206
If we consider just the number of leaflets distributed and the sales, we get a linear model as of
follows,

Sales (Y) = 139 + 0.68 x Leaflets (X)

Q. How reliable and accurate is this linear model?

Based on both the Months of Warranty and the Leaflets Distributed data, the manager runs a very
simple multiple regression analysis in SPSS statistical software, and gets the following result tables:

Model Summary

Model R R Square Adjusted R Std. Error of the

Square Estimate
a
1 .956 .914 .871 5.50623

a. Predictors: (Constant), Leaflets Distributed per Month, Months of

Warranty

ANOVAa

Model Sum of Squares df Mean Square F Sig.

Regression 1286.440 2 643.220 21.215 .347b

1 Residual 121.274 4 30.319

Total 1407.714 6

a. Dependent Variable: Sales of Laptop per Month

b. Predictors: (Constant), Leaflets Distributed per Month, Months of Warraty
 Coefficientsa

Model Unstandardized Coefficients Standardized t Sig.

Coefficients

B Std. Error Beta

(Constant) 139.031 8.399 16.553 .000

Months of Warraty .795 7.943 .116 .100 .925

1
Leaflets Distributed per
.597 .819 .841 .729 .506
Month

a. Dependent Variable: Sales of Laptop per Month

Typical to most Bangladeshi businessman, at this point, the manager is lost, and he has no idea
what these tables tell him, and is his hunch correct or not. He hires you as a consultant to give him
an idea what these outputs mean.

Q. Interpret the findings of these outputs to the manager. Give him an equation, and explain
the equation. What would you propose the MD to increase sales.

Forecast

The following table presents the demand for Oil for the last 7 quarters:

Quarter Demand (in Hundreds)

Q1 98
Q2 105
Q3 70
Q4 84
Q5 90
Q6 94
Q7 86

You have newly been appointed the production and sales manager for the organization.
One of your first assignments is to verify the forecasting method that they are using – 4
period moving averages.

Q. How do you find out that a forecasting method is good/bad?

Q. Check for the method that is being used and comment on that.

You have decided that a simple moving average is not accurate for the purpose at hand. So
you decide to use Weighted Moving Averages.
After your meetings with the office staffs, you found out that the demand for next quarter
depends on last three periods, and that the most recent period is the most important one.
The other two periods previous periods are equally important.

Q. If you use WMA, then what could be the possible weights that you can set?

You decide the weights to be W1 – 0.6, W2 – 0.2, W3 – 02.

Q. Which method comes out to be the better forecasting method?

Q. What can you comment about the data on the demands for the last few quarters?