Dixie Showtime Movie Theathers, Inc., owns and operates a chain of cinemas in several markets in the southern United States. The owners would like to estimate weekly gross revenues as a function of advertising expenditures. Data (in hundreds of dollars) for a sample of eight markets for a recent week follow:
Market
Mobile Shreveport Jackson Birmingham Little Rock Biloxi
New Orleans Baton Rouge
Weekly Gross Television Revenue Advertising ($100s) ($100s)
Newspaper Advertising ($100s)
101.3 5.0 1.5
51.9 3.0 3.0
74.8 4.0 1.5
126.2 4.3 4.3
137.8 3.6 4.0
101.4 3.5 2.3
237.8 5.0 8.4
219.6 6.9 5.8
1) Develop an estimated regression equation with the amount of television advertising as the independent variable. Test for a significant relationship between television advertising and weekly gross revenue at the0.05level of significance. What is the interpretation of this relationship? How much variation in the sample values of weekly gross revenues does this model explain?
2) Develop an estimated regression equation with both television and advertising and newspaper advertising as the independent variables. Is the overall regression statistically significant at the0.05level of significance? If so, then test whether each of the regression parameters , , and is equal to zero at the0.05level of significance. What are the correct interpretations of the estimated regression parameters? Are these interpretations reasonable? How much variation in the sample values of weekly gross revenues does this model explain?
3) Given the results obtained, what should your next step be? Explain. What are the managerial implications of these results?