16. CSO: 1A2a LOS: 1A2c
In order to analyze sales as a function of advertising expenses, the sales manager of
Smith Company developed a simple regression model. The model included the following
equation, which was based on 32 monthly observations of sales and advertising expenses
with a related coefficient of determination of .90.
S = $10,000 + $2.50A
S = sales
A = advertising expenses
If Smith Company’s advertising expenses in one month amounted to $1,000, the related
point estimate of sales would be
a. $2,500.
b. $11,250.
c. $12,250.
d. $12,500.
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