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Group 3 A sporting goods store would like to determine what relationship exists between their annual advertising budget ( Y ) and the annual sales (
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Question

# Group 3YX

A sporting goods store would like to determine what relationship exists between their annual advertising budget () and the annual sales () so that they can assess the effectiveness of their current channels. The data for the last five years is provided in the table below (in \$000).

(A) Estimate a simple linear regression model using the sample data. How well does the estimated model fit the sample data?

(B) Perform an F-test for the existence of a linear relationship between Y and X. Use a 5% level of significance.

(C) Plot the fitted values versus residuals associated with the model in (A). What does the plot indicate?

(D) Diagnose what may be causing the problem seen in the residuals plot in (C). What issue(s) do you identify?

(E) Suggest an alternative model to address the issues identified in (D). Are you able to obtain an improved fit to the data? Explain your answer.

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