Cascade Pharmaceuticals Company developed the following regression model, using

time-series data from the past 33 quarters, for one of its nonprescription cold
remedies

y= -1.04+ 0.24X1 + 0.27X2

Where Y = quarterly sales (in thousands of cases) of the cold remedy

X1 = Cascade's quarterly advertising (X$ 1,000) for the cold remedy

X2 = competitors' advertising for similar products (x$10,000)

Here is additional information concerning the regression model:

sb1 = 0.032 sb2 = 0.070

R2 = 0.64 Se = 1.63 F-statistic = 31.402

Durbin-Watson (d) statistic = .4995

a. Which of the independent variables (if any) appear to be statistically significant

(at the .05 level) in explaining sales of the cold remedy?

For X1 the t test value is .24/.032= 7.5. this is >2 so that we can say that X1 is
statistically significant.

For X2 the t test value is .27/.073.857. this is >2 so that we can say that X2 is
statistically significant.

Both X1 and X2 are significant.

b. What proportion of the total variation in sales is explained by the regression

equation

64% of the total variation in sales is explained by the regression equation

c. Perform an F-test (at the .05 level) of the overall explanatory power of the model

the test value is 31.402

the critical value of F with 2 and 30 degrees is 4.18. clearly the overall regression
equation is significant.

e. What additional statistical information (if any) would you find useful in the
evaluation of this model?

We need adjusted R^2 value.

We can use normal probability plots to check if the assumptions of normality are
satisfied.
We can use the raw data to fit another polynomial model or some other form of the
equation which gives a higher R^2 value.