Smith’s Appliances is evaluating its advertising budget. - 6535

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Smith’s Appliances is evaluating its advertising budget. The owner is trying to decide if the budget needs to be altered or not. The question: Is there a positive return on the investment that is being made in advertising? What is the relationship between sales and the amount spent on advertising? The owner collected data for the past year by month. The data is in millions of dollars.

MonthAdvertising ExpenseSales Revenue

January24

February35

March36

April58

May68

June47

July57

August68

September79

October810

November1013

December911

Is there a relationship between the two variables? What is the coefficient of correlation for this data?

A.   No, 0.457

B.   Yes, 0.961

C.   Yes, 0.980

D.   Yes, 0.892

Solution Description

Smith’s Appliances is evaluating its advertising budget. The owner is trying to decide if the budget needs to be altered or not. The question: Is there a positive return on the investment that is being made in advertising? What is the relationship between sales and the amount spent on advertising? The owner collected data for the past year by month. The data is in millions of dollars.

Month        Advertising Expense     Sales Revenue