Exhibit 14-5.An marketing analyst wants to examine the relationship between sales (in $1,000s)and advertising (in $100s)for firms in the food and beverage industry and collects monthly data for 25 firms.He estimates the model .The following table below shows a portion of the regression results. Refer to Exhibit 14-5.Predict Sales for a firm with Advertising of $500.
A)$1,480
B)$40,100
C)$54,500
D)$148,000

Question

Exhibit 14-5.An marketing analyst wants to examine the relationship between sales (in $1,000s)and advertising (in $100s)for firms in the food and beverage industry and collects monthly data for 25 firms.He estimates the model  .The following table below shows a portion of the regression results.  Refer to Exhibit 14-5.Predict Sales for a firm with Advertising of $500.
A)$1,480 
B)$40,100 
C)$54,500 
D)$148,000

Quizplus · Accepted Answer

From the regression results, we can see that the estimated coefficient for Advertising is 109 (rounded to the nearest whole number). This means that for every $100 increase in Advertising, Sales are predicted to increase by $109,000 (scaled by 1,000). 
To predict Sales for a firm with Advertising of $500 (scaled by 100), we plug in this value into the regression equation:
Sales = -11 + 109(5) = $545,000 (scaled by 1,000) = $54,500. Therefore, the best choice is C.