Exercise 14: Computing for the Pearson r value and testing its significance

Compute the Pearson r value of the following data. Interpret the result. Test for the
significance of the Pearson r value using 5% level of significance.

A corporation owns several companies. The strategic planner of the corporation believes
that amount spent on advertising is significantly related to total sales. As an aid in long-
term planning, he gathers the following sales and advertising expenditures from several
of the companies for 2009 (Php million).

Advertising Expenditures Sales

10.5 130
18.1 250
12.6 148
4.7 55
21.8 338
60.4 994
37.6 541
6.3 89
17.8 125
43.2 370

ASWERS:
Correlations
X Y
VAR00002 Pearson
1 .938**
Correlation
Sig. (2-tailed) .000
N 10 10
VAR00003 Pearson
.938** 1
Correlation
Sig. (2-tailed) .000
N 10 10

-there is a significant relationship between advertising expenditures and sales.

- the relationship is very high.

-at 5% level of significance, the Pearson coefficient is significant indicating a very high
correlation between advertising expenditures and sales.
Exercise 15: Developing simple regression equation, interpreting and predicting

A corporation owns several companies. The strategic planner of the corporation believes
that amount spent on advertising can to some extent be a predictor of total sales. As an
aid in long-term planning, he gathers the following sales and advertising expenditures
from several of the companies for 2009 (Php million).

Advertising Expenditures Sales

10.5 130
18.1 250
12.6 148
4.7 55
21.8 338
60.4 994
37.6 541
6.3 89
17.8 125
43.2 370

Develop the simple regression equation to predict sales from advertising expenditures.
Interpret the model. Predict the total sales of a company who will be spending P35
million for advertisement this year.

ANSWERS:
Coefficientsa
Standardize
Unstandardized d
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant
-41.175 55.963 -.736 .483
)
VAR0000
14.814 1.933 .938 7.662 .000
2
a. Dependent Variable: VAR00003

Sales= -41.18 + 14.81(advertising expenditures)

Sales= -41.18 + 14.81(35,000,000)

Sales= -41.18 +818,350,000

Sales=818,349,958.82