You work for a company in the marketing department. Your manager has tasked you

Question

You work for a company in the marketing department. Your manager has tasked you with forecasting sales by month for the next year. You notice that over the past 12 months sales have consistently gone up in a linear fashion, so you decide to run a regression the company's sales history. You find that the regression equation for the data is (sales) = 61.935*(time) + 159.966. In August (time = 8) you see the actual sales quantity was 436.848. The residual is -218.598. Interpret this residual in terms of the problem.

Question 3 options:

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1) The sales is 436.848 units less than than what we would expect. 2) The sales is 218.598 units less than than what we would expect. 3) The month is 218.598 months less than than what we would expect. 4) The sales is 218.598 units greater than than what we would expect. 5) The month is 218.598 months larger than than what we would expect.

Explanation / Answer

Note that

Residual = y(Actual) - y(expected)

So in this case,

Residual = sales(Actual) - sales(expected) = -218.598.

Hence, as this is negative, the actual sales is less than the expected sales, so

OPTION 2: The sales is 218.598 units less than than what we would expect. [ANSWER]

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