Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $10,000 spent on promotional costs within the relevant range? Which method should Catherine use to predict the effect of promotional costs on ticket revenues? Explain briefly. (CIMA, adapted) Catherine McCarthy, sales manager ofBaxter Arenas, is checking to see if there is any relationship between promotional costs and ticket rev-enues at the sports stadium. She obtains the following data for the past 9 months:Promotional Costs$52,00065,00080,000MonthTicket RevenuesAprilMayJune$200,000270,000320,000480,000JulyAugustSeptember90,000100,000110,000430,000450,000October540,000120,000November670,000180,000197,000December751,000She estimates the following regression equation:Ticket revenues =$65,583 + ($3.54 x Promotional costs)

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Answered: (CIMA, adapted) Catherine McCarthy,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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_{Using (a) the regression equation and (b) the high-low equation, what is the increase in revenues for each $10,000 spent on promotional costs within the relevant range? Which method should Catherine use to predict the effect of promotional costs on ticket revenues? Explain briefly.}

(CIMA, adapted) Catherine McCarthy, sales manager of
Baxter Arenas, is checking to see if there is any relationship between promotional costs and ticket rev-
enues at the sports stadium. She obtains the following data for the past 9 months:
Promotional Costs
$52,000
65,000
80,000
Month
Ticket Revenues
April
May
June
$200,000
270,000
320,000
480,000
July
August
September
90,000
100,000
110,000
430,000
450,000
October
540,000
120,000
November
670,000
180,000
197,000
December
751,000
She estimates the following regression equation:
Ticket revenues =
$65,583 + ($3.54 x Promotional costs)

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