Big Suzy Snack Cake

1322 words 6 pages
To: The Regional Food Marketer Date: November 4, 2012
Ye Olde FoodKing Company


Re: Big Suzy’s Snack Cakes Regression Analysis


The Regional Food Manager for Ye Olde FoodKing Company has retained Mark Craig of Blue Steel Consulting to perform a regression analysis to forecast demand of your product. The four characteristics readily available included price, competitors’ price, average income, and market population. The results of each regression analysis are presented at the end of this memo. The remainder of this memo describes the regression analysis used and limitations to the data available. Running a regression provides a statistical procedure to estimate the liner dependency of one or more
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If there is no correlation between variables, the coefficients of the independent variables would be zero.

For example, a correlation shows only the degree on which two variables move together such as price and average income. While it is possible to find a positive correlation between market population and competitor's price, a correlation would only demonstrate the strength of this relationship, as opposed to a regression analysis which will provide the measured effect of how much sales and price can change.

Even though two variables might be correlated and present a robust regression result, this does not imply that there is causation of the independent variable on the dependent. Causation exists when changes in the dependent variable are correlated to changes in the independent variable and produced by the changes in the independent variable. It is possible to find a positive correlation between two variables and have no causality.

Our analysis revealed that the price -40.71 being the independent variable is affected somewhat if the dependent variables increase or decrease. If there was an increase of 1, there would be a 41 unit decline in the number of cakes sold. As shown in the appendix 1, the p-value of the coefficient is close to one, therefore, less the 0.05 and 0.01 level of