Question 14 Marks
From the data and calculation of illustration $12$ of the chapter of linear correlation, obtain the regression line of profit on the sales. Estimate the profit when sales is $₹ 3$ crore.
Answer
View full question & answer→From the illustration, we know that$ u=\frac{x-A}{c_{x}}=\frac{x-2}{0.1} \text { and } v=\frac{y-B}{c_{y}}=\frac{y-5600}{100}$
$ \therefore c_{x}=0.1 \text { and } c_{y}=100$
Note that $c_{x}$ is the divisor of $(x-A)$.
So, though we have multiplied $(x-A)$ by $10$ for simplicity of calculation, $c_{x}$ is $\frac{1}{10}=0.1$.$( \because$ To multiply by $10$ is same as to divide by $\frac{1}{10}=0.1)$
$\text { Now } b =\frac{n \Sigma u v-(\Sigma u)(\Sigma v)}{n \Sigma u^{2}-(\Sigma u)^{2}} \times \frac{c_{y}}{c_{x}}$
$ =\frac{9(121)-(0)(1)}{9(60)-(0)^{2}} \times \frac{100}{0.1}$
$ =\frac{1089}{540} \times \frac{100}{0.1}$
$ =\frac{108900}{54}$
$ =2016.6667$
$\therefore b \simeq 2016.67$
Now, $a=\bar{y}-b \bar{x}$$ =5611.11-2016.67(2)$
$ =5611.11-4033.34$
$\therefore a =1577.77$
So, the regression line of profit $(Y)$ on the sales $(X)$ is$\hat{y} =a+b x$
$\therefore \hat{y} =1577.77+2016.67 x$
Putting $X=3$,$\hat{y} =1577.77+2016.67(3)$
$ =1577.77+6050.01$
$\therefore \hat{y} =7627.78$
So, when sales is $₹ 3$ crore then the estimated profit is $7627.78 ($thousand $₹ ).$
$ \therefore c_{x}=0.1 \text { and } c_{y}=100$
Note that $c_{x}$ is the divisor of $(x-A)$.
So, though we have multiplied $(x-A)$ by $10$ for simplicity of calculation, $c_{x}$ is $\frac{1}{10}=0.1$.$( \because$ To multiply by $10$ is same as to divide by $\frac{1}{10}=0.1)$
$\text { Now } b =\frac{n \Sigma u v-(\Sigma u)(\Sigma v)}{n \Sigma u^{2}-(\Sigma u)^{2}} \times \frac{c_{y}}{c_{x}}$
$ =\frac{9(121)-(0)(1)}{9(60)-(0)^{2}} \times \frac{100}{0.1}$
$ =\frac{1089}{540} \times \frac{100}{0.1}$
$ =\frac{108900}{54}$
$ =2016.6667$
$\therefore b \simeq 2016.67$
Now, $a=\bar{y}-b \bar{x}$$ =5611.11-2016.67(2)$
$ =5611.11-4033.34$
$\therefore a =1577.77$
So, the regression line of profit $(Y)$ on the sales $(X)$ is$\hat{y} =a+b x$
$\therefore \hat{y} =1577.77+2016.67 x$
Putting $X=3$,$\hat{y} =1577.77+2016.67(3)$
$ =1577.77+6050.01$
$\therefore \hat{y} =7627.78$
So, when sales is $₹ 3$ crore then the estimated profit is $7627.78 ($thousand $₹ ).$