Assignment 3 - Solution

The document is an assignment submission form for a course on Statistical Methods for Management Decisions, submitted by Ronit Agarwal. It includes analyses of the relationship between store size and monthly sales, highlighting strong correlations and the significance of the findings. The document also discusses hypothesis testing and the applicability of retail industry wisdom to the specific case of CCD.

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Assignment 3 - Solution

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ASSIGNMENT SUBMISSION FORM

Course Name: Statistical Methods for Management Decisions

Assignment Title: Assignment 3 (CCD)
Submitted by: Individual, Section C

Student Name PG ID
Ronit Agarwal 62210384

ISB Honour Code

 I will represent myself in a truthful manner.

 I will not fabricate or plagiarize any information regarding the curriculum.
 I will not seek, receive, or obtain an unfair advantage over other students.
 I will not be party to any violation of the ISB Honour Code.
 I will personally uphold and abide, in theory and practice, the values, purpose and
rules of the ISB Honour Code.
 I will report all violations of the ISB Honour Code by members of the ISB
community.
 I will respect the rights and property of all in the ISB community.
 I will abide by all the rules and regulations that are prescribed by ISB.

(Please start writing your assignment below)

1
Q1.

Form: The association between store size and

monthly sales can be described with a linear
equation.

Direction: Positive value of corelation ‘r’

indicates a positive association/direction.

Strength: Does the association appear to be

strong, moderately strong, or weak? A high
enough value of ‘r’ indicates that there is a
strong relationship between the store size
and the monthly sales.

2
Q2.

Interpretation:

1. The R2 value is 0.65 which means the model explains about 65% of the variation in our
dependent variable.
2. There is a strong corelation, which does not necessarily mean that there is a causation
of one factor because of other but there is relation (positive) between the two.
However, because the size of the store intuitively causes greater brand image and
footfall, bigger size of store most probably is the cause of higher month sales.
3. The root mean square error is low which means that the error is not significant in
reference to our fit line. Moreover, the data is normally distributed.
4. The p value of the data is low, which means that we can safely reject our null
hypothesis (there is no causality between the two variables).
5. Covariance is very high which means that the variables are very strongly corelated

Q3.

We can do a hypothesis test to verify our claim. Null

Hypothesis: Ho = the sales are not based on store
size.

Test: p value way less than alpha even at ~99%

confidence so it is safe to assume that the
monthly sales is based on store size.

Q4.

The retail industry wisdom of Rs 500 per month per sq. ft is not applicable to CCD because even
upper 95% of the confidence interval is 498.64 which is less than 500.

Q5.

As clearly described by the analysis below:

Predicted Monthly sales (INR) = 32249.334 + 311.0897*Store Size (Sq. Ft.)

3
For Store size = 200 sq. ft: Monthly sales (INR) = 32249.334 + 311.0897*200 = 94467.274

Similarly, for: 500 sq. ft: Monthly sales (INR) = 32249.334 + 311.0897*500 = 187794.184

Q6.

1. The corelation value between

the store size and monthly sales
is 0.8101 which indicates a
strong relationship between
the two variables.

2. The corelation value between

the monthly sales and predicted
monthly salary is 0.8101 which
is not surprising because the
predicated monthly salary is
the outcome of the fit line.