You have recently taken on work as the quantitative business analyst for a company

| August 30, 2017

Question
You have recently taken on work as the quantitative business analyst for a company that
holds the DVD distribution rights for movies. The company wants to estimate the sales
revenue for each DVD movie it distributes. Currently, the company tends to follow some
adhoc guidelines to form these estimates. However, they have recently acquired some
data on DVD sales, and have hired you to help analyse it and assess or inform/improve
their DVD revenue estimation methods. The data are in the file “Movie.xls”, available on
the BUSS1020 Blackboard site. You are required to present and explain all your
assumptions and discuss whether they could be true, or not, in each case, in answering
each of the questions below

The company has always estimated DVD revenue differently, based on whether the box

office revenue was in excess of $100 million, or not. In fact the company usually

estimates that DVD revenue will be higher by $25 million when the box office revenue is

in excess of $100 million.

i. Fully investigate the hypothesis that DVD revenues are larger on average

when the box office revenue is in excess of $100 million. State all required

assumptions, indicate your chosen level of significance (and why you chose it)

and give a plain-English business context conclusion.

ii. Test the dealership’s hypothesis that $25 million should be added to the

estimated DVD revenue, when the box office revenue is in excess of $100

million. Does the data support that hypothesis?

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