The Prescott Movie Theater Regression Case Study

Case Study: The Prescott Movie Theater Regression Case Study

Excel Spreadsheet: The Prescott Movie Theater Regression Data

Background on the Case Study[1]

            Matt Hale, owner of the Prescott Movie Theater, with 8 screens in the Cineplex, is worried about competition from net screening services and from other online entertainment that seems to be cutting into his profit.  Matt screens only the latest Hollywood hits that some of his younger patrons in Prescott Florida seem to appreciate.  While somewhat profitable, Matt is worried that his audience is primarily teenagers with an occasional young adult attending.  “The main customers for most of our films are teenagers and young adults.  I’d sure like more of the older crowd, but most of today’s movies aren’t for them, so what’s a fella to do?”

            The average ticket at Matt’s theaters costs $15.00 of which he splits this with the movie distributer and the production company.  He makes $7.50 per head, but his real profit comes mainly from two products, soda/drinks and popcorn.  “This is what pays the rent.  I make over 95 percent on the cost for every tub of popcorn, and it costs me about 3 percent for each drink I sell.  Most often those teenagers buy the largest tub of popcorn for $6.00 so I make $5.40 on each of those, and for a $3.50 drink I clear about $3.40 or so.  But, remember I have to pay my help, keep the theaters clean and pay my mortgage and taxes from that profit.”

            Another source of revenue for Matt are the advertising before the movie.  “The sponsors pay me about $50,000 a year to screen their ads, and of course they want the volume turned way up so that the customers cannot ignore the ads.  This does make some of the older customers unhappy so I have to reach a happy medium to keep both the customers and the sponsors happy.”

            Jodie Morgan, Matt’s concession manager has been working hard to increase the number of sales of the high profit drinks and popcorn.  Jodie said, “I’d even run specials for the last 10 minutes that the concession booth is open.  By one and get the next one ½ off, anything to sell out the popcorn and help Matt make more money, plus the popcorn is delicious and good for you![2]”

            Matt and Jodie have decided to try an experiment, she will be given quotas on how much popcorn, drinks and candy to sell and then Matt will try and guess what the number of customers would be that day.  He thinks that this will work, plus give Jodie something to aim for with her sales.  He has given her 5 typical days at the theater with the number of drinks, popcorn and candy to sell, then with your help, you will figure out what the number of customers will be that day, and how much gross and net profit Matt would make at this sales and customer level.

Table 1.           Projected Ticket Sales for a given number of concession items

            Matt has been keeping track of his income over the past several months and wants your help to project out his possible revenue over a five day period.  Using the Excel spreadsheet for this case study you are to do the following:

1.      Complete a one variable summary for all the four categories of attendance and sales.

a.       What do these statistics tell you about the theater income?  Be specific and look at the range, standard deviation, the IQR, the mean versus the median and other statistics from this output.

2.      Complete a single histogram on all four of these data (as a group, not individually) and analyze the results.

a.       What do these histograms tell you about the attendance and revenue for each of these sources of income as a group?

b.      Be sure to add the trendline to each of these and include the equation and r-squared value on each.  What do these tell you about these data when compared to the total number of customers?

3.      Complete a correlation for the four variables, what does this correlation tell you about the importance of all of the sources of revenue to the total number of customers?

4.      Complete 4 Q-Q plots for these four variables.

a.       What do these plots tell you about the data?  Is it relatively normal or not and why? 

5.      Complete a single box and whisker plot with all four of the customers and income on it.  (Hint: Expand the box and whisker plots and you will see more detail in them.)

a.       First explain what a box and whisker plot is, and how to understand it. 

b.      What do these box and whisker plots tell you about the revenues and number of customers and how do they compare to each other?

6.      Complete a multiple regression using the total attendance as the dependent variable, and the other revenue as the independent variables.

a.       Do any of the variables exceed the alpha (0.05) for this test?  If so, remove that/those variables and rerun the regression.  Explain why you removed any of these variables in your report.

b.      What does the r-squared value tell you about this data?

c.       What does the standard error of the estimate tell you about the data?

d.      According to the f-ratio, is this regression significant or not and why?

e.       Using the coefficients generate predict the attendance for the five (5) typical days at the theater as found in Table 1 above.  (You are to complete the column found on the right in yellow and include this table in your mini report.)  NOTE: If you removed any of the variables then the estimated revenue should be based only on the significant variables.

7.      What general things can you tell professor Matt about the sources of revenue?

a.       Do such things as the amount of drinks and popcorn make a difference to his revenue?  Why or why not?

b.      Does the amount the amount of candy and miscellaneous items sold impact the total revenue?  Why or why not?

After you have complete the Table 1, then you have sufficient information to complete the following two tables which are to be included in your extra credit report.  Indicate the gross revenue and the net revenue for the 5 days.  Be sure to explain how you came up with these estimates in the paper.  What does this tell Matt about his sources of revenue and the future for his theater?  Be specific and answer this question in some detail.

Table 2.           Prescott Theater Projected Gross Revenue

Table 3.           Prescott Theater Projected Net Revenue

Remember to develop your mini report as shown in the chats for this assignment.  All work is to be 1 & ½ spaces, ¾ inch margins, with all tables, graphs and figures having a number and a title and explain in the report.  Include an embedded Excel file showing your work, but note this file will not be graded and is only used to demonstrate that you did the actual work for this case study.

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Adding a Trendline to a Graph in Word

First, create the XY scatterplot graph in Excel as shown by your professor during the chats.

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Next right click on any data point in the graph you just created.  Notice that one option available is to Add Trendline.  Select that option (1).

Next you are presented with several options, select linear (2) for the type of trendline you want and also check to display the equation and the r-squared value (3) on the graph and select Close (4).

You can now right click on the graph and paste it into your Word document. 

Be sure to explain to the reader how to read and understand the graph, what the trendline means, and what the equation and r-squared values each mean.