The gross margin in the current quarter is related to the gross margin four quarters (one year) earlier. To determine whether there is a seasonality factor, we need to test the coefficient on lag 4. The t-statistic for the coefficients is calculated as the coefficient divided by the standard error with 61 degrees of freedom (64 observations less three coefficient estimates). The critical t-value for a significance level of 5% is about 2.000 (from the table). The computed t-statistic for lag 4 is 0.168/0.038 = 4.421. This is greater than the critical value at even alpha = 0.005, so it is statistically significant. This suggests an annual seasonal factor.

The process has significant explanatory power since both slope coefficients are significant and the coefficient of determination is 0.767