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    Exercise 11.44 Unsafe Insurance Company

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    Unsafe Insurance Company needs to forecast its personnel department costs. The following output was obtained from a regression program used to estimate the department's costs as a function of the number of employees:

    SUMMARY OUTPUT
    Dependent variable = Personnel costs
    Regression Statistics
    R-square 0.7255
    Standard error 612.0926
    Observations 24
    Independent Variable Coefficients Standard Error T -Statistic
    Intercept 8,421.441 2,687.979 3.133
    Employees 492.703 164.949 2.987
    Monthly data for the past two years were used to construct these estimates. Cost relationships are expected to be the same for the coming period.

    Required
    1. What are the estimated personnel costs for 4,200 employees?
    2. (Appendix A) How confident are you that a significant cost-driver relation exists?

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    Solution Preview

    Exercise 11.44

    Unsafe Insurance Company needs to forecast its personnel department costs. The following output was obtained from a regression program used to estimate the department's costs as a function of the number of employees:

    SUMMARY OUTPUT
    Dependent variable = Personnel costs
    Regression Statistics
    R-square 0.7255
    Standard error 612.0926
    Observations 24

    Independent Variable Coefficients Standard Error T -Statistic
    Intercept 8,421.441 2,687.979 3.133
    Employees 492.703 164.949 2.987

    Monthly data ...

    Solution Summary

    Unsafe Insurance Company needs to forecast its personnel department costs. The following output was obtained from a regression program used to estimate the department's costs as a function of the number of employees:

    $2.19

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