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    Interpretation of Regression Data

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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
    Standard
    Independent Variable Coefficients 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
    a. What are the estimated personnel costs for 4,200 employees?
    b. (Appendix A) How confident are you that a significant cost-driver relation exists?

    See attached file for full problem description.

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    Solution Preview

    You have not provided the unit of number of employees used in regression equation. I hope it is in units and solving assuming that. If it is in thousands make suitable adjustments.

    The regression line ...

    Solution Summary

    This solution calculates the regression equation, personnel cost and value of r-square. A conclusion is made about if the data set is significant and all steps are shown with brief explanations.

    $2.19

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