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    15. A recent article in Business Week listed the "Best Small Companies." We are
    interested in the current results of the companies, sales and earnings. A random
    sample of 12 companies was selected and the sales and earnings, in millions of dollars,
    are reported below.

    Sales Earnings Sales Earnings
    Company ($millions) ($millions) Company ($ millions) $ millions)
    Papa John's $89.2 $4.9 Checkmate Electronics $17.5 $2.6
    Applied Innovation 18.6 4.4 Royal Grip 11.9 1.7
    Integracare 18.2 1.3 M-Wave 19.6 3.5
    Wall Data 71.7 8.0 Serving-N-Slide 51.2 8.2
    Davidson Associates 58.6 6.6 Daig 28.6 6.0
    Chico's Fas 46.8 4.1 Cobra Golf 69.2 12.8

    Let sales be the independent variable and earnings be the dependent variable.

    a. Draw a scatter diagram.
    b. Compute the coefficient of correlation.
    c. Compute the coefficient of determination.
    d. Interpret your findings in parts b and c.
    e. Determine the regression equation.
    f. For a small company with $50.0 million is sales, estimate the earnings.

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    Solution Preview

    Please refer to the attachment.

    a. Draw a scatter diagram.

    b. Compute the coefficient of correlation.
    R = Covariance / (Standard Deviation of Sales * Standard Deviation of ...

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