Accountants at the firm Walker and Walker believed that several traveling execut

Question

Accountants at the firm Walker and Walker believed that several traveling executives submit unusually high travel vouchers when they return from business trips. The accountants took a sample of 200 vouchers submitted from the past year; they then developed the following multiple regression equation relating expected travel cost (Y) to number of days on the road (X1) and distance traveled (x2) in miles:

YN = $90.00 + $48.50X1 + $0.40X2

The coefficient of correlation computed was 0.68.

(a)  If Thomas Williams returns from a 300-mile trip that took him out of town for five days, what is the expected amount that he should claim as expenses?

(b)  Williams submitted a reimbursement request for $685; what should the accountant do?

(c)  Comment on the validity of this model. Should any other variables be included? Which ones? Why?

Explanation / Answer

A) If thomas williams returns form a 300 mile trip that took him of of town for 5 days, what is the expected amount that he should claim as expenses? y= $90+$48.50(5)+$0.40(300) y = $452.50 B) The accountant should calculate a 95% prediction interval for the regression model, and see whether or not $685 falls within it. If not, then the accountant can be 95% certain that Williams

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