Homework - Wageweb conducts surveys of salary data

Chapter 12: Homework

6. Wageweb conducts surveys of salary data and presents summaries on its website.
Based on salary data as of October 1, 2002, Wageweb reported that the average annual
salary for sales vice presidents was $142,111, with an average annual bonus of $15,432.
Assume the following data are a sample of the annual salary and bonus for 10 sales vice
presidents. Data are in thousands of dollars.
Vice President
1
2
3
4
5
6
7
8
9
10

Salary
135
115
146
167
165
176
98
136
163
119

Bonus
12
14
16
19
22
24
7
17
18
11

a) Develop a scatter diagram for these data with salary as the independent variable.
b) What does the scatter diagram developed in part a) indicate about the relationship
between salary and bonus?
c) Use the least squares method to develop the estimated regression equation.
d) Provide an interpretation for the slope of the estimated regression equation.
e) Predict the bonus for a vice president with an annual salary of $120,000.
f) Compute SST, SSR, and SSE
g) Compute the coefficient of determination r2. Comment on the goodness of fit.
h) What is the value of the sample correlation coefficient?
i) Develop the null and alternative hypothesis to test the linear relationship between
salary and bonus
j) At the .05 level of significance, determine whether salary and bonus are linearly
related.
k) Solve the problem in Excel and compare your results.