Question: 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 to do:
1. What are the estimated personnel costs for 4,200 employees?
2. How confident are you that a significant cost-driver relation exists?