Accountants at the firm Michael Vest, CPAs, believed that several traveling executives

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QUESTION:

Accountants at the firm Michael Vest, CPAs, believed that several traveling executives were submitting unusually high travel vouchers when they returned from business trips. First, they took a sample of 200 vouchers submitted from the past year. Then they developed the following multiple-regression equation relating expected travel cost to the number of days on the road (x1) and distance traveled (x2) in miles:

ӯ = $90.00 + $48.50xi + $.40x2

The coefficient of correlation computed was .68.

(a) If Wanda Fennell returns from a 300-mile trip that took her out of town for 5 days, what is the expected amount she should claim as expenses?

(b) Fennell submitted a reimbursement request for $685. What should the accountant do?

(c) Should any other variables be included? Which ones? Why?


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