To encourage performance,loyalty,and continuing education,the human resources department at a large company wants to develop a regression-based compensation model for mid-level managers based on three variables: business unit-profitability in $1,000s (Profit),years with company (Years),and dummy variable (Grad),graduate degree in relevant field.Data have been collected for 36 managers.The sample regression equation is = - 13,264.3 + 14.13Profit + 1,868.53Years + 45,121.94Grad - 0.1539Profit × Grad - 198.34Years × Grad.Which of the following is the predicted value of Compensation for a manager having 15 years with the company,a graduate degree,and a business-unit profit of $4,800,000?
A) $121,492.60
B) $108,324.80
C) $101,749.70
D) $112,101.60

Question

To encourage performance,loyalty,and continuing education,the human resources department at a large company wants to develop a regression-based compensation model for mid-level managers based on three variables: business unit-profitability in $1,000s (Profit),years with company (Years),and dummy variable (Grad),graduate degree in relevant field.Data have been collected for 36 managers.The sample regression equation is  = - 13,264.3 + 14.13Profit + 1,868.53Years + 45,121.94Grad - 0.1539Profit × Grad - 198.34Years × Grad.Which of the following is the predicted value of Compensation for a manager having 15 years with the company,a graduate degree,and a business-unit profit of $4,800,000?
A) $121,492.60 
B) $108,324.80 
C) $101,749.70 
D) $112,101.60

Quizplus · Accepted Answer

Plug in the values given into the sample regression equation:

Compensation = -13,264.3 + (14.13 × 4,800) + (1,868.53 × 15) + (45,121.94 × 1) - (0.1539 × 4,800 × 1) - (198.34 × 15 × 1)

Compensation = -13,264.3 + 67,824 + 28,028 + 45,121.94 - 738.72 - 2,975.10

Compensation = $101,749.70

Therefore, the predicted value of Compensation for a manager having 15 years with the company, a graduate degree, and a business-unit profit of $4,800,000 is $101,749.70. Option C is the correct answer.

To Encourage Performance,loyalty,and Continuing Education,the Human Resources Department at a Large