Question

A company want to find out if there is a linear relationship between indirect labor expense (ILE), in dollars, and direct labor hours (DLH). Data for direct labor hours and indirect labor expense for 10 months are given. Approximately what percentage of the variation in indirect labor expenses is explained by the regression model you derived?

DLH(X) ILE(Y)
20 361_0
25 400
22 376
23 384
20 361_0
19 360
24 427.2
28 458.4
26 450_8
29 475.2

Answer 1

y = 115.0977+12.2992X

91.59%

Explanation:

Given :

DLH(X) ILE(Y)

20 361_0

25 400

22 376

23 384

20 361_0

19 360

24 427.2

28 458.4

26 450_8

29 475.2

DLH (X) : Direct Labor Hours

ILE (Y) : Indirect Labor Expense

The regression model obtained by fitting the data using technology is :

y = 115.0977+12.2992X

Where ;

Intercept = 115.0977 ;

Slope = 12.2992

The Coefficient of determination, R² gives the proportion of explained variance due to the regression line.

For the data given above, the Coefficient of determination R² obtained using the Coefficient of determination calculator is 0.9159 ; which means that (0.9159 * 100%) about 91.59% of the variation in indirect labor expense is explained by the regression line while 8.41% is due to other factors.