The board of directors at a large corporation wants to base their division manag

Question

The board of directors at a large corporation wants to base their division managers' pay raises on the profit performance of their respective divisions. They have asked you to evaluate the performance and raises at other companies and propose a formula for calculating the percentage increase in base pay based on the percentage change in the division's profit. You collected information from 50 divisions at similar companies and performed a linear regression on the percentage change in the division profits vs. the percentage change in the manager’s salary.

SUMMARY OUTPUT
Regression Statistics Multiple R 0.9655 R Square 0.9321 Adjusted R Square 0.9307 Standard Error 0.5383 Observations 50
ANOVA
df SS MS F Significance F Regression 1 191.0842089 191.084209 659.4383 1.07386E-29 Residual 48 13.90887066 0.28976814 Total 49 204.9930796
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0%Upper 95.0% Intercept 2.2899 0.0910 25.1754 0.0000 2.1070 2.4728 2.1070 2.4728 Increase in profits (%) 0.9513 0.0370 25.6795 0.0000 0.8768 1.0258 0.8768 1.0258

Explanation / Answer

Independent variable: Increase in profits (%)

Dependent variable: Pay raise

The regression line:

Pay-raise = 2.2899 + 0.9513 * Increase-in-profits

That is for each unit increase in "Increase-in-profits", pay raise is increased by 0.9513.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.