What are the required conditions for error variable in multiple regression analysis? The Internal Revenue Service (IRS) is trying to estimate the monthly amount of unpaid taxes discovered by its auditing division. The IRS estimated this figure on the basis of field auditing labor hours and number of hours of its computers used. The table given below presents these data for the last ten months.

Month (X1) Field Audit Labor Hours in 100 (X2) Computer Hours in 100 (Y) Actual Unpaid Taxes Discovered million of dollars
Jan 45 16 29
Feb 42 14 24
Mar 44 15 27
April 45 13 25
May 43 13 26
June 46 14 28
Jul 44 16 30
Aug 45 16 28
Sep 44 15 28
Oct 43 15 27

Given ∑YX1=12005, ∑YX2=4013, ∑X1X2=6485, ∑Y2=7428, ∑X12=19461, ∑X22=2173

i. Develop the estimating equation best describing these data.

ii. Interpret the value of regression coefficients.

iii. Estimate the actual unpaid tax for field if audit labour hours is 4200 and computer hours is 1600 hours.

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