DIZON, RAVEN CHELSEA

A-232

1. The Insurance Institute for Highway Safety has listed the following ratings based on collision and
comprehensive claims for nine makes of midsize four-door cars from 2014-2016 model years.
Higher numbers reflect higher claims in the collision and comprehensive categories of coverage. 

2. Determine the slope value.

3. Determine the y-intercept value

4. Develop the linear regression equation or model

5. Predict the comprehensive claim rating for a collision rating of 130

6. Describe the coefficient of correlation

7. Describe the coefficient of determination

Claims Collision - X Comprehensive - Y XY X^2 Y^2

1 113 89 10,057 12,769 7,921

2 108 91 9,828 11,664 8,281

3 124 92 11,408 15,376 8,464

4 131 108 14,148 17,161 11,664

5 128 108 13,824 16,384 11,664

6 90 74 6,660 8,100 5,476

7 99 79 7,821 9,801 6,241

8 106 86 9,116 11,236 7,396

9 116 98 11,368 13,456 9,604

Total 1,015 825 94,230 115,947 76,711

1. Determine the slope value

b = 9(94,230) – (1,015) (825) / 9(115,947) – (1,015) 2

b = 0.80

2. Determine the y-intercept value

a = 825 – 0.8(1,015) / 9

a = 1.44
DIZON, RAVEN CHELSEA
A-232

3. Develop the linear regression equation or model

Y = 1.44 + 0.80x

4. Predict the comprehensive claim rating for a collision rating of 130

Y = 1.44 + 0.80(130)

Y = 105.44

5. Describe the coefficient of correlation

r = 9(94,230) – (1,015) (825) / √9(115,947) – (1,015) 2 * √9(76,711) – (825)2

r = 0.9381

The r-value of 0.9381 reflects the very high positive relationship of collision claims and comprehensive
claims in categories of coverage.

6. Describe the coefficient of determination

r2 = (0.9381)2 = 0.8800 or 88%, which means 88% of the changes in comprehensive claims can be
explained by its interaction with the collision claims, and the remaining 12% are unexplained factors not
included in the study.
DIZON, RAVEN CHELSEA
A-232

2. A mail-order catalog business that sells personal computer supplies, software, and hardware
maintains a centralized warehouse for the distribution of products ordered. Management is
currently examining the process distribution from the warehouse and is interested in studying
the factors that affect warehouse distribution costs. Currently, a small handling fee is added to
the order, regardless of the amount. The table below shows the data (distribution costs in
thousands of dollars and number of orders) collected for the past 12 months.

1. Determine the slope value.

2. Determine the y-intercept value

3. Develop the linear regression equation or model

4. Predict the number of orders for a distribute costs of 90.25 (in thousand dollars)

5.  Describe the coefficient of correlation

6. Describe the coefficient of determination

Month Distribution costs (x) Number of orders (y) X*Y X^2 Y^2
1 52.95 4015 212,594.25 2,803.70 16,120,225
2 71.66 3806 272,737.96 5,135.16 14,485,636
3 85.58 5309 454,344.22 7,323.94 28,185,481
4 63.69 4262 271,446.78 4,056.42 18,164,644
5 72.81 4296 312,791.76 5,301.30 18,455,616
6 68.44 4097 280,398.68 4,684.03 16,785,409
7 52.46 3213 168,553.98 2,752.05 10,323,369
8 70.77 4809 340,332.93 5,008.39 23,126,481
9 82.03 5237 429,591.11 6,728.92 27,426,169
10 74.39 4732 352,013.48 5,533.87 22,391,824
11 70.84 4413 312,616.92 5,018.31 19,474,569
12 54.08 2921 157,967.68 2,924.65 8,532,241
Total 819.70 51,110.00 3,565,389.75 57,270.73 223,471,664

1. Determine the slope value

Slope = 12 (3,565,389.75) – (819.70) (51,110) / 12 (57,270.73) - (819.70) 2

= 58.00

2. Determine the y-intercept value

Y-intercept = 51,110 – 58 (819.70) / 12

= 297.28

3. Develop the linear regression equation or model

= Y = 297.28 + 58x
DIZON, RAVEN CHELSEA
A-232

4. Predict the number of orders for a distribute costs of 90.25 (in thousand dollars)

Y = 297.28 + 58X

Y = 297.28 + 58 (90.25)

Y = 5,531.78

5. Describe the coefficient of correlation

r = 12 (3,565,389.75) – (51,110) (819.70) / √12 (57,270.73) – (819.70) 2 * √12 (223,471,664) – (51,110)2

= 0.8622

6. Describe the coefficient of determination

r2 = 0.86222

r2 = 0.7434 or 74.34%, which means 74.34% of the changes in the number of orders of personal
computers of the store can be explained by the changes in the number of distribution costs and the
25.66% are caused by other unexplainable factors.