Adjust for Different Slopes Using Interaction Terms in Multiple Regression

question 6

Multiple Choice

Adjust for different slopes using interaction terms in multiple regression.
-A sample of 30 companies was randomly selected for a study investigating what
Factors affect the size of company bonuses. Data were collected on the number of
Employees at the company and whether or not the employees were unionized (1 = yes,
0 = no) . The following multiple regression model was fit to the data. Based on this
Model, what is the annual average bonus for a company with 7500 employees that are not
Unionized? $$\begin{array}{l}\text { Dependent Variable is Average Annual Bonus }\\\\\begin{array} { l r r r r } \text { Predictor } & \text { Coef } & \text { SE Coef } & \text { T } & \text { P } \\\text { Constant } & - 1241.0 & 982.3 & - 1.26 & 0.218 \\\text { Employees } & 0.8872 & 0.1318 & 6.73 & 0.000 \\\text { Union } & 5253 & 1579 & 3.33 & 0.003 \\\text { Emp*Union } & - 0.05424 & 0.02012 & - 2.70 & 0.012\end{array}\end{array}$$

• A) $5413
• B) $10,259.20
• C) $10,666
• D) $5253
• E) $7980.25

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Definitions:

Return on Investment

A financial metric evaluating the profitability or effectiveness of an investment, calculated by dividing net profit by the investment's cost.

Common Fixed Costs

Costs that do not change with the level of production or sales and are shared across different products or departments within a company.

Decision Making

The process of choosing among alternative courses of action or solutions to a problem in order to achieve a desired outcome.

Outside Supplier

An outside supplier is an external entity that provides goods or services to a company, typically not affiliated with the company’s internal supply chain.