Accountants at the firm Walker and Walker believed that several traveling executives submit unusually high travel vouchers when they return from business trips. The accountants took a sample of 200 vouchers submitted from the past year; they then developed the following multiple regression equation relating expected travel cost (Y) to number of days on the road (X1) and distance traveled (x2) in miles:
YN = $90.00 + $48.50X1 + $0.40X2
The coefficient of correlation computed was 0.68.
(a) If Thomas Williams returns from a 300-mile trip that took him out of town for five days, what is the expected amount that he should claim as expenses?
(b) Williams submitted a reimbursement request for $685; what should the accountant do?
(c) Comment on the validity of this model. Should any other variables be included? Which ones? Why?