A recent article in Business Week listed the "Best Small Companies." We are interested in the current results of the companies' sales and earnings. A random sample of 12 companies was selected and the sales and earnings, in millions of dollars, are reported below.
COMPANY Sales ($millions) Earnings ($millions) COMPANY Sales ($millions) Earnings ($millions)
Papa John International $89.2 $4.9 Checkmate Electronics $17.5 $2.6
Applied Innovation 18.6 4.4 Royal Grip 11.9 1.7
Integracare 18.2 1.3 M-Wave 19.6 3.5
Wall Data 71.7 8.0 Serving-N-Slide 51.2 8.2
Davidson Associates 58.6 6.6 Daig 28.6 6.0
Chico's Fas 46.8 4.1 Cobra Golf 69.2 12.8
Let sales be the independent variable and earnings be the dependent variable.
a. Draw a scatter plot.
b. Compute the coefficient of correlation
c. Compute the coefficient of determination.
d. Interpret the findings in (b) and (c).
e. Determine the regression equation.
f. For a small company with $50.0 million in sales, estimate the earnings.