Chapter 15, Problem 49SE

Fortune magazine publishes an annual list of the 100 best companies to work for. The data in the DATAfile named FortuneBest shows a portion of the data for a random sample of 30 of the companies that made the top 100 list for 2012 (Fortune, February 6, 2012). The column labeled Rank shows the rank of the company in the Fortune 100 list; the column labeled Size indicates whether the company is a small, midsize, or large company; the column labeled Salaried ($1000s) shows the average annual salary for salaried employees rounded to the nearest $1000; and the column labeled Hourly ($1000s) shows the average annual salary for hourly employees rounded to the nearest $1000. Fortune defines large companies as having more than 10,000 employees, midsize companies as having between 2500 and 10,000 employees, and small companies as having fewer than 2500 employees.

1. a. Use these data to develop an estimated regression equation that could be used to predict the average annual salary for salaried employees given the average annual salary for hourly employees.
2. b. Use α = .05 to test for overall significance.
3. c. To incorporate the effect of size, a categorical variable with three levels, we used two dummy variables: Size-Midsize and Size-Small. The value of Size-Midsize = 1 if the company is a midsize company and 0 otherwise. And the value of Size-Small = 1 if the company is a small company and 0 otherwise. Develop an estimated regression equation that could be used to predict the average annual salary for salaried employees given the average annual salary for hourly employees and the size of the company.
4. d. For the estimated regression equation developed in part (c), use the t test to determine the significance of the independent variables. Use α = .05.
5. e. Based upon your findings in part (d), develop an estimated regression equation that can be used to predict the average annual salary for salaried employees given the average annual salary for hourly employees and the size of the company.