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An independent agency that conducts research on consumer attitudes and behaviors has completed a study of consumer characteristics that can be used to predict the amount charged by credit card users. Data were collected on annual income, household size, and annual credit card charges for a sample of 50 consumers which are included in the attached file. Your job is to prepare a report for management that addresses the following questions: 1. Develop estimated regression equations, first using annual income as the independent variable and then using household size as the independent variable. Which variable is the better predictor of annual credit card charges? Discuss your findings. 2. Develop an estimated regression equation with annual income and household size as the independent variables. Discuss your findings. 3. What is the predicted annual credit card charge for a three-person household with an annual income of $40,000? 4. Discuss the need for other independent variables that could be added to the model. What additional variables might be helpful?

A B C Amount Household Income Charged Size 1 (S1000s) (S) 2 2 64 4,157 3 30 2,583 4 7 41 3,844 3 21 3,623 6 6 23 2,931 7 2 50 3,605 8 4 22 3,074 4 48 4,219 10 2 40 3,348 11 6 42 4,412 12 5 46 4,820 13 2 39 2,972 14 2 30 3,159 15 2 27 2,921 16 3 62 4,705 17 27 2,477 2,212 18 7 26 19 34 3,586 20 4 29 3,890 21 2. 21 2,448 22 2. 48 3,866 3,642 23 3 25 24 6 62 5,678 2,088 2,731 25 2 31 26 37 C 2131 55 27 7 5,30 42 28 2 3,020 4,764 29 66 30 2 52 3,890 5,149 31 4 66 32 67 5,037 33 4 32 2,972 34 2 30 3,067 35 6 55 5,370 36 6 54 4,323 37 5 37 4,171 38 63 4,965 39 3 22 3,579 40 55 4,070 41 5 50 4,742 42 44 2,995 43 4 39 4,183 44 2 33 2,514 45 3 51 4,110 46 1 35 3,121 47 3 54 3,730 48 3 65 4,214 49 3 54 4,016 50 61 4,273 5,345 51 67 A Nn enen N

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