What are the required conditions for error variable in multiple regression analysis? The Internal Revenue Service (IRS) is trying to estimate the monthly amount of unpaid taxes discovered by its…

What are the required conditions for error variable in multiple regression analysis? The Internal Revenue Service (IRS) is trying to estimate the monthly amount of unpaid taxes discovered by its auditing division. The IRS estimated this figure on the basis of field auditing labor hours and number of hours of its computers used. The table given below presents these data for the last ten months.

Month
(X_1) Field Audit Labor Hours in 100
(X_2) Computer Hours in 100
(Y) Actual Unpaid Taxes Discovered million of dollars
Jan
45
16
29
Feb
42
14
24
Mar
44
15
27
April
45
13
25
May
43
13
26
June
46
14
28
Jul
44
16
30
Aug
45
16
28
Sep
44
15
28
Oct
43
15
27

Given ∑YX_1=12005, ∑YX_2=4013, ∑X_1X_2=6485, ∑Y^2=7428, ∑X_1^2=19461, ∑X_2^2=2173

• i) Develop the estimating equation best describing these data.

• ii) Interpret the value of regression coefficients.

• iii) Estimate the actual unpaid tax for field if audit labour hours is 4200 and computer hours is 1600 hours.