Correlation Analysis. The Cost Department of Quick Supply Company attempts to establish a budget to assist in the control of marketing expenses. An examination of individual expenses shows:

Fixed Variable Item Portion Portion Sales staff:

Salaries.

$1,200 none Retainers.

2,000 none Commissions.

none 4% of Advertising.

5,000 sales none Travel expense. ? ?

Statistical analysis is needed to split the travel expense satisfactorily into its fixed and variable portions. Before such an analysis is begun, it is thought that the variable portion of the travel expense might vary in accordance either with the number of calls made on customers each month or the value of orders received each month. Records reveal the following details over the past twelve months:

Calls Orders Travel Month Made Received Expense January.

410

$53,000

$3,000 February.

420 65,000 3,200 March.

380 48,000 2,800 April.

460 73,000 3,400 May.

430 62,000 3,100 June.

450 67,000 3,200 July.

390 60,000 2,900 August.

470 76,000 3,300 September.

480 82,000 3,500 October.

490 62,000 3,400 November.

440 64,000 3,200 December.

460 80,000 3,400 Required:

(1) Compute the coefficient of correlation, r, and coefficient of determination, r2, between

(a) the travel expense and the number of calls made and

(b) the travel expense and orders received. (Round to four deci¬ mal places.)

(2) Compare the answers obtained in requirements la and lb.