To the Internal Revenue Service, the reasonableness of total itemized deductions depends on the taxpayer's adjusted gross income. Large deductions, which include charity and medical deductions, are more reasonable for taxpayers with large adjusted gross incomes. If a taxpayer claims larger than average itemized deductions for a given level of income, the chances of an IRS audit are increased Data (in thousands of dollars) on adjusted gross income and the average or reasonable amount of itemized deductions follow. Adjusted Gross Income |Itemized Deductions ($1,000s) ($1,000s) 22 9.6 27 9.6 32 10.1 48 11.1 65 11.5 85 19.7 120 23.5 (a) Develop a scatter diagram for these data with adjusted gross income as the independent variable. 30 30 25 25 20 20 20 Itemized Deductions ($1,000s) Itemized Deductions ($1,000s) 15 Itemized Deductions ($1,000s 10- 10 10 . .. . . . . . diagram otted on it. The horizontal 0 30 and 20 40 60 80 100 120 140 20 40 60 80 100 120 140 20 owe 40 ft coffer of 80 100 120 140 O Adjusted Gross Income ($1,000s) Adjusted Gross Income ($1,000s) between 20 to Adjusted Gross Income ($1.000s) to 24 on the verti 30 25 Itemized Deductions ($1,000s) 20 40 60 100 120 140 O Adjusted Gross Income ($1,000s) (b) Use the least squares method to develop the estimated regression equation that can be used to predict itemized deductions (in $1,000s) given the adjusted gross income (in $1,000s). (Round your numerical values to three decimal places.) (c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $47,500. (Round your answer to two decimal places.) thousand If this taxpayer claimed itemized deductions of $20,600, would the IRS agent's request for an audit appear justified? Explain. Since the predicted amount of itemized deductions is significantly less than the actual claimed itemized deductions, the agent's request for an audit appears to be justified. Since the predicted amount of itemized deductions is significantly greater than the actual claimed itemized deductions, the agent's request for an audit appears to be justified. Since the predicted amount of itemized ded eductions, the agent's request for an audit does not appear to be justified. Since the predicted amount of item ame as t claimed itemized deductions, the agent's request for an audit appears to be justified. Since the predicted amount of itemized deductions is roughly the same as the actual claimed itemized deductions, the agent's request for an audit does not appear to be justified