What would you use to estimate the audited value

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Reference no: EM131029423

Auditors are often required to compare the audited (or current) value of an inventory item with the book (or listed) value. If a company is keeping its inventory and books up to date, there should be a strong linear relationship between the audited and book values. A company sampled ten inventory items and obtained the audited and book values given in the accompanying table. Fit the model Y = β0 + β1x +ε to these data.

Item	Audit Value (yi)	Book Value (xi)
1	9	10
2	14	12
3	7	9
4	29	27
5	45	47
6	109	112
7	40	36
8	238	241
9	60	59
10	170	167

a. What is your estimate for the expected change in audited value for a one-unit change in book value?

b. If the book value is x = 100, what would you use to estimate the audited value?

Reference no: EM131029423

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