Pauline Raphal, executive assistant to the principal of Ecole Suprieure des Mines de St Etienne, is concerned

Pauline Raphaël, executive assistant to the principal of Ecole Supérieure des Mines de St Etienne, is concerned about the overhead costs at her university. Cost pressures are severe, so controlling and reducing overheads is very important. Raphaël believes overhead costs incurred are generally a function of the number of different academic programmes (including different specialisations, degrees and research programmes) that the university has and the number of enrolled students. Both have grown significantly over the years. She collects the following data:

She finds the following results for two separate simple regression models:
• Regression 1. Overhead costs = a + (b × Number of academic programmes)

• Regression 2. Overhead costs = a + (b × Number of enrolled students)

Required
1. Plot the relationship between overhead costs and each of the following variables: (a) number of academic programmes, and (b) number of enrolled students.
2. Compare and evaluate the two simple regression models estimated by Raphaël. Use the comparison format employed in Exhibit 9.20.
3. What insights do the analyses provide about controlling and reducing overhead costs at the Ecole Supérieure?

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Number of academic programmes Overhead Number of enrolled students costs Year (000) 13 500 19200 16800 20100 19500 23 100 23700 20100 22800 29700 31200 38100 29 36 49 53 54 58 3400 5000 2600 4700 3900 4900 5700 3900 3500 3700 5600 7600 72 83 73 101 103 10 12 Variable Coefficient Standard error t-value E7127.75 2.14 Constant Independent variable 1: E3335.34 Number of academic programmes 240.64 E47.33 5.08 P- 0.72 Durbin-Watson statistic 1.8 1 Variable Coefficient Standard error -value Constant 65991.75 E5067.88 1.18 Independent variable 1: Number of enrolled students 3.78 1.07 3.53 P-055: Durbin-Wason statistic -0.77