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 ($1,000s) | Itemized Deductions ($1,000s) ||---------------------------------|------------------------------|| 22 | 9.6 || 27 | 9.6 || 32 | 10.1 || 48 | 11.1 || 65 | 12.5 || 85 | 16.7 || 120 | 24.5 |(a) Develop a scatter diagram for these data with adjusted gross income as the independent variable.(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).(c) Predict the reasonable level of total itemized deductions (in $1,000s) for a taxpayer with an adjusted gross income of $52,500. If this taxpayer claimed itemized deductions of $20,300, would the IRS agent's request for an audit appear justified? Explain.

a) In this case Adjusted Gross Income (x) is the independent variable and Itemized Deductions (y) is the dependent variable. Enter the data in Excel.Software procedure: Step-by-step procedure to obtain the scatterplot using EXCEL is defined as follows: Open an EXCEL file. In Excel sheet, enter x and y in columns A, and B, respectively. Select the data, choose Insert > Scatter. Output obtained using Excel is given below: From the scatterplot it is obtained that, there is a strong positive relation between adjusted gross income and itemized deduction. As the adjusted gross income increases, the itemized deduction increases.b. Step-by-step software procedure to obtain regression equation using EXCEL is defined as follows: Open an EXCEL file. In Excel sheet, enter x and y in columns A, and B, respectively. In Data, select Data Analysis and choose Regression. In Input Y Range, select $B$1:$B$7. In Input X Range, select $A$1:$A$7. Select Labels. Click OK. Output obtained using Excel is given below: The regression equation is, y = 4.9860 + 0.1484x.c) The unit is in 1,000. Substitute x = 52.5 in the regression equation. That is, y = 4.9860 + 0.1484(52.5) = 12.777. Thus, the reasonable level of total itemized deduction for a taxpayer with an adjusted gross income of $52,500 is $12,777. The predicted itemized deduction is much lower than the claimed deduction of $20,300. Hence, the IRS agent’s request for an audit appear is justified.