Chapter 14.9, Problem 52E

Charity Navigator is America’s leading independent charity evaluator. The following data show the total expenses ($), the percentage of the total budget spent on administrative expenses, the percentage spent on fundraising, and the percentage spent on program expenses for 10 supersized charities (Charity Navigator website, April 12, 2012). Administrative expenses include overhead, administrative staff and associated costs, and organizational meetings. Fundraising expenses are what a charity spends to raise money, and program expenses are what the charity spends on the programs and services it exists to deliver. The sum of the three percentages does not add to 100% because of rounding.

Charity	Total Expenses ($)	Administrative Expenses (%)	Fundraising Expenses (%)	Program Expenses (%)
American Red Cross	3,354,177,445	3.9	3.8	92.1
World Vision	1,205,887,020	4.0	7.5	88.3
Smithsonian Institution	1,080,995,083	23.5	2.6	73.7
Food For The Poor	1,050,829,851	.7	2.4	96.8
American Cancer Society	1,003,781,897	6.1	22.2	71.6
Volunteers of America	929,158,968	8.6	1.9	89.4
Dana-Farber Cancer Institute	877,321,613	13.1	1.6	85.2
AmeriCares	854,604,824	.4	.7	98.8
ALSAC—St. Jude Children’s Research Hospital	829,662,076	9.6	16.9	73.4
City of Hope	736,176,619	13.7	3.0	83.1

1. a. Develop a scatter diagram with fundraising expenses (%) on the horizontal axis and program expenses (%) on the vertical axis. Looking at the data, do there appear to be any outliers and/or influential observations?
2. b. Develop an estimated regression equation that could be used to predict program expenses (%) given fundraising expenses (%).
3. c. Does the value for the slope of the estimated regression equation make sense in the context of this problem situation?
4. d. Use residual analysis to determine whether any outliers and/or influential observations are present. Briefly summarize your findings and conclusions.