Question

(If you want to check data entry, the sample covariance is 80) How much of the variance in Sales is explained by the variance in hours?

Sales	Hours
12	68
9	71
18	120
21	110
18	110
11	90
16	120

Answer 1

We use coefficient of determination R2 to calculate the explained variance of dependent variable by varince of predictor variable .

here Dependent variable is Sales and predictor variable is Hours .

where , r = Pearson's correlation coefficient among the two variables .

Using calculator we find correlation coefficient of Sales and Hours is :

r = 0.8209

So, R2 = 0.82092 x 100 % = 67.38 %  

So, 67.38% of variance of Sales is explained by variance of Hours