Business Analytics Dr.

Kalim Khan

Testing of Hypothesis

1
Xr-1 A business student claims that, on average, an MBA student is required to prepare more than
five cases per week. To examine the claim, a statistics professor asks a random sample of 10 MBA
students to report the number of cases they prepare weekly. The results are exhibited here. Can the
professor conclude at the 5% significance level that the claim is true, assuming that the number of
cases is normally distributed with a standard deviation of 1.5?

2 7 4 8 9 5 11 3 7 4

2
Xr-2 A random sample of 18 young adult men (20–30 years old) was sampled. Each person was
asked how many minutes of sports he watched on television daily. The responses are listed here. It is
known that σ = 10. Test to determine at the 5% significance level whether there is enough statistical
evidence to infer that the mean amount of television watched daily by all young adult men is greater
than 50 minutes.

50 48 65 74 66 37 45 68 64 65 58 55 52 63 59 57 74 65

3
Xr-3 The club professional at a difficult public course boasts that his course is so tough that the
average golfer loses a dozen or more golf balls during a round of golf. A dubious golfer sets out to
show that the pro is fibbing. He asks a random sample of 15 golfers who just completed their rounds
to report the number of golf balls each lost. Assuming that the number of golf balls lost is normally
distributed with a standard deviation of 3, can we infer at the 10% significance level that the average
number of golf balls lost is less than 12?

1 14 8 15 17 10 12 6 14 21 15 9 11 4 8

4
Xr-4 A random sample of 12 second-year university students enrolled in a business statistics course
was drawn. At the course’s completion, each student was asked how many hours he or she spent
doing homework in statistics. The data are listed here. It is known that the population standard
deviation is σ = 8.0. The instructor has recommended that students devote 3 hours per week for the
duration of the 12-week semester, for a total of 36 hours. Test to determine whether there is
evidence that the average student spent less than the recommended amount of time. Compute the
p-value of the test.

31 40 26 30 36 38 29 40 38 30 35 38

5
Xr-5 The owner of a public golf course is concerned about slow play, which clogs the course and
results in selling fewer rounds. She believes the problem lies in the amount of time taken to sink
putts on the green. To investigate the problem, she randomly samples 10 foursomes and measures
the amount of time they spend on the 18th green. The data are listed here. Assuming that the times
are normally distributed with a standard deviation of 2 minutes, test to determine whether the
owner can infer at the 5% significance level that the mean amount of time spent putting on the 18th
green is greater than 6 minutes.

8 11 5 6 7 8 6 4 8 3

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6
Xr-6 A machine that produces ball bearings is set so that the average diameter is .50 inch. A sample
of 10 ball bearings was measured, with the results shown here. Assuming that the standard
deviation is .05 inch, can we conclude at the 5% significance level that the mean diameter is not .50
inch?

.48 .50 .49 .52 .53 .48 .49 .47 .46 .51

7
Xr-7 Spam e-mail has become a serious and costly nuisance. An office manager believes that the
average amount of time spent by office workers reading and deleting spam exceeds 25 minutes per
day.
To test this belief, he takes a random sample of 18 workers and measures the amount of time each
spends reading and deleting spam. The results are listed here. If the population of times is normal
with a standard deviation of 12 minutes, can the manager infer at the 1% significance level that he is
correct?

35 48 29 44 17 21 32 28 34 23 13 9 11 30 42 37 43 48

8
Xr-8 A manufacturer of lightbulbs advertises that, on average, its long-life bulb will last more than
5,000 hours. To test the claim, a statistician took a random sample of 100 bulbs and measured the
amount of time until each bulb burned out. If we assume that the lifetime of this type of bulb has a
standard deviation of 400 hours, can we conclude at the 5% significance level that the claim is true?

9
Xr-9 In the midst of labor–management negotiations, the president of a company argues that the
company’s blue-collar workers, who are paid an average of $30,000 per year, are well paid because
the mean annual income of all blue-collar workers in the country is less than $30,000. That figure is
disputed by the union, which does not believe that the mean blue-collar income is less than $30,000.
To test the company president’s belief, an arbitrator draws a random sample of 350 blue-collar
workers from across the country and asks each to report his or her annual income. If the arbitrator
assumes that the blue-collar incomes are normally distributed with a standard deviation of $8,000,
can it be inferred at the 5% significance level that the company president is correct?

10
Xr-10 A dean of a business school claims that the Graduate Management Admission Test (GMAT)
scores of applicants to the school’s MBA program have increased during the past 5 years. Five years
ago, the mean and standard deviation of GMAT scores of MBA applicants were 560 and 50,
respectively. Twenty applications for this year’s program were randomly selected and the GMAT
scores recorded. If we assume that the distribution of GMAT scores of this year’s applicants is the
same as that of 5 years ago, with the possible exception of the mean, can we conclude at the 5%
significance level that the dean’s claim is true?

11
Xr-11 Past experience indicates that the monthly long-distance telephone bill is normally distributed
with a mean of $17.85 and a standard deviation of $3.87. After an advertising campaign aimed at
increasing long-distance telephone usage, a random sample of 25 household bills was taken.
a. Do the data allow us to infer at the 10% significance level that the campaign was successful?
b. What assumption must you make to answer part (a)?

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12
Xr-12 In an attempt to reduce the number of person-hours lost as a result of industrial accidents, a
large production plant installed new safety equipment. In a test of the effectiveness of the
equipment, a random sample of 50 departments was chosen. The number of person-hours lost in
the month before and the month after the installation of the safety equipment was recorded. The
percentage change was calculated and recorded. Assume that the population standard deviation is σ
= 6. Can we infer at the 10% significance level that the new safety equipment is effective?

13
Xr-13 A highway patrol officer believes that the average speed of cars traveling over a certain stretch
of highway exceeds the posted limit of 55 mph. The speeds of a random sample of 200 cars were
recorded. Do these data provide sufficient evidence at the 1% significance level to support the
officer’s belief? What is the p-value of the test? (Assume that the standard deviation is known to be
5.)

14
Xr-14 An automotive expert claims that the large number of self-serve gasoline stations has resulted
in poor automobile maintenance, and that the average tire pressure is more than 4 pounds per
square inch (psi) below its manufacturer’s specification. As a quick test, 50 tires are examined, and
the number of psi each tire is below specification is recorded. If we assume that tire pressure is
normally distributed with σ = 1.5 psi, can we infer at the 10% significance level that the expert is
correct? What is the p-value?

15
Xr-15 For the past few years, the number of customers of a drive-up bank in New York has averaged
20 per hour, with a standard deviation of 3 per hour. This year, another bank 1 mile away opened a
driveup window. The manager of the first bank believes that this will result in a decrease in the
number of customers. The number of customers who arrived during 36 randomly selected hours was
recorded.
Can we conclude at the 5% significance level that the manager is correct?

16
Xr-16 A fast-food franchiser is considering building a restaurant at a certain location. Based on
financial analyses, a site is acceptable only if the number of pedestrians passing the location
averages more than 100 per hour. The number of pedestrians observed for each of 40 hours was
recorded. Assuming that the population standard deviation is known to be 16, can we conclude at
the 1% significance level that the site is acceptable?

17
Xr-17 Many Alpine ski centers base their projections of revenues and profits on the assumption that
the average Alpine skier skis four times per year. To investigate the validity of this assumption, a
random sample of 63 skiers is drawn and each is asked to report the number of times he or she skied
the previous year. If we assume that the standard deviation is 2, can we infer at the 10% significance
level that the assumption is wrong?

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18
Xr-18 The golf professional at a private course claims that members who have taken lessons from
him lowered their handicap by more than five strokes. The club manager decides to test the claim by
randomly sampling 25 members who have had lessons and asking each to report the reduction in
handicap, where a negative number indicates an increase in the handicap. Assuming that the
reduction in handicap is approximately normally distributed with a standard deviation of two
strokes, test the golf professional’s claim using a 10% significance level.

19
Xr-19 The current no-smoking regulations in office buildings require workers who smoke to take
breaks and leave the building in order to satisfy their habits. A study indicates that such workers
average 32 minutes per day taking smoking breaks. The standard deviation is 8 minutes. To help
reduce the average break, rooms with powerful exhausts were installed in the buildings. To see
whether these rooms serve their designed purpose, a random sample of 110 smokers was taken.
The total amount of time away from their desks was measured for 1 day. Test to determine whether
there has been a decrease in the mean time away from their desks. Compute the p-value and
interpret it relative to the costs of Type I and
Type II errors.

20
Xr-20 A low-handicap golfer who uses Titleist brand golf balls observed that his average drive is 230
yards and the standard deviation is 10 yards. Nike has just introduced a new ball, which has been
endorsed by Tiger Woods. Nike claims that the ball will travel farther than Titleist. To test the claim,
the golfer hits 100 drives with a Nike ball and measures the distances. Conduct a test to determine
whether Nike is correct. Use a 5% significance level.

21
Xr-21 A courier service advertises that its average delivery time is less than 6 hours for local
deliveries. A random sample of times for 12 deliveries to an address across town was recorded.
These data are shown here. Is this sufficient evidence to support the courier’s advertisement, at the
5% level of significance?

3.03 6.33 6.50 5.22 3.56 6.76

7.98 4.82 7.96 4.54 5.09 6.46

22
Xr-22 A diet doctor claims that the average North American is more than 20 pounds overweight. To
test his claim, a random sample of 20 North Americans was weighed, and the difference between
their actual and ideal weights was calculated. The data are listed here. Do these data allow us to
infer at the 5% significance level that the doctor’s claim is true?

16 23 18 41 22 18 23 19 22 15 18 35 16 15 17 19 23 15 16 26

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23
Xr-23 A federal agency responsible for enforcing laws governing weights and measures routinely
inspects packages to determine whether the weight of the contents is at least as great as that
advertised on the package. A random sample of 18 containers whose packaging states that the
contents weigh 8 ounces was drawn. The contents were weighed and the results follow. Can we
conclude at the 1% significance level that on average the containers are mislabeled?

7.80 7.91 7.93 7.99 7.94 7.75

7.97 7.95 7.79 8.06 7.82 7.89
7.92 7.87 7.92 7.98 8.05 7.91

24
A production line operates with a mean filling weight of 16 ounces per container. Overfilling or
underfilling presents a serious problem and when detected requires the operator to shut down the
production line to readjust the filling mechanism. From past data, a population standard deviation
σ=.8 ounces is assumed. A quality control inspector selects a sample of 30 items every hour and at
that time makes the decision of whether to shut down the line for readjustment. The level of
significance is α=.05.
a. State the hypothesis test for this quality control application.
b. If a sample mean of _ 16.32 ounces were found, what is the p-value? What action would you
recommend?
c. If a sample mean of _ 15.82 ounces were found, what is the p-value? What action would you
recommend?
d. Use the critical value approach. What is the rejection rule for the preceding hypothesis
testing procedure? Repeat parts (b) and (c). Do you reach the same conclusion?

25
At Western University the historical mean of scholarship examination scores for freshman
applications is 900. Ahistorical population standard deviation σ=180 is assumed known. Each year,
the assistant dean uses a sample of applications to determine whether the mean examination score
for the new freshman applications has changed.
a. State the hypotheses.
b. What is the 95% confidence interval estimate of the population mean examination score if a
sample of 200 applications provided a sample mean 𝑥̅ =935?
c. Use the confidence interval to conduct a hypothesis test. Using α = .05, what is your
conclusion?
d. What is the p-value?

26
Playbill is a magazine distributed around the country to people attending musicals and other
theatrical productions. The mean annual household income for the population of Playbill readers is
$119,155 (Playbill, January 2006). Assume the standard deviation is 𝜎 = $20,700. A San Francisco
civic group has asserted that the mean for theatergoers in the Bay Area is higher. A sample of 60
theater attendees in the Bay Area showed a sample mean household income of $126,100.
a. Develop hypotheses that can be used to determine whether the sample data support the
conclusion that theater attendees in the Bay Area have a higher mean household income
than that for all Playbill readers.
b. What is the p-value based on the sample of 60 theater attendees in the Bay Area?
c. Use α = .01 as the level of significance. What is your conclusion?

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27
On Friday, Wall Street traders were anxiously awaiting the federal government’s release of numbers
on the January increase in nonfarm payrolls. The early consensus estimate among economists was
for a growth of 250,000 new jobs (CNBC, February 3, 2006). However, a sample of 20 economists
taken Thursday afternoon provided a sample mean of 266,000 with a sample standard deviation of
24,000. Financial analysts often call such a sample mean, based on late-breaking news, the whisper
number. Treat the “consensus estimate” as the population mean. Conduct a hypothesis test to
determine whether the whisper number justifies a conclusion of a statistically significant increase in
the consensus estimate of economists. Use α = .01 as the level of significance.

28
An extensive study of the cost of health care in the United States presented data showing that the
mean spending per Medicare enrollee in 2003 was $6883 (Money, Fall 2003). To investigate
differences across the country, a researcher took a sample of 40 Medicare enrollees in Indianapolis.
For the Indianapolis sample, the mean 2003 Medicare spending was $5980 and the standard
deviation was $2518.
a. State the hypotheses that should be used if we would like to determine whether the mean
annual Medicare spending in Indianapolis is lower than the national mean.
b. Use the preceding sample results to compute the test statistic and the p-value.
c. Use α = .05. What is your conclusion?
d. Repeat the hypothesis test using the critical value approach.

29
The chamber of commerce of a Florida Gulf Coast community advertises that area residential
property is available at a mean cost of $125,000 or less per lot. Suppose a sample of 32 properties
provided a sample mean of $130,000 per lot and a sample standard deviation of $12,500. Use a .05
level of significance to test the validity of the advertising claim.

30
Quality Associates, Inc., a consulting firm, advises its clients about sampling and statistical
procedures that can be used to control their manufacturing processes. In one particular application,
a client gave Quality Associates a sample of 800 observations taken during a time in which that
client’s process was operating satisfactorily. The sample standard deviation for these data was .21;
hence, with so much data, the population standard deviation was assumed to be .21. Quality
Associates then suggested that random samples of size 30 be taken periodically to monitor the
process on an ongoing basis. By analyzing the new samples, the client could quickly learn whether
the process was operating satisfactorily. When the process was not operating satisfactorily,
corrective action could be taken to eliminate the problem. The design specification indicated the
mean for the process should be 12. The hypothesis test suggested by Quality Associates follows.
H0: μ ≠ 12
Ha: μ ≠ 12
Corrective action will be taken any time H0 is rejected.
The following samples were collected at hourly intervals during the first day of operation of the new
statistical process control procedure. These data are available in the data set Quality.
a. Conduct a hypothesis test for each sample at the .01 level of significance and determine
what action, if any, should be taken. Provide the test statistic and p-value for each test.
b. Compute the standard deviation for each of the four samples. Does the assumption of .21
for the population standard deviation appear reasonable?

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31
Hinton Press hypothesizes that the average life of its largest web press is 14,500. They know that the
standard deviation of press life is 2,100 hours. From a sample of 25 presses, the company finds a
sample mean of 13,000 hours. At a 0.01 significance level, should the company conclude that the
average level of the presses is less than the hypothesized 14,500 hours?

32
American Theatres knows that a certain hit movie ran an average of 84 days in each city, and the
corresponding standard deviation was 10 days. The manager of the southeastern district was
interested in comparing the movie’s popularity in his region with that in all of American’s other
theatres. He randomly chose75 theatres in his region and found that they ran the movie an average
of 81.5 days
a. State appropriate hypotheses for testing whether there was significant difference in the
length of the picture’s run between theaters in the southeastern district and all of
American’s other theaters.
b. At a 1percent significance level, test these hypotheses.

33
Atlas sporting Goods has implemented a special trade promotion for its propane stove and feels that
the promotion should result in a price change for the consumer. Atlas knows that before the
promotion began, the average retail price of the stove was $ 44.95, and the standard deviation was$
5.75. Atlas samples 25 of its retailers after the promotion begins and finds the mean price for the
stoves is now $ 42.95. At a 0.02 significance level, does Atlas have reason to believe that the average
retail price to the consumer has decreased?

34
From 1980 until 1985, the mean price/ earnings (P/E) ratio of the approximately 1,800 stocks listed
on the New York Stock Exchange was 14.35 and the standard deviation was 9.73. In a sample of 30
randomly chosen NYSE stocks, the mean (P/E) ratio in 1986 was 11.77. Does this sample present
sufficient evidence to conclude (at the 0.05 level of significance) that in 1986 the mean P/E ratio for
NYSE stocks had changed from its earlier value?

35
General Electric has developed a new bulb whose design specifications call for a light output of 960
lumens compared to an earlier model that produced only 750 lumens. The company’s data indicate
that the standard deviation of light output for this type of bulb is 18.4 lumens. From a sample of 20
new bulbs, the testing committee found an average light output of 954 lumens per bulb. At a 0.05
significance level, can General Electric conclude that its new bulb is producing the specified 960
lumen output?

36
Maxwell’s Hot Chocolate is concerned about the effect of the recent yearlong coffee advertising
campaign on hot chocolate sales. The average weekly hot chocolate sales two years ago was 984.7
pounds and the standard deviation was 72.6 pounds. Maxwell’s has randomly selected 30 weeks
from the past year and found average sales of 912.1 pounds.
a. State appropriate hypotheses for testing whether hot chocolate sales have decreased.
b. At the 2 percent significance level, test these hypotheses.

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37
The average commission charged by full –service brokerage firms on a sale of common stock is $144,
and the standard deviation is $52. Joel Freelander has taken a random sample of 121 trades by his
clients and determined that they paid an average commission of $151. At a 0.10 significance level,
can Joel conclude that his clients’ commissions are higher than the industry average?

38
Each day, the United States Customs Service has historically intercepted about $28 million in
Contraband goods being smuggled into the country, with a standard deviation of $16 million per
day. On 64 randomly chosen days in 1992, the U.S. Customs Service intercepted an average of $30.3
million in contraband goods. Does this sample indicate (at a 5 percent level of significance) that the
Customs Commissioner should be concerned that smuggling has increased above its historic level?

39
Before the 1973 oil embargo and subsequent increases in the price of crude oil, gasoline usage in the
United States had grown at a seasonally adjusted rate of 0.57 percent per month, with a standard
deviation of 0.10 percent per month. In 15 randomly chosen months between 1975 and 1985,
gasoline usage grew at an average rate of only 0.33 percent per month. At a 0.10 level of
significance, can you conclude that the growth in the use of gasoline had decreased as a result of the
embargo and its consequences?

40
Picosoft, Ltd, a supplier of operating system software for personal computers, was planning the
initial public offering of its stock in order to raise sufficient working capital to finance the
development of a radically new, seventh- generation integrated system. With current earnings of
$1.61 a share, Picosoft and its underwriters were contemplating an offering price of $21, or about 13
times earnings. In order to check the appropriateness of this price, they randomly chose seven
publicly traded software firms and found that their average price/earnings ratio was 11.6, and the
sample standard deviation was1.3. At =0.02, can Picosoft conclude that the stocks of publicly
traded software firms have an average P/E ratio that is significantly different from 13?

41
Given a sample mean of 94.3, sample standard deviations of 8.4, and a sample size of 6, test the
hypothesis that the value of the population mean is 100 against the alternative hypothesis that it is
less than100. Use the 0.05 significance level.

42
If a sample of 25 observations reveals a sample mean of 52 and a sample variance of 4.2, test the
hypothesis that the population mean is 65 against the alternative hypothesis that it is some other
value. Use the 0.01 significance level.

43
Realtor Elaine Snyderman took a random sample of 12 homes in a prestigious suburb of Chicago and
found the average appraised market value to be $780,000 and the standard deviation was $49,000.
Test the hypothesis that for all homes in the area, the mean appraised value is $825,000 against the
alternative that it is less than $825,000. Use the 0.05 level of significance.

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44
For a sample of 60 women taken from a population of over 5,000 enrolled in a weight –reducing
program at a nationwide chain of health spas, the sample mean diastolic blood pressure is 101 and
the sample standard deviation is 42. At a significance level of 0.02, on average, did the women
enrolled in the program have diastolic blood pressure that exceeds the value of 75?

45
The data- processing department at a large life insurance company has installed new color video
display terminals to replace the monochrome units it previously used. The 95 operators trained to
use the new machines averaged 7.2 hours before achieving a satisfactory level of performance. Their
sample variance was 16.2 squared hours. Long experience with operators on the old monochrome
terminals showed that they averaged 8.1 hours on the machines before their performances were
satisfactory. At the 0.01 significance level, should the supervisor of the department conclude that
the new terminals are easier to learn to operate?

46
As the bottom fell out of the oil market in early 1986, educators in Texas worried about how the
resulting loss of state revenues (estimated to be about $100 million for each $1 decrease in the price
of a barrel of oil) would effect their budgets. The state board of education felt the situation would
not be critical as long as they could be reasonably certain that the price would stay above $18 per
barrel. They surveyed 13 randomly chosen oil economists and asked them to predict how low the
price would go before it bottomed out. The 13 predictions average $21.60, and the sample standard
deviation was $4.65. At =0.01, is the average prediction significantly higher than $18.00? Should
the board conclude that a budget crisis is unlikely? Explain.

47
XCO, a multinational manufacturer, uses a batch process to produce widgets. Each batch of widgets
takes 8 hours to produce and has material and labor costs of $8,476. Because of variations in
machine efficiency and raw material purity, the number of widgets per batch is random. All widgets
made can be sold for $2.50 each, and widget production is profitable so long as the batches sell for
more than $12,500 on average. XCO sampled 16 batches and found 5,040 widgets per batch on
average, with a standard deviation of 41.3 widgets. At =0.025 can XCO conclude that its widget
operation is profitable?

48
A television documentary on overeating claimed that Americans are about 10 pounds overweight on
average. To test this claim, eighteen randomly selected individuals were examined; their average
excess weight was found to be 12.4 pounds, and the sample standard deviation was 2.7 pounds. At a
significance level of 0.01, is there any reason to doubt the validity of the claimed 10-pound value?

49
A soft drink filling machine, when in perfect adjustment, fills the bottles with 12 ounces of soft drink.
A random sample of 25 bottles is selected, and the contents are measured. The sample yielded a
mean content of 11.88 ounces, with a standard deviation of 0.24 ounces. With a 0.05 level of
significance, test to see if the machine is in perfect adjustment.

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50
In the past the average age of employees of a large corporation has been 40 years. Recently, the
company has been hiring older individuals. In order to determine whether there has been an
increase in the average age of all the employees, a sample of 25 employees was selected. The
average age in the sample was 45 years with a standard deviation of 5 years. Assume the
distribution of the population is normal. Let  = .05.
a. State the null and the alternative hypotheses.
b. Test to determine whether or not the mean age of all employees is significantly more
than 40 years.

51
At a local university, a sample of 49 evening students was selected in order to determine whether
the average age of the evening students is significantly different from 21. The average age of the
students in the sample was 23 with a standard deviation of 3.5. Determine whether or not the
average age of the evening students is significantly different from 21. Use a 0.1 level of significance.

52
A group of young businesswomen wish to open a high fashion boutique in a vacant store, but only if
the average income of households in the area is at least $25,000. A random sample of 9 households
showed the following results.

$28,000 $24,000 $26,000 $25,000 $23,000

$27,000 $26,000 $22,000 $24,000

Use statistical techniques to advise the group on whether or not they should locate the boutique in
this store. Use a .05 level of significance.

53
A company that manufactures plastic chairs has launched a new brand. The company sells through
various retail outlets across the country. The management of the company believes that the average
price for the new brand is Rs. 550 in all outlets. A researcher wants to verify this claim and has taken
a random sample of selling price of the new brand from 25 outlets across the country. These prices
are given in the table below. Use α = 0.05.

540 555 560 565 563 567 555 552 543 546
560 551 542 558 556 552 550 556 559 554
557 558 556 543 553

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54
A soft drink company produces 2 liters bottles of one of its popular drinks. The quality control
department is responsible for verifying that each bottle contains exactly 2 liters of soft drink. The
results of a random check of 40 bottles undertaken by the quality control officer are given in the
table below.

Bottle Sl. Quantity of soft Bottle Quantity of soft

No drink (in litres) Sl. No drink (in litres)
1 1.97 21 2.01
2 1.98 22 2.05
3 1.99 23 2.03
4 2.01 24 2.04
5 2.02 25 2.01
6 2.03 26 1.97
7 2.01 27 1.98
8 1.97 28 1.99
9 1.96 29 1.98
10 2.04 30 2.03
11 2.00 31 2.01
12 2.01 32 1.99
13 2.02 33 1.97
14 1.99 34 1.96
15 2.00 35 2.02
16 1.97 36 2.03
17 1.98 37 2.04
18 2.03 38 1.98
19 1.98 39 1.99
20 1.99 40 2.01

Use  = 0.01 to test whether each bottle contains exactly 2 liters of soft drink.

55
A Ketchup manufacturer is in the process of deciding whether to produce a new extra- spicy brand.
The company’s marketing research department used a national telephone survey of 6,000
households and found that the extra-spicy Ketchup would be purchased by 335 of them. A much
more extensive study made 2 years ago showed that 5 percent of the households would purchase
the brand then. At a 2 percent significance level, should the company conclude that there is an
increased interest in the extra-spicy flavour?

56
Steve Cutter sells Big Blade lawn mowers in his hardware store, and he is interested in comparing
the reliability of the mowers he sells with the reliability of Big Blade mowers sold nationwide. Steve
knows that only 15 percent of all Big Blade mowers sold nationwide require repairs during the first
year of ownership. A sample of 120 of Steve’s customers revealed that exactly 22 of them required
mower repairs in the first year of ownership. At the 0.02 level of significance, is there evidence that
Steve’s Big Blade mowers differ in reliability from those sold nationwide?

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57
Grant, Inc. a manufacturer of women’s dress blouses knows that its brand is carried in 19 percent of
the women’s clothing stores east of the Mississippi River. Grant recently sampled 85 women’s
clothing stores on the West Coast and found that 14.12 percent of the stores carried the brand. At
the 0.04 level of significance, is there evidence that Grant has poorer distribution on the West Coast
than it does east of the Mississippi?

58
From a total of 10,200 loans made by a state employees’ credit union in the most recent 5-year
period, 350 were sampled to determine what proportion was made to women. This sample showed
that 39 percent of the loans were made to employees. A complete census of loans 5 years ago
showed that 41 percent of the borrowers then were women. At a significance level of 0.02, can you
conclude that the proportion of loans made to women has changed significantly in the past 5 years?

59
Some financial theoreticians believe that the stock market’s daily prices constitute a “random walk
with positive drift.” If this is accurate, then the Dow Jones Industrial Average should show a gain on
more than 50 percent of all trading days. If the average increased on 101 of 175 randomly chosen
days, what do you think about the suggested theory? Use a 0.01 level of significance.

60
Macroswift estimated last year that 35 percent of potential software buyers were planning to wait
to purchase the new operating system, Window Panes, until an upgrade had been released. After an
advertising campaign to reassure the public, Macroswift surveyed 3,000 people and found 950 who
were still skeptical. At the 5 percent significance level, can the company conclude the proportion of
skeptical people has decreased?

61
Rick Douglas, the new manager of Food Barn, is interested in the percentage of customers. Who are
totally satisfied with the store. The previous manager had 86 percent of the customers totally
satisfied, and Rick sampled 187 customers and found 157 were totally satisfied. At the 1 percent
significance level, is there evidence that Rick’s claim is valid?

62
Xr-62 Has the recent drop in airplane passengers resulted in better on-time performance? Before
the recent downturn one airline bragged that 92% of its flights were on time. A random sample of
165 flights completed this year reveals that 153 were on time. Can we conclude at the 5%
significance level that the airline’s on-time performance has improved?

63
Xr-63 The results of an annual Claimant Satisfaction Survey of policyholders who have had a claim
with State Farm Insurance Company revealed a 90% satisfaction rate for claim service. To check the
accuracy of this claim, a random sample of State Farm claimants was asked to rate whether they
were satisfied with the quality of the service (1 = Satisfied and 2 = Unsatisfied). Can we infer that the
satisfaction rate is less than 90%?

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Business Analytics Dr. Kalim Khan

64
An airline promotion to business travelers is based on the assumption that two-thirds of business
travelers use a laptop computer on overnight business trips.
a. State the hypotheses that can be used to test the assumption.
b. What is the sample proportion from an American Express sponsored survey that found 355
of 546 business travelers use a laptop computer on overnight business trips?
c. What is the p-value?
d. Use α _ .05. What is your conclusion?

65
Virtual call centers are staffed by individuals working out of their homes. Most home agents earn
$10 to $15 per hour without benefits versus $7 to $9 per hour with benefits at a traditional call
center (BusinessWeek, January 23, 2006). Regional Airways is considering employing home agents,
but only if a level of customer satisfaction greater than 80% can be maintained. A test was
conducted with home service agents. In a sample of 300 customers, 252 reported that they were
satisfied with service.
a. Develop hypotheses for a test to determine whether the sample data support the conclusion
that customer service with home agents meets the Regional Airways criterion.
b. What is your point estimate of the percentage of satisfied customers?
c. What is the p-value provided by the sample data?
d. What is your hypothesis testing conclusion? Use α = .05 as the level of significance.

66
During the 2004 election year, new polling results were reported daily. In an IBD/TIPP poll of 910
adults, 503 respondents reported that they were optimistic about the national outlook, and
President Bush’s leadership index jumped 4.7 points to 55.3 (Investor’s Business Daily, January 14,
2004).
a. What is the sample proportion of respondents who are optimistic about the national
outlook?
b. A campaign manager wants to claim that this poll indicates that the majority of adults are
optimistic about the national outlook. Construct a hypothesis test so that rejection of the
null hypothesis will permit the conclusion that the proportion optimistic is greater than 50%.
c. Use the polling data to compute the p-value for the hypothesis test in part (b). Explain to the
manager what this p-value means about the level of significance of the results.

67
A radio station in Myrtle Beach announced that at least 90% of the hotels and motels would be full
for the Memorial Day weekend. The station advised listeners to make reservations in advance if they
planned to be in the resort over the weekend. On Saturday night a sample of 58 hotels and motels
showed 49 with a no-vacancy sign and 9 with vacancies. What is your reaction to the radio station’s
claim after seeing the sample evidence? Use α = .05 in making the statistical test. What is the p-
value?

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Business Analytics Dr. Kalim Khan

68
According to the federal government, 24% of workers covered by their company’s health care plan
were not required to contribute to the premium (Statistical Abstract of the United States: 2006). A
recent study found that 81 out of 400 workers sampled were not required to contribute to their
company’s health care plan.
a. Develop hypotheses that can be used to test whether the percent of workers not required to
contribute to their company’s health care plan has declined.
b. What is a point estimate of the proportion receiving free company-sponsored health care
insurance?
c. Has a statistically significant decline occurred in the proportion of workers receiving free
company-sponsored health care insurance? Use α = .05.

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