Business Statistics IIT B Course 2015

Confidence Interval Problem

1. Maxi is preparing a barbecue for his friends tonight. Thus he buys four 500g-packs of pork.
But the packages are felt to have different weights. Thus he decided to weigh the packs. The
results are: 471g, 508g, 490g and 463g.
Determine a confidence interval (95% confidence level) for the mean of the weight assuming
that the packs have population standard deviation of 20g.

o [453.6; 520.8]
o [463.4; 502.6]
o [470.1; 490.5]
o [493.8; 540.2]

2. Sonja loves only red wine from France. During the past years, Sonja always drank in average
5 bottles of French red wine per month with a standard deviation of 1.5 bottles. One of her
New Year’s resolutions was to live a healthier live. However, without great success. She
merely managed it to drink 4 bottles of red wine per month in average in the first six months
of the year. Her friend claims that her wine consumption has not reduced significantly. Test
the Null-Hypothesis vs Alternate (reduced compared to previous years) on a significance
level of 90%.

o You can reject the Null-Hypothesis

o You cannot reject the Null-Hypothesis
o You can neither accept nor reject the Null-Hypothesis

3. The typical Bavarian breakfast includes a pretzel, Bavarian sausages and wheat beer. Anja,
Corinna, Magdalena, Max and Paul are friends and meet for breakfast at the Chinese Tower,
a beer garden in Munich. They discuss how much salt needs to be on a pretzel. Having a look
at their five pretzels, they count 45, 55, 50, 62 and 38 grains of salt on their pretzels.
The baker who is delivering the pretzels to the beer garden instructs the friends to calculate a 99
% confidence interval for the mean amount of grains of salt based on their pretzel sample. The
amount of salt is normally distributed with a standard deviation of σ = 5.

a) [47.4, 52.6]
b) [44.8, 55.2]
c) [44.24, 55.76]
d) [37.2, 62.9]
4. Taco’s Burrito Shop
Taco owns a burrito restaurant for several years now and realized that his customers are getting
more and more health-conscious. In order to cope with this trend, he wants to know how much
fat one burrito contains. So he gave a random sample of 10 burritos to a laboratory which
obtained the following fat contents per burrito in gram: 12.1, 9.4, 12.7, 8.6, 11.0, 12.1, 10.8, 8.9,
10.2 and 11.6

Assuming that the fat content per burrito is normally distributed with a standard deviation of 1.5
g, he wants to know the 95% confidence interval for the average fat content of one burrito.

Which is the right CI?

a) [9.96,11.52]
b) [9.81,11.67]
c) [10.45,11.03]
d) [9.35,12.13]

5. Masskrug filling level

To celebrate the good results of their Quality Management exams, four classmates decided to go
to the Oktoberfest. They enjoyed drinking beer out of the favorite Masskrug as well as eating
Brezn’. Just after ordering the second Mass, they thought that it would be fun if teacher Holly
joins them. Hence, they called her…

…she answered the phone immediately and was pleased by the invitation. However she told the
guys that she is really unhappy about the Masskrug filling level at the Oktoberfest. “The price
per Mass is so unreasonable high. First, I need to know the 99% Confidence Interval for the
mean filling level of the Masskrug. Based on this, I will decide whether I will come or not!” she
said.

Just a second later, the Bavarian waitress delivers the four Mass which the guys ordered before
calling Holly. They immediately measured the filling level: Arjan956ml; Manon 1020ml; Max
946ml; Linda 966ml.

Thanks to Arjans short flirt, the waitress revealed that the filling rates are normally distributed
with a population standard deviation of σ = 100ml.
Based on their observations, what is the 99% Confidence Interval for the mean Masskrug filling
level that the guys need to tell to Holly?

ANSWERS

A) [894.35 ml , 1210.65 ml ]

B) [843.25 ml , 1100.75 ml ]

C)[913.10 ml , 1200.59 ml ]

D) [718.12 ml , 1020.88 ml ]

6. Playing golf
Last summer Adam and his wife discovered a new hobby for themselves: they started to play
golf. During their first season they exercised a lot, so that they can take part in tournaments the
next summer.

Now, in their second summer, Adam bought new golf balls, called “Extra Fly”. The company,
that manufactures them, promises, that those balls fly longer than ordinary balls because they are
heavier. The first time Adam tries them, he doesn’t notice any difference. At first, he thinks as a
beginner his play is too bad, but after taking some extra training hours, nothing changes. He even
buys a new box of those special balls and still recognizes no difference. His wife suggests Adam
to examine the weight of the golf balls.

The results are: 45.01g, 45.67g, 45.7g, 45.84g, 45.93g, 45.32g.

Adam contacts the company to get his money back, as in his opinion they didn’t keep their
promise. After some weeks he receives an answer, saying that the Quality Management
Department of the company set up a 99% confidence interval between [45.50g, 45.75g]. They
used a standard derivation of σ= 0.25. In the eyes of the company it is not possible, that Adam
got that many various weights and can’t get his money back.

Angry about this answer, Adam calculates the Confidence Interval of his golf balls on his own.
Although he only has a small number of samples, he wants to prove the company wrong.

What Confidence Interval does Adam calculate, using the weight of his golf balls and the data
from the company?
 a) [45.24g, 45.62g]
b) [45.32g, 45.84g]
c) [45.63g, 45.72g]
d) [45.47g, 45.93g]

7. The Online Lecture Problem

The lectures of the online course “Statistics” is supposed to be 90 minutes long. The first
lectures which have been recorded take 1:28, 1:26, 1:32 and 1:16 hours. Now the students are
wondering how much time they have to calculate to watch the recorded lectures. It is known
that the length of lecture is normally distributed with a standard deviation σ=6 minutes.
Find the 95% confidence interval for the mean length of the lecture. [Format: 00:00:00h ]

(a) [01:19:36h; 01:31:23h]

(b) [01:20:52h; 01:33:17h]
(c) [01:17:01h; 01:29:47h]

8. How buggy is my software

Admir and Diana are two software developers at a start-up company called “Horizont”. At the
moment they are developing a new smart phone application that helps record personal expenses.

The new application needs to be tested, so they want to estimate the number of errors per
application method. For this, they picked randomly nine different application methods. The error
rates resulted as follows:

1, 1, 2, 3, 3, 5, 3, 6, 1

Give a 95% Confidence Interval if it is known that the number of errors per application method
is normally distributed with a standard deviation of 2 errors.

[1.480, 4.076]

[2.745, 2.811]

[1.471, 4.085]

[2.314, 3.242]
 Business Statistics IIT B Course 2015

Hypothesis Testing Problem

1. Feather requirements
Every year the samba schools in Brazil invest millions to present themselves in the worldwide
known carnival parade. One of the directors wants to be sure that all feathers for the costumes
are meeting their requirements and takes a sample of 36 feathers for measure. The supplier
claims them to be 1.5 m long and the director obtains a sample mean of 1.46 m. The standard
deviation is known to be 0.1 m.

Given H0 : µ = 1.5 m; H1 : µ < 1.5 𝑚; α = 0.01, what is the correct answer?

1) zobs = 2.40 and H0 can be rejected

2) zobs = 2.40 and H0 cannot be rejected
3) zobs = 1.44 and H0 can be rejected
4) zobs = 1.44 and H0 cannot be rejected

2. Octoberfest Beer Problem

Once a year, the famous Octoberfest takes place in Munich. It is called “Wiesn” by Bavarians
and known all over the world. In this occasion, famous brewers run beer halls and serve Bavarian
food and of course beer.Beer can only be ordered in steins which contain 1 l beer. One waitress
can carry 12 steins at once. This year, many customers complained about the fill quantity of the
steins being too small. The brewer is concerned about the satisfaction of the customers and wants
to verify that the mean of 1000 ml is met. The fill quantity is normally distributed with a
standard deviation σ = 100 ml. The sample carried by waitress Gisela showed an average of 980
ml.

Can the null hypothesis of a mean of 1000 ml be rejected with α = 0.02?

What is the value for Zobs ?

Can the null hypothesis be rejected if the sample shows a mean of 940 ml?

3. Money on the Oktoberfest

Every year the Oktoberfest in Munich attracts a lot of visitors from all over the world. The city’s
major knows that Munich locals on average spend 51.2€ at the Oktoberfest. As he is wondering
whether it would be beneficial to attract even more tourists to the Oktoberfest he wants to
analyze the spending habits of the visiting tourists. Accordingly he sent his secretary to the
Oktoberfest to conduct an empirical study by asking ten randomly selected tourists about their
expenses. She came up with the following data set: 88.6€, 153.7€, 74.1€, 59.4€, 106.0€, 81.5€,
48.6€, 66.2€, 93.6€, 36.5€.

Now he wants to know, if the expenses of the tourists exceed the amount that the locals spend on
a significance level of 5%, assuming that the expenditures of tourists are normally distributed
with a standard deviation of 30€. Therefore he formulates the following hypotheses:

H0:The average expenditures of tourists are equal or less than the locals’ expendituresµ ≤ µ0

H1: The average expenditures of tourists exceed the locals’ expendituresµ > µ0

Calculate the observed value of the test statistic, compare it to the appropriate critical value and
tick the right conclusion.

Zobs = 3.12 - H0 can’t be rejected

Zobs = 1.645 - H0 can’t be rejected

Zobs = 1.36 - H0 can’t be rejected

Zobs = 3.12 - H0 is rejected

Zobs = 1.645 - H0 is rejected

Zobs = 1.36 - H0 is rejected

4. Defective Products
A large mail-order company has placed an order for 5,000 electric can openers with a supplier on
the condition that no more than 2% of the devices will be defective. To check the shipment, the
company tests a random sample of 400(n=400)of the can openers and finds that 11 (sample
proportion=11/400=.0275)are defective.

1.Does this provide sufficient evidence to indicate that the proportion of defective can openers in
the shipment exceeds 2%? Test using a = .05.

5. Contaminated Soil
Environmental Science & Technology (Oct. 1993) reported on a study of contaminate soil in The
Netherlands. Seventy-two(n=72) 400-gram soil specimens were sampled, dried, and analyzed
for the contaminant cyanide. The cyanide concentration [in milligrams per kilogram (mg/kg) of
soil] of each soil specimen was determined using an infrared microscopic method. The sample
resulted in a mean cyanide level of x-bar = 84mg/kg and a standard deviation of s = 80 mg/kg.

Test the hypothesis that the true mean cyanide level in soil in The Netherlands exceeds 100
mg/kg. Use a = .10.

6 Hospital Costs

The American Hospital Association reports in Hospital Stat that the mean cost to community
hospitals per patient per day in U.S. hospitals was $931 in 1994. In that same year, a random
sample of 30 daily costs in Massachusetts hospitals yielded a mean of $1131. Assuming a
population standard deviation of $333 for Massachusetts hospitals, do the data provide sufficient
evidence to conclude that in 1994 the mean cost in Massachusetts hospitals exceeded the national
mean of $931? Perform the required hypothesis test at the 5% significance level.

7. Highway Statistics

In 1990 the average passenger vehicle was driven 10.3 thousand miles, as reported by the U.S.
Federal Highway Administration in Highway Statistics. A random sample of 500 passenger
vehicles had a mean of 10.1 thousand miles driven for last year. Let m denote last year's mean
distance for all vehicles.

Perform the hypothesis test

Ho: m=10.3 thousand miles

Ha: m ≠10.3 thousand miles

at the 5% significance level. Assume last year's standard deviation of distances driven for all
passenger vehicles is 6.0 thousand miles.

8. Gourmet of Wine
Sonja loves only red wine from France. During the past years, Sonja always drank in average 5
bottles of French red wine per month with a standard deviation of 1.5 bottles. One of her New
Year’s resolutions was to live a healthier live. However, without great success. She merely
managed it to drink 4 bottles of red wine per month in average in the first six months of the year.
Her friend claims that her wine consumption has not reduced significantly. Test the Null-
Hypothesis vs Alternate (reduced compared to previous years) on a significance level of 90%.

o You can reject the Null-Hypothesis

o You cannot reject the Null-Hypothesis
o You can neither accept nor reject the Null-Hypothesis

9. Student dorm
8 student who live in the same home take the same U-bahn (metro) at the end of the street each
morning . The time it takes each of them to get to school is: 17, 13, 18, 14, 16, 18, 14 and 12
minutes.

a. Is there evidence that the mean time to get to school is greater than 15 minutes if the
standard deviation is 3 minutes? (Assume time to school follows normally distribution
and α=0,05)
1) Yes and the tobs is 0,2357
2) No and the tobs is 0,2357
3) Yes and the tobs is 1,7821
4) No and the tobs is 1,7821

During rush hour they also have the option to take another U-bahn on the other end of the street. The
time it takes them then to get to school is: 18, 14, 19, 13, 17, 17, 14 and 11 minutes.

b. Is there evidence to show that the average times it takes them to get to school is different
for the two different U-bahns? Assume a standard deviation of 3 minutes and a normal
distribution. (α =0,025)

10. Coffee Fraud Problem

The Cafeteria “TUM-Café” which is part of the Technical University of Munich was redesigned
a few years ago because of lacking revenue. The new concept of the Cafeteria also included new
fully automated coffee machines, which give the students the opportunity to make their coffee on
their own by just pushing a button. The machine then fills the hot coffee into a cup and stops
when an amount of 0.25 liters is reached.
However some TUM students are of the opinion that this fill rate of 0.25 l liters is not fulfilled on
average. To examine if this can be approved a group of students drew a sample of 64 cups of
coffee and measured the exact fill rate. The sum of all 64 cups gave an amount of 15.1 liters of
coffee. The variance has a value of 0.01 liters. Furthermore a normal distributed fill rate is
assumed.

a) The Cafeteria feels confident that the single cups have at least a filling level of 0.25 liters.
Test the hypothesis that the true mean is equal or greater than 0.25 at a significance level
of 5 percent. Can 𝐻0 be rejected?

11. The Dutchman Claim

Dutch people are not only worldwide known for their mills, cheese, wooden shoes and amazing
soccer players, but also for their average height: Dutch inhabitants are on average the tallest
people in the world.

According to a sample study per country of size 33, the Dutch average height is 182.88 cm (#1).
It is also know that the population average of Estonian inhabitants is 178.00 cm (#5). For
simplicity, we assume that the average height follows approximately a normal distribution, and
the variance of the height is equal across countries, and that the population standard deviation is
known (𝜎 = 6.5 𝑐𝑚).

A famous Dutchman claims, when he meets his Estonian friend in Munich, that Dutch people are
taller (statistically significant) than Estonian people.

“Dutch people are significantly taller than Estonian people!” Is the Dutchman, based on ∝=
0.05, correct?

ANSWERS:

A) The Dutchman is correct.

B) The Dutchman is wrong.
C) Based on the given information, it is not possible to answer this question.

Stock variation

An investor wants to compare the risks associated with two different stocks. One way to
measure the risk of a given stock is to measure the variation in the stock’s daily price changes.
The investor obtains a random sample of 20 daily price changes for stock 1 and 20 daily price
changes for stock 2. These data are shown in the table below. Show how this investor can
compare the risks associated with the two stocks by testing the null hypothesis that the variances
of the stocks are equal. Use α = 0.10 and interpret the results of the statistical test.

Price Change
Price Change
Day for stock 1 for stock 2

1 1.86 0.87

2 1.80 1.33

3 1.03 -0.27

4 0.16 -0.20

5 -0.73 0.25

6 0.90 0.00

7 0.09 0.09

8 0.19 -0.71

9 -0.42 -0.33

10 0.56 0.12

11 1.24 0.43

12 -1.16 -0.23

13 0.37 0.70

14 -0.52 -0.24

15 -0.09 -0.59

16 1.07 0.24

17 -0.88 0.66

18 0.44 -0.54

19 -0.21 0.55

20 0.84 0.08