Module 8:

At the end of this module, students are expected to :

1.Define the 𝐻𝑜 , 𝐻𝑎, level of significance, test statistic, p-value, and statistical significance

2.Define the Type I and Type II errors, and identify the type of error that researchers control

3.Distinguish the difference between the One-tailed and two-tailed tests.

4.Solve problems and interpret results involving one-sample hypothesis testing using statistical tools
Lesson 1 : Statistical Hypotheses
The first thing a researcher should do is to choose a topic for his/her
research. Next is to formulate the statement of the problem. The he/she
should enumerate the research questions and identify the target
population. Another important thing a researcher should do is to make
assumptions about the population . These assumptions, which may or
may not be true are called statistical hypotheses.

A hypothesis is a logical supposition and educated guess based on

observation. It provides tentative explanation for certain events,
phenomena or behaviors. It is a suggested solution for an unexplained
occurrence that does not fit into current accepted scientific theory.
 1. The null hypothesis , denoted by 𝐻𝑜 , is a statement saying that there is no
significant difference between population parameter and the value that is being claimed . It
is the hypothesis to be tested.

2. The alternative hypothesis , denoted by 𝐻𝑎 , is a statement saying that there is a

significant difference between the population parameter and the value that is being claimed .
This is a statement that will be true once the null hypothesis is rejected .
Example 1: State the null hypothesis and alternative hypothesis for the following
statements.

a. Significant difference in the leadership performance of sectarian and

non-sectarian school administrator.
–Ho: There is no significant difference in the leadership performance of
sectarian and non-sectarian school administrator.
–Ha: There is significant difference in the leadership performance of sectarian
and non-sectarian school administrator.
b. Significant relationship between the attitude score and academic
performance.
– Ho: There is no significant relationship between the attitude score and
academic performance.
– Ha: There is significant relationship between the attitude score and
academic performance.
Example 2 : Express the null hypothesis 𝑯𝟎 and the alternative hypothesis 𝑯𝐚 in notation
form .

Scenario : The Head of the IT department of a certain university claims that the mean
height of third year BSIT students is 163 cm. The mean height of 45 randomly selected
third year BSIT students is 161 cm . Using 0.01 significance level, can it be concluded
that the mean height of third year BSIT students is different from 163m cm claimed by the
head of the IT department?

The following are the null and alternative hypotheses.

𝐻𝑜 : 𝜇 = 163
𝐻𝑎 : 𝜇 ≠ 163
Example 3: Express the null hypothesis 𝑯𝟎 and the alternative hypothesis 𝑯𝐚 in notation
form.

Scenario : Last year the mean number of ladies’ bags produced by GB Company
was 2,500 each day . This year , the manager claims that there is an increase in the
number of bags produced . A researcher who wants to find out whether this is true
counted the number of bags produced each day for a period of one month . His
computation resulted to a mean of 2,515 ladies’ bags . At 0.05 significance level, is
there enough evidence to conclude that the mean numbers of ladies’ bags produced by
GB company is greater than 2500?The following are the null and the alternative
hypotheses.

𝐻𝑜 : 𝜇 = 2,500
𝐻𝑎 : 𝜇 > 2,500
• In the last example the null hypothesis is assumed to be true. For instance, Example 2,
that is the mean height of the third year BSIT students is 163 cm . If the researcher can
gather enough evidence that can result to the rejection of the null hypothesis then s/he
can conclude that the mean height of the third year BSIT students is not equal to 163cm .
A rejection of the null hypothesis results in the acceptance of the alternative hypothesis.

• The researcher should follow some steps and rules as basis to decide whether or not to
reject the null hypothesis .

• After setting up the null hypothesis and the alternative hypothesis, the next step is to
state the level of significance .
 Level of Significance
❑ The probability of rejecting the null hypothesis when it is true. The level of significance is
designated , the Greek letter alpha (𝛼 ). It is also sometimes called the level of risk . This may be a
more appropriate term because it is the risk you take of rejecting the null hypothesis when it is
really true .

❑ 𝑆𝑖𝑔𝑛𝑖𝑓𝑖𝑐𝑎𝑛𝑐𝑒 𝐿𝑒𝑣𝑒𝑙 𝛼 = 1 − 𝐶𝑜𝑛𝑓𝑖𝑑𝑒𝑛𝑐𝑒 𝐿𝑒𝑣𝑒𝑙

❑When researchers talk about the 5% level of significance (written as α=0.05), they’re setting a
threshold for how much evidence they need before they’re willing to reject the null hypothesis
(the idea that there is "no effect" or "no difference" in the population they’re studying).
 In statistical hypothesis testing, you might commit one of the types of errors:
1. Type I error
A Type I error is committed when the researcher rejects a null hypothesis when in fact
it is true. Alpha 𝜶 is used to represent the probability of Type I error.

2. Type II error
A type II error is committed when the researcher fails to reject null hypothesis that is
false . But if the researcher fails to reject a true hypothesis , then there is no error . Beta 𝛽 is
used to represent the probability of a Type II error .

True State of Nature

Decision
The null hypothesis is true The null hypothesis is false

Reject the null hypothesis 𝐇𝟎 Type I error Correct decision

Accept the null hypothesis 𝐇𝟎 Correct decision Type II error

Rejection and Acceptance Regions

The rejection region is the region in which the null hypothesis is rejected if the test statistics falls
within it. By setting the level of significance, the rejection or critical value can be determined. It serves
as the basis whether the hypothesis is rejected or not rejected.
The location of the rejection region is determined by the nature of the alternative hypothesis,
whether the hypothesis is one-tailed or a two-tailed test.

One Tailed Test

A test of any statistical hypothesis, where the alternative is one– sided. In a one- sided test, it is
a directional statement of the alternative hypothesis wherein only one meaning can be interpreted
from it.

Figure 1: Diagram for One-Tailed Test

Example of one tailed test;
𝐻0 : The average income of a skilled worker in the Philippines is not greater
than 300Php.

𝐻𝑎 : The average income of a skilled worker in the Philippines is greater than

₱ 300 .

For the above example the test to be used is one tailed test because the
alternative hypothesis is stated directional. Greater than ₱ 300 has only one
meaning.
Two Tailed Test

A test of any statistical hypothesis, where the alternative is two-sided. It means that the
statement is stated as non-directional. Non- directional means that there are two ideas that could
be interpreted from the very way how the alternative hypothesis is stated.

Figure 2: Diagram for Two-Tailed Test

Example of two tailed test;

𝐻0 : There is no significant difference in the leadership performance of sectarian

and non-sectarian school administrator.

𝐻𝑎 : There is a significant difference in the leadership performance of sectarian

and non-sectarian school administrator.

The above alternative hypothesis is stated non-directional. Significant difference in the

leadership performance can be interpreted that the sectarian perform well than the non-sectarian
or the other way around. Two meanings can be interpreted from the alternative hypothesis.
Lesson 2 : Hypothesis Testing About A Population Mean When The Variance Is
Known

Hypothesis testing is a procedure used by statisticians to determine whether or not to reject

a statement about a population .

Steps in Hypothesis Testing

1. State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ).
2. Set the 𝛼 (level of significance)
3. Compute the test statistic.
4. Determine the critical value or the 𝑝 − 𝑣𝑎𝑙𝑢𝑒
5. Draw a conclusion
 The appropriate test statistic for testing a claim about a population mean when the
population variance is known and 𝑛 ≥ 30 is

𝑥ҧ − 𝜇
𝑧= 𝜎
𝑛
where :
𝑥ҧ = 𝑠𝑎𝑚𝑝𝑙𝑒 𝑚𝑒𝑎𝑛
𝜇 = 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑚𝑒𝑎𝑛
𝜎 = 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑑𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛
𝑛 = 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑖𝑧𝑒
Example 1 : The leader of the association of jeepney drivers claims that the average daily take home
pay of all jeepney drivers in Pasay City is ₱400 . A random sample of 100 jeepney drivers in Pasay
City was interviewed and the average daily take home pay of these drivers is found to be ₱425 . Use a
0.05 significance level to find out if the average daily take home pay of all jeepney drivers in Pasay
City is different from ₱400 . Assume that the population variance is ₱8,464.
Solution :

A. By Critical Value Method

Step 1 : State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ 𝜇 = 400
𝐻𝑎 ∶ 𝜇 ≠ 400
Step 2 : Choose the level of significance : 𝛼 = 0.05
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population variance is known and 𝑛 > 30 , the
appropriate test statistic is the 𝑧 − value .
ҧ
𝑥−𝜇
𝑧= 𝜎
𝑛
 Computation :
The standard deviation 𝜎 is the square root of the variance 𝜎 2 . The square root of ₱8,464 is 92 , hence
𝜎 = 92.
𝑥ҧ − 𝜇
𝑧= 𝜎
𝑛
425 − 400
𝑧=
92
100

𝑧 = 2.72

Step 4: Determine the critical value .

The alternative hypothesis is non –directional , hence, the two-tailed test shall be used . Divide 𝛼 by 2 , and
then subtract the quotient from 0.5
𝛼
= 0.025
2
0.5 − 0.025 = 0.475 𝑜𝑟 0.4750

Use the Areas Under The Normal Curve Table .

 The area 0.4750 is under column headed 0.06 . Move along this row to the left until 1.9 under
column headed 𝑧 is reached. Therefore 𝑧𝛼 = 1.96 . At 5% level of significance the critical value is
2
± 1.96.

Step 5: Draw a conclusion.

Because the computed test statistic , 𝑧 = 2.72 falls within the rejection region (beyond the
critical value ±1.96), reject the null hypothesis and conclude that there is evidence to support the
alternative hypothesis. Conclude that the average daily take home pay of jeepney drivers is not equal
to ₱400. This result is considered to be significant at 𝛼 = 0.05 level .
B. By 𝒑 − 𝒗𝒂𝒍𝒖𝒆 Value Method
This method is gaining popularity because of statistical computer programs . Most statistical programs
are using the 𝑝 −value method. For making a decision and drawing a conclusion, following rules are
important.
a. if 𝑝 −value < 𝛼 , reject 𝐻0 .
b. if 𝑝 −value ≥ 𝛼 , do not reject 𝐻0 .

Solution :
Step 1 : State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ 𝜇 = 400
𝐻𝑎 ∶ 𝜇 ≠ 400
Step 2 : Choose the level of significance : 𝛼 = 0.05
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population variance is known and > 30 ,
the appropriate test statistic is the 𝑧 − value .
𝑥ҧ − 𝜇
𝑧= 𝜎
𝑛
Computation : Step 4: Determine the 𝑝 −value .
The standard deviation 𝜎 is the square root The computed test statistics is z = 2.72 . Use the Areas
of the variance 𝜎 2 . The square root of Under the Standard Normal Curve Table . In the first column
₱8,464 is 92 , hence 𝜎 = 92. under , look at 2.7 . Move to the right along this row until the
column headed 2 is reached . The value under the column
𝑥ҧ − 𝜇 head 2 is 0.4967 . Subtract 0.4967 from 0.5 . Since this is a
𝑧= 𝜎
two-tailed test , double the result .
𝑛 Hence, 0.5 − 0.4967 = 0.0033. The 𝑝 − 𝑣𝑎𝑙𝑢𝑒 = 2 0.0033 =
425 − 400 0.0066 .
𝑧=
92
100

𝑧 = 2.72

1 1
𝑝 = 0.0033 𝑝 = 0.0033
2 2
Step 5: Draw a conclusion.
Since 0.0066 is less than 0.05 reject the null hypothesis and conclude that there is evidence to
support the alternative hypothesis. Conclude that the average daily take home pay of jeepney drivers is
not equal to ₱400. This result is considered to be significant at 𝛼 = 0.05 level .
Example 2 : According to a study done last year , the average monthly expenses for cellphone
load of college students in Pangasinan was ₱350.00 . A statistics student believes that this
amount has increased since January of this year . Is there a reason to believe that this month
has really increased if a random sample of 60 students has an average monthly expenses for
cellphone load of ₱380. Use a 0.05 level of significance . Assume that the population standard
deviation is ₱77.00
Solution
A. By critical Value Method
Step 1 : State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ 𝜇 = 350
𝐻𝑎 ∶ 𝜇 > 350
Step 2 : Choose the level of significance : 𝛼 = 0.05
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population variance is known and 𝑛 >
30 , the appropriate test statistic is the 𝑧 − value .
𝑥ҧ − 𝜇
𝑧= 𝜎
𝑛
Computation : Step 4: Determine the critical value.
The alternative hypothesis is directional . Hence , the one-tailed
The standard deviation 𝜎 is the square root of the
test shall be used . This time, 𝛼 will not be divided by 2 . Subtract
variance 𝜎 2 . The square root of ₱8,464 is 92 , 𝛼 =0.05 from 0.5
hence 𝜎 = 92. 0.5 − 0.05 = .4500
𝑥ҧ − 𝜇 Use the Areas Under The Normal Curve Table .The area 0.4500 is
𝑧= 𝜎 between 0.4495 under the headed 4 and 0.4505 under the column
headed 5 . Move along this row to the left until 1.6 under column
𝑛 headed 𝑧 is reached. Therefore, 𝑧 = 1.645 ((1.64 + 1.65) ÷ 2 =
1.645). At 5% level of significance, the critical value is 1.645.
380 − 350
𝑧=
77
60
𝑧 = 3.02

𝛼 = 0.05

𝜇 = 350
1.645
Critical Value

Step 5: Draw a conclusion .

Because the computed test statistic, 𝑧 = 3.02 falls within the rejection region(beyond the critical value of 1.645) ,
reject the null hypothesis and conclude that there is evidence to support the alternative hypothesis. Conclude that the
average monthly expenses for cell phone load of college students in Pangasinan is more than ₱350. This result is
considered to be significant at 𝛼 = 0.05 .
B. By p-Value Method

Step 1 : State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ). ∶
𝐻0 ∶ 𝜇 = 350
𝐻𝑎 ∶ 𝜇 > 350
Step 2 : Choose the level of significance : 𝛼 = 0.05
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population variance is known
and >30 , the appropriate test statistic is the z-value .

𝑥ҧ − 𝜇
𝑧= 𝜎
𝑛
Computation : Step 4 : Determine the 𝒑 − 𝒗𝒂𝒍𝒖𝒆.
The standard deviation σ is the square root of the The computed test statistics is 𝑧 = 3.02. Use the Areas
variance 𝜎 2 . The square root of ₱8,464 is 92 , Under the Standard Normal Curve Table . In the first column
hence 𝜎 = 92. under , look at 3.0 . Move to the right along this row until the
column headed 2 is reached . The value under the column head 2
𝑥ҧ − 𝜇 is 0.4987 . Subtract 0.4987 from 0.5 . Since this is one-tailed ,
𝑧= 𝜎
do not double the result . Hence, 0.5 − 0.4987 = 0.0013.
𝑛 The 𝑝 − 𝑣𝑎𝑙𝑢𝑒 = 0.0013.
380 − 350
𝑧=
77
60
𝒛 = 𝟑. 𝟎𝟐

Step 5: Draw a conclusion.

Since 0.0013 is less than 0.05 , reject the null hypothesis and conclude that there is evidence to support the alternative
hypothesis. Conclude that the average monthly expenses for cell phone loads of college students in Pangasnan is more
than ₱350. This result is considered to be significant at α=0.05 level .
 Lesson 3 : Hypothesis Testing About A Population Mean When The Variance Is Unknown

Assuming that the population follows a normal distribution , the appropriate test statistic for
testing a claim about a population mean when the population variance is assumed to be unknown
and 𝑛 < 30 is the
𝑡 − 𝑡𝑒𝑠𝑡 for a single mean

𝑥ҧ − 𝜇
𝑡= 𝑠
𝑛
where :
𝑥ҧ = 𝑠𝑎𝑚𝑝𝑙𝑒 𝑚𝑒𝑎𝑛
𝜇 = 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑚𝑒𝑎𝑛
𝑠 = 𝑠𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑑𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑡ℎ𝑒 𝑠𝑎𝑚𝑝𝑙𝑒
𝑛 = 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑖𝑧𝑒
Example 1 : A history teacher claims that the average height of Filipino males is
163 cm. A student taking up Statistics randomly selects 20 Filipino males and
measures their heights. Their heights in cm are shown below .

163 164 165 177

167 163 159 169
159 160 163 163
165 169 163 165
162 174 163 167

Do the collected data present sufficient evidence to indicate that the average heights of
Filipino males is different from 163 cm ? Use ).05 level of significance and assume that the
population follows a normal distribution.
Solution :
The population mean is known but Number 𝐱 𝐱 − 𝐱ത (𝐱 − 𝐱ത)𝟐
the variance is not. The sample size is less 1 163 -2 4
than 30. Hence, the most appropriate test is 2 167 2 4
the t-test for a single mean. The first thing 3 159 -6 36
4 165 0 0
to do is find the sample mean and the 5 162 -3 9
sample standard deviation. 6 164 -1 1
7 163 -2 4
σ 𝑥 3,300 8 160 -5 25
𝑥ҧ = = = 165
𝑛 20 9 169 4 16
10 174 9 81
11 165 0 0
12 159 -6 36
σ(𝑥 − 𝑥)ҧ 2
𝑠= 13 163 -2 4
𝑛−1 14 163 -2 4
15 163 -2 4
16 177 12 144
17 169 4 16
396
= = 20.63 = 4.57 18 163 -2 4
20−1
19 165 0 0
20 167 2 4
෍ 𝐱 = 𝟑𝟑𝟎𝟎 ෍(𝐱 − 𝐱ത)𝟐 = 𝟑𝟗𝟔
A. By critical Value Method
Step 1 : State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ 𝜇 = 163
𝐻𝑎 ∶ 𝜇 ≠ 163
Step 2 : Choose the level of significance : 𝛼 = 0.05
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population standard deviation is unknown
and 𝑛 < 30 , the appropriate test statistic is the 𝑡 − 𝑡𝑒𝑠𝑡 for a single mean.
Computation :
𝑥ҧ − 𝜇
𝑡= 𝑠
𝑛
165 − 163
𝑡=
4.57
20

𝑡 = 1.96
Step 4: Determine the critical value.

a. determine the degrees of freedom.

𝑑𝑓 = 𝑛 − 1
= 20 − 1
= 19
b. The alternative hypothesis is non directional . Hence the two-tailed shall be used . Use the table of 𝑡-Critical
Values on the next slide . Because the test is two-tailed with 𝛼 = 0.05 in two tail . The critical value is ±2.093.

Step 5 : Draw a conclusion.

Because the computed test statistic 𝑡 = 1.96 does not fall within the rejection region , do not reject the null
hypothesis . Conclude that there is no sufficient evidence to indicate that the average heights of Filipino males
is different from 163.
Critical t values
B. By 𝒑 −Value Method

Step 1 : State the null hypothesis (𝐻0 ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ 𝜇 = 163
𝐻𝑎 ∶ 𝜇 ≠ 163
Step 2 : Choose the level of significance : 𝛼 = 0.05
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population standard deviation is unknown and
𝑛 < 30 , the appropriate test statistic is the 𝑡 − 𝑡𝑒𝑠𝑡 for a single mean.

Computation :
ҧ
𝑥−𝜇
𝑡= 𝑠
𝑛

165 − 163
𝑡=
4.57
20

𝑡 = 1.96
Step 4 : Determine the 𝑝 −value.
a. determine the degrees of freedom.
𝑑𝑓 = 𝑛 − 1
= 20 − 1
= 19
b. Significance level 𝛼 = 0.05
The alternative hypothesis is non-directional . Hence the two-tailed test shall be used . Use the table 𝑡 – Critical Values .
The computed 𝑡 − 𝑣𝑎𝑙𝑢𝑒 of 1.96 is between 1.729 and 2.093 under the column headed 0.10 and 0.05 , respectively .
This means that 𝑝 − 𝑣𝑎𝑙𝑢𝑒 is between 0.10 and 0.05 or 0.10 > 𝑝 > 0.05 .

Step 5 : Draw a conclusion.

Since the p−𝑣𝑎𝑙𝑢𝑒 > 0.05 , do not reject the null hypothesis . Conclude that there is no sufficient evidence
to indicate that the average heights of Filipino males is different from 163.
Example 2 : The Mcfarland Insurance Company claims Department reports the mean cost to process a claim
is $𝟔𝟎 . An industry comparison showed that the amount to be larger than most other insurance companies, so
the company instituted cost-cutting measures. To evaluate the effect of the cost-cutting measures, the
Supervisor of the Claims department selected a random sample of 26 claims processed last month. The
sample information is reported below :

$45 $49 $62 $40 $43 $61

$48 $53 $67 $63 $78 $64
$48 $54 $51 $56 $63 $69
$58 $51 $58 $59 $56 $57
$38 $76

At 0.01 significance level is it reasonable to conclude that the mean cost to process a claim is now less than
$60?
Solution :
Number 𝐱 𝐱−𝒙 ഥ (𝐱 − 𝒙ഥ)𝟐
The population mean is known but the variance is not. 1 45 -11.42 130.49
2 48 -8.42 70.95
The sample size is less than 30. Hence, the most 3 48 -8.42 70.95
appropriate test is the t-test for a single mean. The 4 58 1.58 2.49
first thing to do is find the sample mean and the 5 38 -18.42 339.41
6 49 -7.42 55.10
sample standard deviation. 7 53 -3.42 11.72
8 54 -2.42 5.87
9 51 -5.42 29.41
10 76 19.58 383.26
𝑥ҧ = 56.42 11 62 5.58 31.10
12 67 10.58 111.87
13 51 -5.42 29.41
14 58 1.58 2.49
15 40 -16.42 269.72
16 63 6.58 43.26
𝑠 = 10.04 17 56 -0.42 0.18
18 59 2.58 6.64
19 43 -13.42 180.18
20 78 21.58 465.56
21 63 6.58 43.26
22 56 -0.42 0.18
23 61 4.58 20.95
24 64 7.58 57.41
25 69 12.58 158.18
26 57 0.58 0.33
෍ 𝑥 = 1467 ෍(𝑥 − 𝑥)ҧ 2 = 2520.35
A. By critical Value Method

Step 1 : State the null hypothesis (𝐻0 ∶ ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ μ=60
𝐻𝑎 ∶ μ<60
Step 2 : Choose the level of significance : 𝛼 = 0.01
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population standard deviation is unknown and 𝑛 < 30 ,
the appropriate test statistic is the t-test for a single mean.

Computation:

𝑥ҧ − 𝜇
𝑡= 𝑠
𝑛

56.42 − 60
𝑡=
10.04
26

𝑡 = −1.818
Step 4: Determine the critical value.

a. determine the degrees of freedom.

𝑑𝑓 = 𝑛 − 1
= 26 − 1
= 25

b. The alternative hypothesis is directional. Hence, the one-tailed shall be used. Use the table of t-Critical Values..
Locate 25 in the first column headed 𝑑𝑓. Because the test is one -tailed with 𝜶 = 𝟎. 𝟎𝟏 in one tail. The critical value is
− 𝟐. 𝟒𝟖𝟓.

Step 5 : Draw a conclusion.

Because the computed test statistic 𝒕 = −𝟏𝟖𝟏𝟖 lies in the region to the right of the critical value of
− 𝟐. 𝟒𝟖𝟓, the null hypothesis is not rejected at 0.01 significance level. We have not demonstrated that the
cost-cutting measures reduced the mean cost per claim to less than $60 .
B. By 𝒑 −Value Method

Step 1 : State the null hypothesis (𝐻0 ∶ ) and alternative hypothesis (𝐻𝑎 ).
𝐻0 ∶ μ=60
𝐻𝑎 ∶ μ<60
Step 2 : Choose the level of significance : 𝛼 = 0.01
Step 3 : Compute the test statistic.
Since it is the population mean that is being tested and the population standard
deviation is unknown and 𝑛 < 30 , the appropriate test statistic is the t-test for a single
mean.

Computation:
𝑥ҧ − 𝜇
𝑡= 𝑠
𝑛

56.42 − 60
𝑡=
10.04
26

𝒕 = −𝟏. 𝟖𝟏𝟖
Step 4 : Determine the 𝑝 −value.
a. a. determine the degrees of freedom.
𝑑𝑓 = 𝑛 − 1
= 26 − 1
= 25
b. The alternative hypothesis is directional. Hence, the one-tailed shall be used. Use the table of
t-Critical Values . The computed t-value is − 1.818 is between 1.708 and 2.060 under the column
headed 0.05 and 0.025 , respectively. This means that 𝑝 − 𝑣𝑎𝑙𝑢𝑒 is between 0.05 and 0.025 or 0.05 >
𝑝 > 0.025 .

𝟎. 𝟎𝟓 > 𝑝 > 𝟎. 𝟎𝟐𝟓

Step 5 : Draw a conclusion.
Since the p−𝑣𝑎𝑙𝑢𝑒 > 0.01 , do not reject the null hypothesis . We have not demonstrated that the cost-
cutting measures reduced the mean cost per claim to less than $60 .