Homework Assignment-7

POM 500 Statistical Analysis

Note: Attempt all questions as per rubric. Problems including case study has a
weightage of 10 marks each. The maximum you can score is 50. Use Excel function
wherever possible.

Problem-1
According to the Hospital Care cost Institute, the annual expenditure for prescription
drugs is $838 per person in the Northeast region of the country. A sample of 60
individuals in the Midwest shows a per person annual expenditure for prescription
drugs of $745. Use a population standard deviation of $300 to answer the following
questions.
a) Formulate hypotheses for a test to determine whether the sample data support the
conclusion that the population annual expenditure for prescription drugs per person
is lower in the Midwest than in the Northeast.
b) What is the value of the test statistic?
c) What is the p-value?
d) At = 0.01, what is your conclusion?
. Formulate hypotheses for a test
The null hypothesis (H0) and the alternative hypothesis (H1) can be formulated as
follows:
 Null Hypothesis (H0): The population mean annual expenditure for prescription
drugs per person in the Midwest is equal to or greater than that in the Northeast.
In mathematical terms, H0: μ >= $838.
 Alternative Hypothesis (H1): The population mean annual expenditure for
prescription drugs per person in the Midwest is less than that in the Northeast. In
mathematical terms, H1: μ < $838.
2. Value of the test statistic
The test statistic can be calculated using the formula for a one-sample z-test:
z = (X̄ - μ) / (σ / √n)
Where:
 X̄ is the sample mean ($745)
 μ is the population mean ($838)
 σ is the population standard deviation ($300)

1
  n is the sample size (60)
Substituting the given values into the formula, we get:
z = ($745 - $838) / ($300 / √60) ≈ -3.16
So, the value of the test statistic is approximately -3.16.
3. P-value
The p-value is the probability of observing a test statistic as extreme as the one
calculated, assuming the null hypothesis is true. For a z-score of -3.16, the p-value can
be found using a standard normal distribution table or a statistical software. The exact p-
value is less than 0.01.
4. Conclusion at α = 0.01
At a significance level of α = 0.01, if the p-value is less than α, we reject the null
hypothesis. Since our calculated p-value is less than 0.01, we reject the null hypothesis
and conclude that the data provides sufficient evidence to support the claim that the
population annual expenditure for prescription drugs per person is lower in the Midwest
than in the Northeast.

e) Problem-2
The United States ranks ninth in the world in per capita chocolate consumption; Forbes
reports that the average American eats 9.5 pounds of chocolate annually. Suppose you
are curious whether chocolate consumption is higher in Hershey, Pennsylvania, the
location of the Hershey Company’s corporate headquarters. A sample of 36 individuals
from the Hershey area showed a sample mean annual consumption of 10.05 pounds
and a standard deviation of s= 1.5 pounds. Using  =.05, do the sample results
support the conclusion that mean annual consumption of chocolate is higher in
Hershey than it is throughout the United States?

To answer your question, we need to conduct a one-sample t-test. This test is used to
determine whether a sample mean significantly differs from a known or hypothesized
population mean.

Here are the steps:

Step 1: State the Hypotheses

The first step in hypothesis testing is to set a null hypothesis and an alternative
hypothesis.

 Null hypothesis (H0): μ = 9.5 (Mean chocolate consumption in Hershey is the

same as the national average)

2
  Alternative hypothesis (H1): μ > 9.5 (Mean chocolate consumption in Hershey is
greater than the national average)

Step 2: Calculate the Test Statistic

The test statistic for a one-sample t-test is calculated as follows:

t = (X̄ - μ) / (s / √n)

Where:

 X̄ is the sample mean

 μ is the hypothesized population mean

 s is the sample standard deviation

 n is the sample size

Substituting the given values:

t = (10.05 - 9.5) / (1.5 / √36) = 2.2

Step 3: Determine the Critical Value

The critical value for a one-tailed t-test with 35 degrees of freedom (n-1) and α = 0.05
can be found in a t-distribution table or calculated using statistical software. The critical
value is approximately 1.689.

Step 4: Make the Decision

If the absolute value of the test statistic is greater than the critical value, we reject the
null hypothesis.

In this case, 2.2 > 1.689, so we reject the null hypothesis.

Conclusion

The sample results support the conclusion that the mean annual consumption of
chocolate is higher in Hershey, Pennsylvania than it is throughout the United States.

Problem-3

Last year, a soft drink manufacturer had 21% of the market. In order to increase their
To answer your question, we need to conduct a one-sample t-test. This test is used to
determine whether a sample mean significantly differs from a known or hypothesized
population mean.

3
 1.
Set up the null and the alternative hypotheses.

1. Determine the test statistic.

1. Determine the p-value.

1. Using α = .05, test to determine if more than 21% of the population will like the
new soft drink.

Case Study: Quality Associates, Inc.

Quality Associates, Inc. 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 0.21; hence,
with so much data, the population standard deviation was assumed to be 0.21. 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.

Managerial Report

1. Conduct a hypothesis test for each sample at the 0.01 level of significance and
determine what action, if any, should be taken. Provide the test statistic and p-value for
each test.

4
2. Compute the standard deviation for each of the four samples. Does the
assumption of 0.21 for the population standard deviation appear reasonable?
3. Compute limits for the sample mean x̄ around μ=12 such that, as long as a new
sample mean is within those limits, the process will be considered to be operating
satisfactorily. If x̄ exceeds the upper limit or if x̄ is below the lower limit, corrective action
will be taken. These limits are referred to as upper and lower control limits for quality
control purposes.

4. Discuss the implications of changing the level of significance to a larger value.

What mistake or error could increase if the level of significance is increased? Data set
Quality
Sample 1 Sample 2 Sample 3 Sample 4
11.55 11.62 11.91 12.02
11.62 11.69 11.36 12.02
11.52 11.59 11.75 12.05
11.75 11.82 11.95 12.18
11.90 11.97 12.14 12.11
11.64 11.71 11.72 12.07
11.80 11.87 11.61 12.05
12.03 12.10 11.85 11.64
11.94 12.01 12.16 12.39
11.92 11.99 11.91 11.65
12.13 12.20 12.12 12.11
12.09 12.16 11.61 11.90
11.93 12.00 12.21 12.22
12.21 12.28 11.56 11.88
12.32 12.39 11.95 12.03
11.93 12.00 12.01 12.35
11.85 11.92 12.06 12.09
11.76 11.83 11.76 11.77
12.16 12.23 11.82 12.20
11.77 11.84 12.12 11.79
12.00 12.07 11.60 12.30
12.04 12.11 11.95 12.27
11.98 12.05 11.96 12.29
12.30 12.37 12.22 12.47
12.18 12.25 11.75 12.03
11.97 12.04 11.96 12.17
12.17 12.24 11.95 11.94

5
 11.85 11.92 11.89 11.97
12.30 12.37 11.88 12.23
12.15 12.22 11.93 12.25

The interval for population mean is (11.8764 ,12.0410)

b. Sample 2:
´x−t
11.9464<μ<12.1110
The interval for population mean is (11.9464,12.1110)
c. Sample 3:
´x−t
11.8116<μ<11.9664
The interval for population mean is (11.8116,11.9664)
d. Sample 4:
´x−t
12.0043<μ<12.1583
The interval for population mean is (12.0043,12.1583)
4. Discuss the implications of changing the level of significance to a larger value. What
mistake or
error could increase if the level of significance is increased?
We can see that, the margin of error will increase and the width of confidence interval
will
decrease with the increase in level of significance.

7 feedback

eedback to Learner12/11/24 11:15 PM

1a) H0: μ ≥ 838

Ha: μ < 838 (Research hypothesis)

b) Test statistic z =(745-838)/(300/√60) = - 2.4

c) p-value = NORM.S.DIST(-2.4,TRUE) = 0.0082

d) p-value α = 0.01; reject H0.

Conclude that the annual expenditure per person on prescription drugs is less in the
Midwest than in the Northeast

6
2)H0: μ ≤ 9.5

Ha : μ > 9.5 (Research hypothesis)

3) Not Attempted

4) Not Attempted

Case Study: Quality Associates, Inc. - Incomplete

a) The hypothesis testing results are shown below:

Sample 1

Sample 2

Sample 3

Sample 4

Sample Size

=COUNT(B2:B31)

30

30

30

30

Mean

=AVERAGE(B2:B31)

11.959

7
12.029

11.889

12.081

Standard Deviation

=STDEV.S(B2:B31)

0.220

0.220

0.207

0.206

Level of Significance (alpha)

0.01

0.01

0.01

0.01

Critical Value (lower tail)

=NORM.S.INV(0.005)

–2.576

–2.576

–2.576

–2.576

8
Critical Value (upper tail)

=NORM.S.INV(0.995)

2.576

2.576

2.576

2.576

Hypothesized value

12

12

12

12

12

Standard Error

=B34/SQRT(B32)

0.040

9
0.040

0.038

0.038

Test Statistic

=(B33-B40)/B41

–1.027

0.713

–2.935

2.161

p-value

2*(1-NORM.S.DIST(ABS(B42),TRUE))

0.304

0.476

0.003

0.031

Only sample 3 leads to the rejection of the hypothesis H0: µ = 12. Thus, corrective
action is warranted for sample 3. The other samples indicate H0 cannot be rejected and
thus from all we can tell, the process is operating satisfactorily. Sample 3 with sample
mean = 11.89 shows the process is operating below the desired mean. Sample 4 with
sample mean = 12.08 is on the high side, but the p-value of 0.03 is not sufficient to
reject H0.

b) The sample standard deviations for all four samples are in the 0.20 to 0.22 range. It
appears that the process population standard deviation assumption of 0.21 is good.

10
c) α = 0.01, z.005 = 2.58. Using the standard error of the mean = 0.038, the upper and
lower control limits are computed as follows:

Upper Control Limit = 12 + 2.58 (0.038) = 12.1

Lower Control Limit = 12 – 2.58 (0.038) = 11.9

As long as a sample means is between these two limits, the process is in control and no
corrective action is required. Note that sample 3 with a mean of 11.89 shows corrective
action is necessary because the sample mean is outside the control limits.

d) Increasing the level of significance will cause the null hypothesis to be rejected more
often. While this may mean quicker corrective action when the process is out of control,
it also means that there will be a higher error probability of stopping the process and
attempting corrective action when the process is operating satisfactorily. This would be
an increase in the probability of making a Type I error.

You are required to show the Excel function in an Excel sheet for all the questions as
per the rubric. In the absence of the Excel functions, I am unable to give you complete
feedback and you lose 15% points due to the non submission of Excel functions even
after feedback. Next time you will lose a 25% grade.

Late Submission (-4), next time you will lose grade as per the syllabus.

8 feedba

11