# SOLUTION: An auditor reviewed 25 oral surgery insurance claims from a particular surgical office, determining that the mean out-of-pocket patient billing above the reimbursed amount was \$27

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 Question 130409: An auditor reviewed 25 oral surgery insurance claims from a particular surgical office, determining that the mean out-of-pocket patient billing above the reimbursed amount was \$275.66 with a standard deviation of \$78.11. (a) At the 5 percent level of significance, does this sample prove a violation of the guideline that the average patient should pay no more than \$250 out-of-pocket? State your hypotheses and decision rule. (b) Is this a close decision?Answer by stanbon(57246)   (Show Source): You can put this solution on YOUR website!An auditor reviewed 25 oral surgery insurance claims from a particular surgical office, determining that the mean out-of-pocket patient billing above the reimbursed amount was \$275.66 with a standard deviation of \$78.11. (a) At the 5 percent level of significance, does this sample prove a violation of the guideline that the average patient should pay no more than \$250 out-of-pocket? State your hypotheses and decision rule. Ho: mu= 250 Ha: mu > 250 Critical value for alpha = 5% and df = 24 is t = 1.711 Test statistic: t(275.66) = (275.66-250)/[78.11/sqrt(25)] = 25.66*5/78.11 = 1.643 Since the test statistic is less than the critical value Fail to reject Ho. ------------------------------- (b) Is this a close decision? The p-value for t= 1.643 is 0.05675... Very close to 5% which is the breakpoint for deciding rejection of Ho. ================= Cheers, Stan H.