Question 134229This question is from textbook Applied Statistics in Business and Economics
: An auditor reviewed 25 oral surgery insurance claims from a particular surgical office, determining that the mean out-of-pocket patient billing above the remibursed amount was $275.66 with a standard deviation of $78.11. (a) At the 5% 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?
Thanks for your help.
Applied Statistics in Business and Economics
David P. Doane, Lori E. Seward
Publisher: Boston : McGraw-Hill/Irwin, c2007.
ISBN: 0072966939 DDC: 519.5 LCC: HF1017 Edition: (student ed.)
This question is from textbook Applied Statistics in Business and Economics
Answer by stanbon(75887)   (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 remibursed amount was $275.66 with a standard deviation of $78.11.
(a) At the 5% 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
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Critical Value for 1-tail t-test with df=24 and alpha=5% = 1.711
Test statistic: t(275.66) = (275.66-250)/[78.11/sqrt(25)]
= 25.66*5/78.11 = 1.6426
p-value = P(1.6425 < t < 10 with df=24) = 0.0568
Conclusion: Fail to reject Ho because p-value is greater than alpha= 5%.
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(b) Is this a close decision?
Yes, because the p-value is very close to alpha = 5%
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Cheers,
Stan H.
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