Question 141594: An auditor reviewed 25 oral surgery insurance claims from a particular surgical office, determining that the mean out-of-pocket patient biling 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 hypothesis and decision rule. (b) Is this a close decision?
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 biling 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 hypothesis and decision rule.
Ho: u <= 250
Ha: u > 250
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test statistic: t(275.66) = (275.66-250)/[78.11/sqrt(45)] = 1.64256...
p-value: P(1.64256 < t < 10, with df=24) = 0.05676
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Conclusion: Since p-value is greater than 5%, fail to reject Ho.
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(b) Is this a close decision?
Yes, it is a rather close decision.
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Cheers,
Stan H.
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