Question 153288This question is from textbook
: 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?
This question is from textbook
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 reimbursed amount was $275.66 with astandard 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.
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Ho: u = 250
Ha: u > 250
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Critical value for one-tail test with alpha = 5% and df= 24
t = 1.711
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Rule: Reject Ho if test statistic is greater than 1.711.
Test statistic: t(275.66) = (275.66-250)/[78.11/sqrt(25)] = 1.642555..
Conclusion: Fail to reject Ho since test statistic is not in the rejection interval.
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(b) Is this a close decision?
p-value = P(1.711 < t < 100; with df=24) = 0.49989
Comment: Since p-value is so close to 5% this is a close decision.
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Cheers,
Stan H.
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