Question 180315: 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(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 a standard deviation of $78.11.
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(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: u = 250
Ha: u > 250
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Critical Value: z = 1.645
Rule: Reject Ho if test statistic is > 1.645
Test statistic: z(275.66) = (275.66-250)/[78.11/Sqrt(25)] = 1.6436
P-value = 0.05023..
Conclusion: Fail to reject Ho since p-value is greater than 5%, or
because test statistic is < 1.645.
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(b) Is this a close decision?
Yes, very close. More testing would be advisable.
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Cheers,
Stan H.
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