Procedure for Hypothesis Testing

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Quantitative Techniques
Lab 5 (Topic 3: Hypothesis Testing)

Procedure for Hypothesis Testing

Step 1: Formulate the null and alternative hypothesis. Draw the one-tail or two- tail test diagram.

Step 2: Specify the level of significance. Determine the critical value (s).

Step 3: Identify the test statistics to be used and calculate it.

Step 4: Draw the conclusion.

Formulae List
Hypothesis Testing

Test Statistics for Single Mean| | Test Statistics for Two Means| known| | 1 and 2 known|
z* = x-μ0σn| | z* = x1-x2-δ0σ12n1+σ22n2|
unknown and n > 30| | 1, 2 unknown and n1 n2 2 30|
z* = x-μ0sn| | z* = x1-x2-δ0s12n1+s22n2|
unknown and n < 30| | 1, 2 unknown and n1 n2 2 < 30|
t* = x-μ0σn df = n 1| | t* = x1-x2-δ0s12n1+s22n2 df = n1 + n2 2|

Test Statistics for Single Proportion| | Test Statistics for Two Proportions| z* = Ps-P0P01-P0n| | z* = Ps1-Ps2-δ0Ps11-Ps1n1+Ps21-Ps2n2|

Using Excel

Z-score: Use =NORM.S.INV() function.

t-statistics: Use =TINV() function.

Use the above steps and formulae; solve the following questions using Excel and write down the solution on MS Word.

Question 1

The Safe Appliance Store issues its own credit card. The credit manager wants to find whether the mean monthly unpaid balance is more than $400. The level of significance is set at 0.05. A random check of 172 unpaid balances revealed the sample mean is $407 and the standard deviation of the sample is $38.

Should the credit manager conclude that the population mean is greater than $400?

Question 2

A machine is set to fill a specially designed bottle with 9.0 grams of vitamins. It is claimed that the mean is less than 9.0 grams. The hypothesis is to be tested at the 0.01 level.

A sample revealed these weights (in...
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