Staff

QAM – II
Problem Set – 1
(Instructor: Gaurav Garg)

1) According to the U.S. department of Labour, private sector workers earned, on

average, $354.32 a week in 1991. A recently taken random sample of 400 private
sector workers showed that they earn, on average $362.50 a week with a standard
deviation of $72. Find the p-value for the test with an alternative hypothesis that
the current mean weekly salary of private sector workers is different from
$354.32. Give your conclusion at 5% level of significance.

Solution:
To test H0: µ = 354.32 against H1: µ ≠ 354.32
𝑥̅ −𝜇 362.50−354.32
Test Statistic: 𝑍𝑐 = 𝑠 /√𝑛 = =2.27.
1 72/√400
p-value = 2 P(Z>2.27) = 0.023208 < 0.05, therefore at 5% level of significance
we reject null hypothesis in favor of alternative hypothesis and conclude that
the current mean weekly salary of private sector workers is different from
$354.32.

2) The lottery commissioner's office in a state wanted to find if the percentage of men
and women who play the lottery often are different. A sample of 500 men showed
that 165 of them play the lottery often. Another sample of 300 women showed
that 69 of them play the lottery often. Construct a 99% confidence interval for the
difference between the proportions of all men and women who play the lottery
often.
Solution:
Sample of man:
Size: nm = 500, proportion pm = 165/500
Sample of woman:
Size: nw = 300, proportion pw = 69/300
Population proportion of man playing lottery Pm and population proportion of
woman playing lottery Pw are unknown.
𝜋 (1−𝜋 ) 𝜋 (1−𝜋 )
We know that 𝑝𝑚 ~𝑁(𝜋𝑚 , √( 𝑚 𝑛 𝑚 ) and 𝑝𝑤 ~𝑁(𝜋𝑤 , √( 𝑤 𝑛 𝑤 ) for large
𝑚 𝑤
sample sizes. As the two samples are independent, we have
𝜋 (1−𝜋 ) 𝜋 (1−𝜋 )
(𝑝𝑚 − 𝑝𝑤 )~𝑁(𝜋𝑚 − 𝜋𝑤 , √( 𝑚 𝑛 𝑚 + 𝑤 𝑛 𝑤 ).
𝑚 𝑤
Using above result, and unbiased estimates of 𝝅m and 𝝅w, given by pm and pw,
respectively, 99% confidence interval estimate of 𝝅m - 𝝅w is
𝑝 𝑞𝑚 𝑝𝑤 𝑞𝑤
(𝑝𝑚 − 𝑝𝑤 ) ∓ 𝑧0.005 √( 𝑚 + ) or (0.01710, 0.18290)
𝑛 𝑚 𝑛 𝑤

3) According to McKinsey Global Institute, the mean annual output per worker is
$49,600 in the United States. Assume that the mean output for all workers in the
United States is $49,600 and its standard deviation is $7000. Let a and b be the
 sample means of two independent samples of 900 and 700 workers from United
States. Find the mean and standard deviation of the sampling distributions of a, b
and a - b.
Solution:
E(a) = 49,600, E(b) = 49,600, E(a - b) = 0.
Std(a) = 7000/√900, std(b) = 7000/√700,
std (a – b) = 7000 * √[(1/900) + (1/700)]

4) A telephone company plans to ascertain the conditions of telephone poles in the

region it services and the cost of their repair. There are altogether 10000 poles, a
list of which is maintained by the company. From this list in a pilot survey, a simple
random sample of 100 poles was selected without replacement. Crews were sent
out to examine the conditions of the poles selected, and to calculate the cost of
needed repairs. The results of the inspection were as follows: sample average
repair cost = Rs. 830; sample standard deviation of repair cost = Rs. 110. How
many poles must be sampled if the estimate of the total cost of repairing all
telephone poles is to be within Rs. 100000 of the true total cost with probability
90%?
Solution:
Population Size = Total number of poles = N = 10,000
Error of Estimation = |Estimate of Population Total – True Population
Total|
= |N x Population Mean – N x Sample Mean|
= N x |Population Mean – Sample Mean|
From the question,
N x |Population Mean – Sample Mean| = 100,000
Or 10,000 x |Population Mean – Sample Mean| = 100,000
Or |Population Mean – Sample Mean| = 10
 z 
2

Required Sample Size n is given by n    /2  ,

where  e 
e = |Population Mean – Sample Mean| = 10
σ = population standard deviation. Since σ is unknown, we use its estimate
given by pilot survey which is 110.
zα/2 = Two sided critical value of N(0,1) distribution for 0.10 as significance
level = 1.645
Using the above formula, we get n = 327.429025 or 328 poles approximately.

5) Municipal board of a city wants to get the 15,000 faulty street lights of the city
repaired. In order to get the work done by a private contractor, it wishes to
estimate the total expenditure. A pilot sample of 100 lights was collected which
yielded an average repair cost of Rs. 1250 with a standard deviation of Rs. 250.
What should be the appropriate sample size to obtain a reasonably good estimate
of total expenditure within Rs. 250,000 of the true total cost with probability 90%?
Solution:
Population Size = Total number of poles = N = 15,000
 Error of Estimation
=|Estimate of Population Total – True Population Total|
= |N x Population Mean – N x Sample Mean|
= N x |Population Mean – Sample Mean|

250,000 = N x |Population Mean – Sample Mean|

250,000 = 15,000 x |Population Mean – Sample Mean|
Or
|Population Mean – Sample Mean| = 16.6667
 z 
2

Required Sample Size n is given by n    / 2  ,

where  e 
e = |Population Mean – Sample Mean| = 16.6667
σ = population standard deviation. Since σ is unknown, we use its estimate given
by pilot survey which is 250.

zα/2 = Two sided critical value of N(0,1) distribution for 0.10 as significance level
= 1.645
Using the above formula, we get n = 609 poles approximately.

6) A quality characteristic of interest for tea-bag-filling process is the weight of the

tea in the individual bags. If the bags are under filled, two problems arise. First,
customers may not be able to brew the tea to be as strong as they wish. Second,
the company may be in violation of the truth-in-labelling laws. For this product,
the label weight on the package indicates that, on an average, there are 5.5 grams
of tea in a bag. If the mean amount of tea in a bag exceeds the label weight, the
company is giving away product. Getting an exact amount of tea in a bag is
problematic because of variation in the temperature and humidity inside the
factory, differences in the density of the tea, and extremely fast filling operation of
the machine (approximately 170 bags per minute). The data given below provide
the weight, in grams, of a sample of 50 tea bags produced in one hour by a single
machine:
5.65 5.44 5.42 5.40 5.53 5.34 5.54 5.45 5.52 5.41
5.57 5.40 5.53 5.54 5.55 5.62 5.56 5.46 5.44 5.51
5.47 5.40 5.47 5.61 5.53 5.32 5.67 5.29 5.49 5.55
5.77 5.57 5.42 5.58 5.58 5.50 5.32 5.50 5.53 5.58
5.61 5.45 5.44 5.25 5.56 5.63 5.50 5.57 5.67 5.36
From this sample data, the management of the company is interested to ascertain
that mean weight of a tea bag is 5.5 grams. What decision rule should the analyst
adopt if the company is willing to take 1% risk of committing an error by
concluding that mean weight of a tea bag is different from 5.5 grams whereas
actually it is 5.5 grams?
Solution:
To test: H0: μ = 5.5 Against H1: μ ≠ 5.5
From the given data we obtain,
sample size = 50, sample mean = 5.5014, sample standard deviation =
0.10583
 Population variance is unknown. Since the sample size is large enough, we can
use sample standard deviation in place of population standard deviation and
still use Z-test (test based on N(0,1) distribution) for testing difference of means.
x
Test Statistic: Zc   0.09354
 n
Critical Value from N(0,1) for a two sided test and 1% significance level =
2.575
Decision Rule: We can use sample standard deviation (= 0.10583) as population
standard deviation. For any sample, we reject the above mentioned null
hypothesis when

sample mean  5.5

 2.575
0.10583 sample size

Otherwise, we accept null hypothesis at 1% significance level.

For the given sample, sample mean  5.5
 0.09354  2.575
0.10583 sample size
So, we accept null hypothesis at 1% significance level and conclude that mean
weight of a tea bag is not different from 5.5 grams.

7) The Consumer Fraud Council claims that Skippy Foods does not put the required
weight of peanut butter in its 100 grams jar. In order to prove the claim the Council
studied a sample of 25 jars and found the average amount of peanut butter as 98
grams with a standard deviation of 4 grams. Using the sample, can the Council
prove their claim? Explain using the concept of Statistical Hypothesis. Skippy
Foods requests the Council to take a bigger sample and provides 25 more jars of
100 grams peanut butter. Now the average amount of bigger sample is 99.5 grams
with a standard deviation of 8 grams. Using this bigger sample, can the Council
prove their claim? Explain the change in the conclusions suggested by two
samples.
Solution:
To Test: H0: μ ≥ 100 Vs. H1: μ < 100

Sample Size = 25, sample mean = 98, sample standard deviation = 4

Assumption Required: Amount in Jars follows normal distribution

𝑥̅ −𝜇 98−100
Test Statistic: 𝑇𝑐 = 𝑠1 = 4 = -2.5
√𝑛 √25

Critical Value for left tail test using t distribution with 24 degree of freedom at
5% level of significance is –1.7109, which is higher than the computed
test statistic. Therefore at 5% level of significance null hypothesis is rejected
and the claim of the Consumer Fraud Council is proved.

Using the bigger sample:

Sample Size = 50, sample mean = 99.5, sample standard deviation = 8
 Assumption Required: None (as the sample size is large)
𝑥̅ −𝜇 99.5−100
Test Statistic: 𝑍𝑐 = 𝑠1 = 8 = -0.44194
√𝑛 √50
Critical Value for left tail test using N(0,1) distribution at 5% level of
significance is –1.96, lower than the computed test statistic. Therefore, at 5%
level of significance we do not have enough evidence to reject the null
hypothesis and the claim of the Consumer Fraud Council is not proved.

Additional 25 jars provided by the Skippy Foods have more amount of peanut
butter and may not be representing the population fairly as the variability is also
increased.

8) ATMs must be stocked with enough cash to satisfy customers making withdrawals
over an entire weekend. But if too much cash is unnecessarily kept in the ATMs,
the bank is forgoing the opportunity to invest the money and earning interest. At
a particular ATM in a colony, the average cash withdrawal per customer over last
5 years during weekends is Rs. 1000 with a standard deviation of Rs. 1900. In
order to decide if there is any requirement to increase the cash stocked in the ATM,
a sample of 130 customers is collected. Sample observations are summarized
below:
Cash Withdrawal (Rs.) No. of Customers
0 – 500 5
500 – 1000 11
1000 – 1500 12
1500 – 2000 15
2000 – 3000 30
3000 – 4000 25
4000 – 5000 20
5000 – 10000 12
Sample Mean = 3025, Sample Standard Deviation= 1872.
Since standard deviation of above sample is very close to the standard deviation
of the past 5 years’ population, it seems that the difference is because of sampling
fluctuation only. So, we consider that population variance is still the same. Looking
at the value of sample mean, it seems that average withdrawal has become
threefold. Using the concept of hypothesis testing, examine this claim. Sample is
large enough to assume normality of the observations. Use 5% level of
significance.
Solution:
Given that σ = 1900. 𝑥̅ =3025, n = 130
To test H0: μ = 3000 Against H1: μ ≠ 3000
𝑥̅ −𝜇 3025−3000
Test Statistic 𝑍𝑐 = 𝜎/ 𝑛 ~𝑁(0,1) = 1900/√130 = 0.1500
√
At 5% level of significance, for two sided test, using N(0,1) distribution, critical
values are +1.96 and -1.96. Computed test statistic lies in the acceptance region
so we cannot reject the null hypothesis at 5% level of significance.
 9) Blue Ray Disk Players are getting popular. Tony Inc., a well-known manufacturer
of Blue Ray Disk Players, claims that at least 5% upper middle class households in
the metro cities of India have a Blue Ray Disk Player. Audiocon Ltd., a
manufacturer of DVD players, not manufacturing Blue Ray Disk Players, claims
that DVD players are still very popular and there is no significant market for Blue
Ray Disk Players. In order to disprove the claim of Tony Inc, officials at Audiocon
Ltd. collected a sample of 120 upper middle class households and found that only
5 households in the sample have Blue Ray Disk Players. Using the sample and
Prob{reject the claim of Tony Inc. given that it is true} = 0.05, can the officials of
Audiocon Ltd. prove the claim of Tony Inc. as wrong? Help them using the concept
of p – value.
Solution:
To Test: H0: 𝝅 ≥ 0.05 Vs. H1: 𝝅 < 0.05
Sample Size: n = 120,
sample proportion: p = 5/120 = 0.041667
Assumption Required: large sample (satisfied)
𝑝−𝜋 0.041667−0.05
Test Statistic: 𝑍𝑐 = = = -0.41885 =-0.42
√𝜋(1−𝜋)/𝑛 √0.05×0.95/120
For left tailed test, p – value = P(Z < Zc) = P(Z < -0.42)
= P(Z > 0.42) = 1 – P( ≤ 0.42) = 1 – 0.66276 = 0.33724
p-value is much higher than given level of significance 0.05. So, at 5% level of
significance, we cannot reject null hypothesis and conclude that officials at
Audiocon Ltd. are not successful in disproving the claim of Tony Inc.

10)One of the few negative effects of quitting smoking is weight gain. Suppose that the
weight gain in the 12 months following a cessation in smoking is normally
distributed with a standard deviation of 6 pounds. To estimate the mean weight
gain a random sample of 13 quitters was taken and their gain in weights (in pounds)
are listed here:
16 23 8 2 14 22 18 11 10 19 5
8 15
Determine the 90% confidence interval estimate of the mean 12-months weight
gain for all quitters.

Solution:
Sample Size = 13,
sample mean = 13.1538
Population Standard Deviation = 6
𝑠1
90% Confidence Interval for population mean is given by 𝑥̅ ∓ 𝑍(0.05)
√𝑛
Z(0.05) = 1.645
6
Thus, required Confidence Interval is 13.1538 ∓ 1.645
√13
Or (10.4164, 15.8912).
11)In the last election a state representative received 52% of the votes cast. One year
after the election the representative organized a survey that asked a random
sample of 300 people whether they would vote for him in the next election. If we
assume that his popularity has not changed, what is the probability that more than
half of the sample would vote for him?
Solution:
Given that, 𝝅 = 0.5, Q = 1 – 𝝅 = 0.48, n = 300
𝑝−𝑃
For large n, ~𝑁(0,1)
√𝑃𝑄⁄𝑛
Required Probability is

𝑝−𝜋 0.5−0.52
Prob ( p > 0.5) = Prob( > )
√𝜋(1−𝜋)/𝑛 √0.52×0.48⁄300
= Prob ( Z > - 0.69338)
= Prob (Z < 0.69 ) approximately
= 0.75490

12)A soft drink manufacturer is to decide about launching a new variety of soft drink.
On the basis of his past experience, he believed that at least 80% of the customers
would like the new product. In order to decide about the launching of the new
product, the manufacturer collects the opinion of 400 customers selected by
means of random sampling scheme. He further frames the decision rule of
rejecting the hypothesis of 𝝅 ≥ 0.8 in favor of the alternative 𝝅 < 0.8 if 308 or less
customers favor the new product. Thus, the new product would not be launched
if on the basis of sample it is concluded that 𝝅 < 0.8. Calculate the probability of
concluding that less than 80% of the customers would like the new product when
actually 80% of the customers like the new product. Also, calculate the probability
of concluding that at least 80% of the customers would like the new product when
actually 70% of the customers like the new product.

Solution:
H0: 𝝅 ≥ 0.8 Against H1: 𝝅 < 0.8 Sample size n = 400,
Decision Rule: Reject H0 when Sample proportion p < 308/400 = 0.77

Required Probability = Prob (Reject H0 | 𝝅 = 0.8) = Prob (p < 0.77 | 𝝅 = 0.8)

𝑝−𝜋 0.77−𝜋 0.77−0.8
= Prob ( < |𝜋 = 0.8) = Prob (𝑍 < ) =Prob (Z <
√𝜋(1−𝜋)/𝑛 √𝜋(1−𝜋)/𝑛 √0.8×0.2/400
– 1.5)
= Prob (Z > 1.5) = 0.06681.

Required Probability = Prob (Accept H0 | 𝝅 = 0.7) = Prob (p ≥ 0.77 | 𝝅 = 0.7)

𝑝−𝜋 0.77−𝜋 0.77−0.7
= Prob ( < |𝜋 = 0.7) = Prob (𝑍 ≥ ) =Prob (Z ≥
√𝜋(1−𝜋)/𝑛 √𝜋(1−𝜋)/𝑛 √0.7×0.3/400
3.06)
= 0.00111.

13)A market research group wishes to estimate the average number of customers
visiting a supermarket per day in the month of December 2011. The group wants
 that its estimated value to be within 5% of the actual value with a probability of
0.95. The earlier studies indicated that the coefficient of variation of the number
of customers visiting the supermarket in the given month was 24%. The cost of
collection of data is Rs. 125/- per day. Without ignoring finite population
correction, calculate the cost involved in estimating the required value. If the
research group decides to settle for an estimate with a probability of 0.90, how
much reduction in cost can be achieved?
Solution:
e = 0.05μ, N = 31, α = 0.05, σ/ μ = 0.24

(1 - α)100% Confidence Interval Estimate for unknown population mean μ is

𝜎
given by (T-h, T+h), where T = sample mean 𝑥̅ and ℎ = 𝑧𝛼/2 × 𝑛. When
√
population size is small, we use fpc. In such a case
𝜎 𝑁−𝑛
𝑒 = ℎ = 𝑧𝛼/2 × ×√
√𝑛 𝑁−1
𝜎2 𝑁
or ℎ2 = 𝑧𝛼/2 2 × (𝑁−1) × ( 𝑛 − 1)
or
𝑁 𝑁 𝑁
𝑛= = =
(𝑁 − 1)ℎ2 (𝑁 − 1)(0.05𝜇)2 (𝑁 − 1)(0.05)2
2 2 +1 2 2 +1 +1
𝑧𝛼/2 𝜎 𝑧𝛼/2 𝜎 𝑧𝛼/2 2 (𝜎/𝜇)2
or
31
𝑛= = 23.15 ≈ 24 days
(31 − 1)(0.05)2
+1
(1.96)2 (0.24)2

Cost = 24 × Rs. 125 = Rs. 3000/-

When α = 0.10, 𝑧𝛼/2 = 1.65.

31
𝑛= = 20.97 ≈ 21 days
(31 − 1)(0.05)2
+ 1
(1.65)2 (0.24)2

Cost = 21 × Rs. 125 = Rs. 2625/-

Reduction in Cost = 3000 – 2625 = 375/-

14)A pharmaceutical manufacturer is concerned that the impurity concentration in

pills on an average does not exceed 3%. It is known from a particular run that
impurity concentration follow normal distribution with standard deviation of
0.4%. A random sample of 64 pills from a production run was checked and the
sample mean impurity was found to be 3.07%. Help the manufacturer in testing
the appropriate hypotheses using p-value approach. Obtain power of a 5%
level test when true mean impurity concentration is actually 3.10%.
Solution:
n = 64, σ = 0.4%, 𝑥̅ = 3.07%
 H0: μ ≤ 3 Against H1: μ > 3
𝑥̅ − 𝜇 3.07 − 3
𝑍𝑐 =
𝜎 = 0.4/8 = 1.4.
√𝑛
𝑝 − value = 𝑃(𝑍 > 1.4) = 0.08076.
At 5% level of significance, we can not reject null hypothesis, while at 10% level
of significance, we reject the null hypothesis. Thus at 10% level of significance,
we conclude that impurity concentration in pills on an average exceeds 3%.

At 5% level of significance, null hypothesis accepted (can not be rejected) when

𝑥̅ − 𝜇 𝑥̅ − 3
𝑍𝑐 = 𝜎 < 𝑧0.05 or when < 1.65 or when 𝑥̅ < 3.0825.
0.4
√𝑛 √64
β = 𝑃(Accept 𝐻0 |𝐻0 is false) = 𝑃(𝑥̅ < 3.0825|𝜇 = 3.1)
𝑥̅ −𝜇 3.0825−3.1
= 𝑃( 𝜎 < 0.4 ) = 𝑃(𝑍 < −0.35) = 𝑃(𝑍 > 0.35) = 0.36317.
√𝑛 8

Power of the test = 1 – 0.36317 = 0.63623.

15)Some quality control experiments require destructive sampling. The test to

determine whether the item is defective destroys the item. The cost of destructive
sampling often dictates small samples. For example, suppose a manufacturer of
printers for personal computers wishes to estimate the mean number of
characters printed before the print-head fails. Suppose the printer manufacturer
tests n = 15 randomly selected print-heads and records the number of characters
printed until failure for each. These 15 measurements (in millions of characters)
are listed below followed by EXCEL summary statistics:

Mean 1.2387
Standard Error 0.0499
Median 1.25
Mode #N/A
Standard Deviation 0.1932
Sample Variance 0.0373
Kurtosis 0.0636
Skewness -0.4913
Range 0.7
Minimum 0.85
Maximum 1.55
Sum 18.58
Count 15

Making the appropriate assumptions, form a 99% confidence interval for the
mean number of characters printed before the print-head fails. If population
standard deviation is known as 0.2, form a 99% confidence interval for the mean
 number of characters printed before the print-head fails. Compare the width of
the two confidence intervals.
Solution:
𝑠
n = 15, 𝑥̅ = 1.2387, s1 = 0.1932, √𝑛1 = 0.0499.
Assume that sample has been drawn from normal population. 99% CI Estimate
of unknown population mean μ is given by
𝑠1
(𝑥̅ − 𝑡0.005,𝑑𝑓=14 × , 𝑥̅ + 𝑡0.005,𝑑𝑓=14× 𝑠1 )
√𝑛 √𝑛
or (1.2387 − 2.9768 × 0.0499 , 1.2387 + 2.9768 × 0.0499)
or (1.2387 – 0.1485, 1.2387 + 0.1485)
or (1.0902, 1.3872).

When σ =0.2, 99% CI Estimate of unknown population mean μ is given by

𝜎 𝜎
(𝑥̅ − 𝑧0.005 × , 𝑥̅ + 𝑧0.005 × )
√𝑛 √𝑛
or (1.2387 − 2.58 × 0.2/√(15), 1.2387 + 2.58 × 0.2/√(15))
or (1.2387 – 0.1332, 1.2387 + 0.1332)
or (1.1055, 1.3719).

For fixed confidence coefficient, the width of the confidence interval is higher in
case when we do not know σ and use sample standard deviation s1 in its place.
In such a case we use t distribution in place of N(0,1) distribution to obtain
critical values. The width is higher because t distribution has larger spread or
variability.

16)A company services home air conditioners. It has been found that times for service
calls follow a normal distribution with mean 60 minutes and standard deviation
10 minutes. A random sample of 4 service calls was taken. What is the probability
that the sample mean service time is more than 65 minutes? What is the
probability that more than two calls in the sample take more than 65 minutes?
Solution:
Time for service call X ~ N(60, 10), n = 4.
10
Sample mean 𝑥̅ ~𝑁 (60, ) or 𝑁(60, 5).
√4
𝑥̅ −60 65−60
𝑃(𝑥̅ > 65) = 𝑃 ( > ) = 𝑃(𝑍 > 1) = 0.15866.
5 5

Y =Number of service calls taking more than 65 minutes in the sample of 4.

𝑋−60 65−60
Y~ Bin (4, p), where 𝑝 = 𝑃(𝑋 > 65) = 𝑃 ( 10 > 10 ) = 𝑃(𝑍 > 0.5) = 0.31.
Required Probability 𝑃(𝑌 > 2) = 𝑃(𝑌 = 3) + 𝑃(𝑌 = 4) = 𝐶34 (0.31)3 (0.69)1 +
𝐶44 (0.31)4 (0.69)1 = 0.09146.

17)Suppose 40% Lucknowites have enjoyed Tunde’s Kebab at least once. If a random
sample of size 300 is drawn from the population, what is the probability that 44%
or fewer in the sample have enjoyed Tunde’s Kebab at least once?
 Ans: 0.9207

18)A carload of steel rods has arrived at Cybermatic Construction Company. The car
contains 50,000 rods. Claude Ong, manager of Quality Assurance, directs his crew
measure the lengths of 100 randomly selected rods. If the population of rods has
a mean length of 120 inches and a standard deviation of 0.05 inch, what is the
probability that Claude's sample has a mean between 119.985 and 120.0125
inches?
Ans: 0.9925
19)Albert Abbasi, VP of Operations at Ingleside International Bank, is evaluating the
service level provided to walk‐in customers. Accordingly, he plans a sample of
waiting times for walk‐in customers. If the population of waiting times has a mean
of 15 minutes and a standard deviation of 4 minutes, what is the probability that
Albert's sample of 64 will have a mean less than 14 minutes?
Ans: 0.0228

20)Pinky Bauer, Chief Financial Officer of Harrison Haulers, Inc., suspects

irregularities in the pay roll system. If 10% of the 5,000 payroll vouchers issued
since January 1, 2000, have irregularities, what is the probability that Pinky's
random sample of 200 vouchers will have a sample proportion of between .06 and
.14?
Ans: 0.9412

21)Catherine Chao, Director of Marketing Research, needs a sample of Kansas City

households to participate in the testing of a new toothpaste package. If 40% of the
households in Kansas City prefer the new package, what is the probability that
Catherine's random sample of 300 households will have a sample proportion
between 0.35 and 0.45?
Ans: 0.9232

22)Brian Vanecek, VP of Operations at Portland Trust Bank, is evaluating the service

level provided to walk‐in customers. Accordingly, his staff recorded the waiting
times for 64 randomly selected walk‐in customers and determined that their
mean waiting time was 15 minutes. Assuming the population standard deviation
to be 4 minutes, construct 90% confidence interval for the population mean of
waiting times.
Ans: (9.46, 34.09)

23)Elwin Osbourne, CIO at GFS, Inc., is studying employee use of GFS e‐mail for non‐
business communications. A random sample of 200 e‐mail messages was selected.
Thirty of the messages were not business related. Construct 90% confidence
interval for the population portion.
Ans: (14.1775, 15.8225)
24)Brian Vanecek, VP of Operations at Portland Trust Bank, is evaluating the service
level provided to walk‐in customers. Brian would like to minimize the variance of
waiting time for these customers, since this would mean each customer received
the same level of service. Accordingly, his staff recorded the waiting times for 15
randomly selected walk‐in customers, and determined that their mean waiting
time was 15 minutes and that the standard deviation was 4 minutes. Assuming
normal distribution, construct 95% confidence interval for the population
variance of waiting times.
Ans: (8.58, 39.79)

25)If X1, X2, …, Xn is a random sample from a N(μ, σ) population, write the distribution
of following statistics:
𝑋1 −𝜇 2
a. ( )
𝜎

(𝑛−7) ∑7𝑖=1(𝑋𝑖 −𝜇)2

b. 2, 𝑛>7
7 ∑𝑛 𝑖=8(𝑋𝑖 −𝜇)

(𝑋1 −𝑋2 )2
c. 2𝜎2

(𝑋1 −𝑋2 )2
d. (𝑋3 −𝑋4 )2

Ans:
a. Chi Square with 1 d.f.
b. F(7, n-7)
c. Chi Square with 1 d.f.
d. F(1,1)

26)A coin was tossed 400 times and the head turned up 216 times. Test at 5% level of
significance that the coin is unbiased.
Solution:
Testing of Proportion
H0: 𝝅= 0.50 H1: 𝝅  0.50
Decision rule: If p-value < 0.05, reject H0.
Test statistic = 1.6 p-value = 0.1096
Decision: Since the p-value is greater than the 0.05 level of significance, do not
reject H0. You conclude that the coin is unbiased.

27)A person throws 10 fair dice 500 times and obtains 2560 times 4, 5 or 6. Can this
be attributed to fluctuations of sampling?
Solution:
Testing of Proportion
H0: 𝝅= 0.50 H1: 𝝅  0.50
Decision rule: If p-value < 0.05, reject H0.
Test statistic = 1.6971 p-value = 0.0897
 Decision: Since the p-value is greater than the 0.05 level of significance, do not
reject H0. You conclude that this is attributed to sampling fluctuation.

28)In a hospital 480 female and 520 male babies were born in a week. Does this figure
confirm the hypothesis that males and females are born in equal number?
Solution:
Testing of Proportion
n=480+520; x=480;
H0: 𝝅= 0.50 H1: 𝝅  0.50
Decision rule: If p-value < 0.05, reject H0.
Test statistic = -1.2649 p-value = 0.2059
Decision: Since the p-value is greater than the 0.05 level of significance, do not
reject H0. You conclude that males and females are born in equal number in the
whole population.

29)In a big city 325 men out of 600 men were found to be self‐employed. Does this
information support the conclusion that the majority of men in this city are self‐
employed?
Solution:
Testing of Proportion
H0: 𝝅= 0.50 H1: 𝝅> 0.50
Decision rule: If p-value < 0.05, reject H0.
Test statistic = 2.0412 p-value = 0.0206
Decision: Since the p-value is less than the 0.05 level of significance, reject H0. You
conclude that the majority of men in this city are not self‐employed.

30)A machine puts out 16 imperfect articles in a sample of 500. After machine is
overhauled, it puts out 3 imperfect articles in a batch of 100. Has the machine
improved?
Solution:
Testing of Proportion
N=500, X=16, n=100, x=3
H0: 𝝅= 16/500 H1: 𝝅<16/500
Decision rule: If p-value < 0.05, reject H0.
Test statistic = -0.1136 p-value = 0.4548
Decision: Since the p-value is greater than the 0.05 level of significance, do not
reject H0. You conclude that the machine has not improved.
31)It is claimed that a random sample of 100 tires with a mean life of 15269kms is
drawn from a population of tires which has a mean life of 15200 kms and a
standard deviation of 1248 kms. Test the validity of the claim.
Solution:
Testing of Mean
H0: μ =15200, H1: μ≠15200 (σ =1248)
Decision rule: If p-value < 0.05, reject H0.
 Test statistic = 0.5529 p-value = 0.5803
Decision: Since the p-value is greater than the 0.05 level of significance, do not
reject H0. You conclude that the claim is true.

32)A company producing light bulbs finds that mean life span of the population of
bulbs is 1200 hrs with a standard deviation of 125hrs. A sample of 100 bulbs
produced in a lot is found to have a mean life span of 1150hrs. Test whether the
difference between the population and sample means is statistically significant at
5% level of significance.
Solution:
Testing of Mean
H0: μ =1200, H1: μ≠1200 (σ =125)
Decision rule: If p-value < 0.05, reject H0.
Test statistic = -4 p-value = 0, approx.
Decision: Since the p-value is less than the 0.05 level of significance, reject H0. You
conclude that the difference is significant.

33)A manufacturing company produces bearings. One line of bearings is specified to

be 1.64 cm in diameter. A major customer requires that the variance of the
bearings be no more than 0.001 cm square. The producer is required to test the
bearings before they are shipped, and so the diameters of 16 bearings are
measured with a precise instrument, resulting in the following values:
1.69 1.62 1.63 1.70 1.66 1.63 1.65 1.71 1.64 1.69
1.57 1.64 1.59 1.66 1.63 1.65
Assume bearing diameters are normally distributed. Use the data and α=0.01 to
test the data to determine whether the population of these bearings is to be
rejected because of too high variance.
Solution:
Testing of Variance
H0: σ2 = 0.001, H1: σ2 > 0.001
Decision rule: If p-value < 0.05, reject H0.
Test statistic = 21.7 p-value = 0.1159
Decision: Since the p-value is more than the 0.05 level of significance, do not reject
H0. You conclude that the population of these bearings cannot be rejected because
of too high variance.

34)A small business has 37 employees. Because of the uncertain demand for its
product, the company usually pays overtime on any given week. The company
assumed that about 50 total hours of overtime per week is required and that the
variance on this figure is about 25. Company officials want to know whether the
variance of overtime hours has changed. Given here is a sample of 16 weeks of
overtime data (in hours per week). Assuming hours of overtime are normally
distributed, can you help company officials?
57 56 52 44 46 53 44 44 48 51 55
48 63 53 51 50
Solution:
 Testing of Variance
H0: σ2 =25, H1: σ2≠25
Test statistic = 16.8375
This lies between 6.262 and 27.488 (critical values obtained using chi square
distribution with 15), so we accept H0 at 5% level and conclude that the variance of
overtime hours has not changed.

35)A political researcher wants to prove that a candidate is currently carrying more
than 60% of the vote in the state. She has her assistants randomly sample 200
eligible voters in the state by telephone and only 90 declare that they support her
candidate. Help the researcher in making conclusions.
Solution:
Testing of Proportion
H0: 𝝅= 0.60 H1: 𝝅> 0.60
Decision rule: If p-value < 0.05, reject H0.
Test statistic = -4.33 p-value = 1 almost
Decision: Since the p-value is larger than the 0.05 level of significance, do not reject
H0. You conclude that the candidate does not carry more than 60% votes in the
state.

36)The diameter of 3.5 inch diskettes is normally distributed. Periodically, quality

control inspectors at Dallas Diskettes randomly select a sample of 16 diskettes. If
the mean diameter of the diskettes is too large or too small the diskette punch is
shut down for adjustment; otherwise, the punching process continues. The last
sample showed a mean and standard deviation of 3.55 and 0.08 inches,
respectively. Using α = 0.05, make the appropriate decision.
Solution:
Testing of Mean
H0: μ =3.5, H1: μ≠3.5 (σ unknown, s1=0.08, n= 16, use t distribution with 15
d.f.)
Decision rule: If critical value < modulus of computed test statistic, reject H0.
Test statistic = 2.5
Critical value (t distribution with 15 d.f., two tailed test, 0.05 level of significance)
= 2.13145
Decision: Since critical value < modulus of computed test statistic, reject H0 at 5%
level of significance. You conclude that the inspector should shut down the process
for adjustment as the diameter of diskette is significantly different from 3.5 inch.

37)The executives of XYZ Insurance, Inc. feel that "a majority of our employees
perceive a participatory management style at XYZ." A random sample of 200 XYZ
employees is selected to test this hypothesis at the 0.05 level of significance.
Eighty employees rate the management as participatory. What is the appropriate
decision?
Solution:
Testing of Proportion
H0: 𝝅= 0.50 H1: 𝝅> 0.50
Decision rule: If p-value < 0.05, reject H0.
 Test statistic = -2.83 p-value = 0.9977
Decision: Since the p-value is larger than the 0.05 level of significance, do not reject
H0. You conclude that the majority of employees do not perceive a participatory
management style at “XYZ”.

38)ABC Components, Inc. manufactures a line of electrical resistors. Presently, the

carbon composition line is producing 100 ohm resistors. The population variance
of these resistors "must not exceed 4" to conform to industry standards.
Periodically, the quality control inspectors check for conformity by randomly
select 10 resistors from the line, and calculating the sample variance. The last
sample had a variance of 4.36. Assume that the population is normally distributed.
Using a = 0.05, make the appropriate decision.
Solution:
Testing of Variance
H0: σ2 = 4, H1: σ2 > 4
Decision rule: If critical value < computed test statistic, reject H0.
Test Statistic will have Chi square distribution with 9 d.f.
Test statistic = 9.81
Critical value (Chi square distribution with 9 d.f., right tailed test, 0.05 level of
significance) = 16.919
Decision: Since critical value > computed test statistic, accept H0 at5% level of
significance. You conclude that the variance is not more than 4 significantly.

39)David D., VP of Human Resources of American First Banks (AFB), is reviewing the
employee training programs of AFB banks. Based on a recent census of personnel,
David knows that the variance of teller training time in the Southeast region is 8,
and he wonders if the variance in the Southwest region is the same number. His
staff randomly selected personnel files for 15 tellers in the Southwest Region, and
determined that their mean training time was 25 hours and that the standard
deviation was 4 hours. Assume that teller training time is normally distributed in
the population. Using a = 0.10, help David to make the appropriate decision.
Solution:
H0: σ2 =8, H1: σ2 ≠ 8
Decision rule: Two tailed test. Test Statistic will have Chi square distribution with
14 d.f.
Reject H0 if
Computed Test Statistic < Lower critical value
Or
Computed Test Statistic > Upper critical value
Test statistic = 9.81
Level of Significance = 0.10
Lower critical value = 6.571
Upper critical value = 23.685
Decision: Since computed test statistic is higher than lower critical value and
lower than upper critical value, we accept H0 at 10% level of significance. You
conclude that the variance is not different from 8 significantly.