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A. The 95% Confidence Interval Is Given by The Formula

The 95% confidence interval for the mean amount of wages from a sample of 10 observations is $26.86 to $28.29. Hypothesis testing allows managers to test assumptions and theories before committing resources. For example, a company could test a new marketing campaign on a smaller scale first to understand how it will perform. This helps managers make more informed decisions. A test of the hypothesis that the mean mileage of a motorcycle is 60 km/liter against the alternative that the mean is not 60 km/liter results in rejection of the null hypothesis at the 5% significance level, as the calculated z-score of -6.00 is less than the critical value of -1.960. The manufacturer

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25 views5 pages

A. The 95% Confidence Interval Is Given by The Formula

The 95% confidence interval for the mean amount of wages from a sample of 10 observations is $26.86 to $28.29. Hypothesis testing allows managers to test assumptions and theories before committing resources. For example, a company could test a new marketing campaign on a smaller scale first to understand how it will perform. This helps managers make more informed decisions. A test of the hypothesis that the mean mileage of a motorcycle is 60 km/liter against the alternative that the mean is not 60 km/liter results in rejection of the null hypothesis at the 5% significance level, as the calculated z-score of -6.00 is less than the critical value of -1.960. The manufacturer

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tawanda
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Question 1

a. The 95% confidence interval is given by the formula


s
x ± t α ( n−1)×
2
√n
∑x
x=
n
26.50+26.15+27+ 27.10+ 27.50+27.55+28+28.12+28.13+29.7
x=
10
275.75
x=
10
x=27.575

The Variance is given by


2 1
s= ¿
n−1
2 1
s= ¿
10−1
1
s2= ¿
9
2 1
s= ¿
9
2 1
s = [9.05005]
9
2
s =1.00556111
s=√ 1.005561111
s=1.0028(4. d . p)
We use the t-distribution because the population variance is not known and n- the sample
size is small, that is, less than 30.
The 95% C.I.
s
x ± t 0.05 (n−1) ×
2
√n
t 0.05 , 9=2.262
2

1.0028
27.575 ±2.262 ×
√ 10
( 26.86 ; 28.29 )
We are 95% confident that the mean amount of wages lies between $26.86 and $28.29

b. Hypothesis testing is an act in statistics whereby an analyst testing an assumption


regarding a population parameter. The methodology employed by the analyst depends on
the nature of the data used and the reason for the analysis.
The real value of hypothesis testing in business is that it allows managers to test their
theories and assumptions before putting them into action. This essentially allows an
organization to verify its analysis is correct before committing resources to implement a
broader strategy.
For example, consider a company that wishes to launch a new marketing campaign to
revitalize sales during a slow period. Doing so could be an incredibly expensive
endeavor, depending on the campaign’s size and complexity. The company, therefore,
may wish to test the campaign on a smaller scale to understand how it will perform.
By testing different theories and practices, and the effects they produce on businesses,
management can make more informed decisions about how to grow your business
moving forward. Hypothesis testing can keep managers from wasting time on initiatives
that have no effect on growing the business, and it can help management to maximize
resources and manpower by focusing them toward measures that can produce the biggest
effects. Once managers understand how hypothesis testing works and the steps involved,
it is easy to apply it to business decisions.
However, the statistics used in hypothesis testing are estimated, which limits the extent to
which the practice can be applied in the real-world business situations.
c. Let X be the mileage of the motorcycle in km/litre
H 0 : μ=60
H 0 : μ≠ 60
If H0 is true then x N ¿)
We use a two-tailed test at 5% level of significance
Z crit =± 1.960
We reject H0 if |Z calc|>1.960
x−μ
Z calc=
σ
√n
57−60
Z calc=
2
√ 16
Z calc=−6.00
Since Zcalc < -1.960, we reject H0 and conclude that the manufacturer’s claim that the
motorcycle having a mileage of 60km/ litre is not justified at 5% level of significance.

Question 2
a. Correlation and regression analysis are two related concepts which complement each
other, but they are different. Correlation analysis is a technique of measuring the
degree of linear relationship or association between two variables. Using this
technique, business people will be able to tactfully manipulate one variable for the
betterment of the other variable or to exploit the relationship between the variables in
order to maximise profits. Correlation analysis is a statistical procedure that is used to
measure the extent to which variables are related or associated.
Regression analysis is concerned with establishing the functional form of the
relationship between variables. It is a widely used statistical technique that has many
business applications. It involves studying the relationship between variables and
formulating models that connect the variables. Regression analysis in its simpler form
involves modelling a relationship between only two variables.
b. The Scatter Plot

Total Cost (ZW$)


25000

20000

15000

10000

5000

0
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

The scatter plot shows a positive relationship between the monthly output and total costs.

c. The regression equation


i. The regression equation will be y = 32.14 – 14.54 x . The value of a is 32.14 is
the weekly sales in thousands of gallons that are realised when the price of
milk per gallon is ZW$0. This is the value of the y- intercept, that is, the value
of y when x assumes a value of zero.
The value of negative 14.54 is the gradient of the linear relationship between
the weekly milk sales and the price of milk per gallon. From this, means that
there is a negative linear relationship between the weekly milk sales and the
price of the milk.
When r 2 is 0.77, this is the value of the coefficient of determination which
measures the relative strength of the linear relationship between the
independent variable (price of milk) and the dependent variable (number of
weekly sales in ZWL$).
From the figure above, it can be concluded that 77% of variation in weekly
sales of milk is explained by the variation in milk prices per gallon.
ii. y=32.14−14.54 x

when x=2.10 , then

y=32.14−14.54 ( 2.10 )

y=1.606

The weekly sales are 1606 gallons of milk

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