STATISTICS

ESTIMATION THEORY: EXAMPLES AND TUTORIAL

EXAMPLE 1:

A marketing research analyst collects data for a random sample of 100 customers of the 500who
purchased a particular item under promotion. The 100 people in the sample spent an average
(mean) of Tshs 27,000 in the store with a standard deviation of Tshs 8,000 and 70% of the
customers in the sample made at least one other purchase in addition to the item under
promotion. Based on these results, estimate the values of the following;

a) Mean purchase amount by all 500 customers who purchased the item under promotion.
b) The standard deviation of the distribution of purchase amounts by 500 customers.
c) Total amount of purchases made by 500 customers.
d) The number of customers out of 500 who made at least one other purchase in addition to
the product under promotion.

EXAMPLE 2:

A mining company in Zambia needs to estimate the average amount of copper ore per ton mined.
A random sample of 50 tones gives a sample mean of 146.75kg. The population standard
deviation is assumed to be 35.2kg.

a) Provide a 90% C.I for the average amount of copper per ton.
b) Provide a 95% C.I for the average amount of copper per ton.
c) Provide a 99% C.I for the average amount of copper per ton.

EXAMPLE 3:

TTCL wants to estimate the average length of long distance calls during weekends. A random
sample of 50 calls gives a mean of 14.5 minutes and standard deviation of 5.6 minutes. Give
95% C.I for the average length of a long distance phone call during weekends.

EXAMPLE 4:

The makers of a medicated facial cream are interested in determining the percentage of people in
a given age group who may benefit from the ointment. A random sample of 68 people results in
42 successful treatments. Contract a 95% C.I for the proportion of people in the given age group
who may be successfully treated with the facial cream.

1
EXAMPLE 5:

A marketing research firm wants to conduct a survey to estimate the average amount spent on
entertainment by each person visiting a popular resort. The people who panned the survey would
like to be able to determine the average amount spent by all people visiting the resort to within
Tshs. 2000/=, with 95% confidence. From past operation of the resort, an estimate of the
population standard deviation is Tshs. 4,000/=.what is the minimum required sample size?

EXAMPLE 6:

Find the minimum required sample size of accounts if the proportion of accounts in error is to be
estimated to within 0.02 with 95% confidence. A rough guess of proportion of accounts in error
is 0.1.

TUTORIAL QUESTIONS

QUESTION 1:

A management consulting firm needs to estimate the average number of years of experience of
executives in a given branch of management. A random sample of 32 executives gives a mean of
6.7 years and standard deviation of 2.5 years. Give a 95% C.I for the average number of years of
experience for all executives in this branch.

QUESTION 2:

In a department store an auditor finds that 30 randomly chosen charge accounts of a total of
3,000 such accounts have a mean debit balance of Tshs. 32,800/= with a standard deviation of
Tshs. 8,400/=.

a) Estimate the mean balance of all accounts using 99%

b) Estimate the total balance due for all 3,000 charge accounts using 99%

QUESTION 3:

As an aid in the establishment of personnel requirements, the director of Muhimbili National

Hospital (MNH) wishes to estimate the mean number of people who are admitted to the
emergency room during 24-hour period. The director randomly selects 64 different 24-hour
periods and determines the number of admissions for each. For this sample mean is 19.8 and
variance 25. Estimate the number of admissions per 24-hour period with 95% confidence interval
at MNH.

2
QUESTION 4:

In checking the reliability of bank’s records, auditing firms sometimes ask a sample of bank’s
customers to confirm the accuracy of their savings account balances as reported by the bank.
Suppose an auditing firm interested in estimating P, the proportion of bank’s savings accounts on
whose balances the bank and its customers disagree. Of 200 saving accounts customers
questioned by the auditors, 15 said their balance disagree with that reported by the bank.

a) Use 95% confidence interval to estimate the actual proportion of the bank’s savings
accounts on whose balances the bank and customers disagree.
b) How many savings account customers should the auditors question if they want to
estimate P to within 0.02 with probability equal to 0.95?

QUESTION 5:

In a small firm employing 100 people a random sample shows that 35 employees earn an average
hourly wage of Tshs. 475/=with a standard deviation of Tshs. 25/=. Suppose the wages are
approximately normally distributed, estimate the average hourly wage of all 100 employees,
using 95% confidence limits.

QUESTION 6:

An analyst wishes to estimate the mean monthly wages of workers in a particular company
within Tshs. 2500/= and with 95% confidence. The standard deviation of the wages rates is
estimated as being Tshs. 10,000/=. What is the number of personnel records that should be
sampled as the minimum to satisfy this research objective?

QUESTION 7:

A marketer of candy products wants to estimate the total number of candy bars sold in a given
month in all 500 candy stores in a given area. A random sample of 32 stores gives a mean of
1220 and standard deviation of 550. Construct a 95% C.I for the total number of candy bars sold
in all 500 stores.

TESTING OF HYPOTHESIS EXAMPLES AND TUTORIAL QUESTIONS

EXAMPLES
EXAMPLE 1
An investment Company claims that the average annual return on stock within a certain industry is
11.5%. An investor wants to test whether this claim is true and collects a random sample of 50 stocks
in the industry of interest. He finds that the average annual return is 10.8% and the sample standard
deviation is 3.4%. Does the investor have enough evidence to reject the Investment Services
Company’s claim at 5% level of significant?

3
EXAMPLE 2
The price of shares of a company on the different days in a month was found to be 66, 65, 69, 70, 69,
71, 70, 63, 64 and 68. Discuss whether mean price of shares in the month is 65 at 5% level of
significant
EXAMPLE 3
The U.N wants to know if the mean daily caloric intake in a developing country is less than 2,000
calories. A random sample of 500 rural adults reported a mean daily caloric intake of 1985 with a
standard deviation of 210. At the 0.05 level of significant, can the U.N conclude from these data that
the population mean is less than 2000 calories) Also set up 99% confidence limits of the mean daily
caloric intake.
EXAMPLE 4
A Company believes that its market share is about 14%. It conducts a strong three month market
campaign and it now wants to know if the campaigns have been successful in increasing its market
share. Out of 80 respondents interviewed 12 are found to be in favor of the Company’s products.
Have the campaigns been successful in increasing the market share at 5% level of significant?

EXAMPLE 5
20 people were attacked by a disease and only 18 survived. Will you reject the hypothesis that the
survived rate if attacked by this disease is 85 % in favor of the hypothesis that is more, in 5 % level
of signify

TUTORIAL QUESTIONS

QUESTION 1

A certain commodity is known to have a price that is stable through time and does not change
according to any known trend. The price however, changes from day to day in a random fashion. If
the price is at a certain level one day, it is likely to be at any level the next day within some
probability bounds approximately given by a normal distribution. The mean price is believed to be
Tshs. 1425. To test the null hypothesis that the average price is Tshs. 1425, a random sample of 40
daily prices is located. The results are; mean=Tshs. 1650 and S=Tshs. 58. Using 5% level of
significance, can you reject the null hypothesis?

QUESTION 2

A tyre manufacturer claims that the average number of km that may be driven on his new model tyre
before it wears out is at least 38,000 km. A random sample of 32 tyres is chosen: the tyres are driven
on until they wear out, and number of km driven on each tyre is recorded. The data in thousands km
are: 32, 33, 33, 28, 28, 37, 30, 23, 27, 39, 40, 26, 27, 30, 25, 30, 31, 29 34, 29, 24, 36, 25, 37, 20, 22,
35, 23, 30, 36, 40, 41. At 5% level of significance what conclusion can you give about the
manufacture’s claim?

4
QUESTION 3

The percentage of farmers using fertilizers in Tanzania was known to be 35%. The drought and other
events of the last few years are believed to have had a potential impact on the proportion of farmers
using fertilizers. An international aid program wants to test whether or not the percentage is still
around 35% and gathers a random sample of 150 farmers. The findings reveal that 68 of the farmers
use fertilizers. Conduct the test at 5% level of significance and state your conclusion.

QUESTION 4

Suppose a certain manufacturer of building components claims that at least 95% of the building
components they produce conform to specifications. An examination of 500 various components
supplied by the firm revealed 40 faulty ones. Does this result provide sufficient evidence to reject the
manufacture’s claim at 5% decision level?

QUESTION 5

A sample of 900 members has a mean of3.4 cm and standard deviation of2.61 cm. Is the sample
from a large population of mean 3.25 cm and standard deviation2.26 cm ?

QUESTION 6

An insurance agent has claimed that the average age of policy-holders who insure through him is less
than average for all agents which is30.5 yrs. A random sample of 100 policy-holders who had
ensured through him gave the following age distribution

Age 16−20 21−25 26−30 31−35 36−40

No of person 12 22 20 30 16
Calculate the arithmetic mean and standard deviation of this distribution and use these values to test
his claim at 5 % level of significance.

QUESTION 7

The mean muscular endurance score of a random sample of 60 subjects was found to be 145with
standard deviation of 40. Construct a 95 % confidence interval for the true mean. What is the sample
size required to estimate the mean within 5 units of the true mean at 95 % confidence?

QUESTION 8

A survey is proposed to be conducted to know the annual earnings of the old statistic graduates of
Delhi University. How large should the sample be taken in order to estimate the mean monthly
earnings within plus and minus Rs Rs 10000 at 95 % confidence level? The standard deviation of the
annual earnings of the entire population is known to be Rs 30000.

5
QUESTION 9

A personnel manager claims that 80 % of all single women hired for secretarial job get married and
quit work within two years after they are hired. Test this hypothesis at 5 % level of significant if
among 200 such secretaries, 112 got married within two years after they were hired and quit their
job.

QUESTION 10

In a sample of 1000 people in Maharashtra, 540 are rice eaters and the rest are wheat eaters. Can we
assume that both rice and wheat eaters are equally popular in this state at 1 % level of significant?

QUESTION 11

Forty people were attacked by a disease and only 36 survived. Will you reject the hypothesis that the
survived rate if attacked by this disease is 85 % in favor of the hypothesis that is more, in 5 % level
of significant?

QUESTION 12
ABC Company Limited is a big manufacturing company with many brunches in East Africa. The
Company uses thousands of fluorescent bulbs each year. The brand of bulbs is currently uses have a
mean life of 900 hours. A South African manufacturer claims that its new brand of bulbs, which cost
the same as the brand currently used by ABC Company, has a mean of more than 900 hours. ABC
Company has decided to purchase the new brand if, when tested, the test evidence supports the
manufacture’s claim at the 0.05 significance level. Suppose 64 fluorescent bulbs were tested with the
following results; mean is 920 hours, S=80 hours. Will ABC Company purchase the new brand of
fluorescent bulb?
QUESTION 13

In some dice throwing experiments Weldon threw die 75145 times and of these 49152 yield 4 , 5∨6
. Is this consistence with hypothesis that the die was unbiased at 5 %level of significant?
QUESTION 14

The manufacture of television tubes known from past experience that the average life of tube is
2000 hrs with the standard deviation of200 hrs . A sample of 100 tubes has an average life of
1950 hrs . Test at 0.05 level of significant if this sample comes from a normal population of mean
2000 hrs .

QUESTION 15

The mean weekly sales of soap bars in departmental store were 146.3 bars per shop. After
advertising campaign the mean weekly sales of 32 shops increased to 153.7 bars and showed a
standard deviation of 17.2 bars. Was the advertising campaign successful at the level of 5 % of
significant?

6
QUESTION 16

A machine is considered to be unsatisfactory if it produces more than 8 % defectives. A random

sample of 120 items produced by the machine contains 14 defectives. Does the sample evidence
support the claim that the machine is unsatisfactory at 1 % level of significant?

QUESTION 17

A random sample of 35 values from a normal population is found to have a mean of 41.5 and
standard deviation of 2.795. On this basis is there any reason to reject the hypothesis that the
population mean is 43 at 5 % level of significant? Also find the confidence limits at that level of
significant.

QUESTION 18
XYZ Company produces bolts and nuts. The bolts are produced with a diameter of exactly 5.0 cm. A
sample of 36 such bolts produced an average diameter of 5.02 cm with a standard deviation of 2.03
cm. Is there sufficient statistical evidence at 5% level of significant that the average diameter of bolts
is not 5.0 cm?
QUESTION 19
A mechanist is making engine parts with axel diameter 0.7 inch. A random sample of 10 parts shows
a mean diameter of 0.742 inch with standard deviation of 0.04. Compute the statistic you would use
to test whether the work is meeting the specification at 5% level of significant.
QUESTION 20

A random sample of 16 values from a normal population is found to have a mean of 41.5 and
standard deviation of 2.795. On this basis is there any reason to reject the hypothesis that the
population mean is 43 at 5 % level of significant? Also find the confidence limits at that level of
significant.

QUESTION 21

A random sample of 8 cigarettes of a certain brand has average nicotine content of 18.6 mg and
standard deviation of2.4 mg . Is this line of manufacture’s claim that average nicotine content does
not exceed 17.5 mg at 99 % confidence limit?

QUESTION 22. The height of 10 males of a given locality are found to be

70 , 67 , 62 ,68 , 61 , 68 ,70 , 64 , 64∧66∈h es . Is this reasonable to believe that average height is
greater than 64 ∈h es at 5 % level of significant?

QUESTION 23. The mean weekly sales of soap bars in departmental store were 146.3 bars per
shop. After advertising campaign the mean weekly sales of 22 shops increased to 153.7 bars and
showed a standard deviation of 17.2 bars. Was the advertising campaign successful at the level of
5 % of significant?

7
QUESTION 24

An important measure of the risk associated with an investment is the standard deviation, or
variance, of the investment’s income movement. A financial analyst wants to test the hypothesis
that investment A has a greater risk than investment B. Random samples of 25 daily incomes of
investment A and 21of the investment B provide the data shown in the table below.

Statistic Investment A Investment B

Mean 750,000 684,000
S2 6,500 3,470

Carry out the test at α=0.05.

QUESTION 25

Two random samples gave the following results;

sample Size Sample Sum of squares of deviations from the

mean mean
1 9 15 90
2 12 14 108

Test whether the samples have been drawn from populations with the same variance at
5% level of significant.

QUESTION 26

Among 64 offspring of a certain cross between guinea pigs, 34 were red, 10 were black and 20
were white. According to genetic model these numbers should be in the ratio of 9 :3 :4 . Are these
data consistence with the model at 5 % level of significant?

QUESTION 27

Then mean height of 50 male students who showed above average participation in college athletics
was 68.2 inches with standard deviation of 2.5 inches while 50 male students who showed no
interest in such participation had a mean height of 67.5 inches with standard deviation of 2.8 inches.

(i) Test the hypothesis that male students who participated in college athletics are taller than
other male students in 5 % level of significant?

8
 (ii) By how much should the sample size of each of the two groups be increased in order that
the observed difference of 0.7 inches in the mean height be significant at 5 % level of
significant?

QUESTION 28

A random sample of 400 male students has average weight of 55kg. Can we say that the sample
comes from the population with mean 58kg and variance of 5kg at 1% level of significance?

QUESTION 29

A random sample of 400 tins of vegetable oil labeled 5kg net weight has mean of 4.98kg with
SD of .22kg. Can we reject the hypothesis of net weight of 5kg per tin on the base of this sample
at 1% level of significance?

QUESTION 30

A stenographer claims that she can take a dictation at the rate of 120words/min. can we reject her
claim on the basis of 100 trials in which she demonstrates a mean of 116words/min with SD of
15 words at 5% level of significance?

QUESTION 31

A sample of 600 people selected at random from a large city shows that53% are smokers. Is
there any reason to reject the hypothesis that smokers and non smokers are equal in number in
the city at 5% level of significance?

QUESTION 32

When flipped a coin 1000 times a coin landed 515 times head up. Does it support the hypothesis
that the coin is unbiased at 1% level of significance?

QUESTION 33

A patented medicine claimed that it is effective in curing 90% of patients suffering from malaria.
From a sample of 200 patients using this medicine it was found that only 170 were cured.
Determine whether the claim is right or not at 5% level of significance.

QUESTION 34

In one sample of 8 observations the sum of squares of deviations of the sample values from the
sample mean was 84.4 and in other sample of 10 observations it was 120.6. Test whether the two
samples have been drawn from populations with the same variance at 5% level of significance.

QUESTION 35
9
The average hourly wages of a sample of 150 workers in a plant A was Rs 2.56 with SD of Rs
1.08. The average hourly wages of a sample of 200 workers in a plant B was Rs 2.87 with SD of
Rs 1.28. Can applicant safely assume that the hourly wages paid by plant B are higher than those
of plant A at 5% level of significance?

QUESTION 36

An automatic dispenser for ice cream has been set to dispense exactly 100gm of ice cream per
serving. For a sample of 10 servings the average amount of ice cream is 101.05gm with SD of
2.5gm. The amounts being dispensed are assumed to fallow normal distribution. Basing the null
hypothesis on the assumption that the process is in control, should the dispenser be reset as a
result of a test at 5% level of significance?

QUESTION 37

The following date presents the number of units of production per day turned out by 5
different workers using 4 different types of machines:
Machine Type
Workers A B C D
1 44 38 47 36
2 46 40 52 43
3 34 36 44 32
4 43 38 46 33
5 38 42 49 39

a) Test whether the mean productivity is the same for the different machine types.
b) Test whether the 5 workers differ with respect to mean productivity
.

QUESTION 38

Given below are the yields (in Kg.) per acre for 5 trial plots of 4 varieties of
Treatments.
Treatment
Plot name 1 2 3 4
A 42 48 68 80
B 50 66 52 94
C 62 68 76 78
D 34 78 64 82
E 52 70 70 66
Carry out an analysis of variance and state whether there is any significant difference in
treatments.

10
11