Practice Problems - 2

I. Confidence Intervals

The weight of oranges produced by the MoneyWorth Orchards is distributed normally with mean 
and standard deviation . The oranges which weigh more than 266 gms. are exported and those
with weight less than 100 gms. are sold to the local fruit juice factory. When MoneyWorth Orchards
estimated a two-sided 95% confidence interval for  based on the known value of , the width of
the interval turned out to be 39.2. Considering that the standard error is inversely proportional to
the square root of the sample size, they increased the sample size by 300 more oranges, and the
width was exactly halved (i. e., it became 19.6). They have exported 12.30% of their production.

1. What is the value of ?

2. What is the value of ?
3. What percentage of the production was sold to the local fruit juice factory?
4. What should be sample size required if MoneyWorth orchards wants a 95% confidence interval with
a width of ± 15 gms?

II. Hypothesis Test

NS Software Systems and Services (popularly known as N4S) has recently recruited Komala, a quality
expert from Institute of International Management, Bilekahalli (IIMB). She decided to train the
employees of N4S in quality awareness as well as the techniques to be used through a new innovative
method, developed specially by her. Dr. Raghav who is the VP, Corporate Training agreed to experiment
with the new method of training, provided the effectiveness of the training can be measured. Komala
and Dr. Raghav agreed to use a special instrument (as some of the OB experts prefer to call it), which
has to be administered to the trainees before and after the training. Based on the scores of the
instrument, before and after the training, a “Quality Capability Motivation Improvement Index (QCM)”
can be computed for each of the trainees. They have agreed to use this index as a measure for the
effectiveness of the training and a positive value of the index indicates effectiveness of the training.

It was proposed that a sample of 20 employees would be selected for training under the new method.
For obvious reasons, they decided to do a one sided hypothesis test. The sample standard deviation of
the QCM obtained from these 20 observations was 12.5.

1. Dr. Raghav informed Komala that he is willing to go ahead with the new method if the
sample average of QCM is greater than equal to 4.8327. Based on this decision, calculate
the Type I error that Dr. Raghav is willing to tolerate.
2. Based on the above, formulate the null and alternate hypothesis.
3. At this stage, Dr. Rahav decided to change the  value to 0.025 and suitably modified the
decision rule. The average QCM of the 20 trainees turned out to be 5.3. Should Dr. Raghav
go ahead with the new method of training?
4. Assume that the true average QCM is 0.4673. What is the Type II error that Dr. Raghav will
be committing, based on the decision in question 3 above?
Dr. Raghav decided to compare the new method with the old method of training that the company had
been using. He selected a random sample of 60 employees for training based on the old method and
obtained the QCM scores for these 60 employees. The average for this sample was 0.1 with a sample
standard deviation of 9.3. Dr. Raghav insisted that all  values have to be less than or equal to 0.025

5. Test whether the old method is effective or not?

6. What is the p-value associated with this hypothesis test?
7. How will the answers change if the standard deviations used in questions 1 to 6 above are
population standard deviation (σ) and not sample standard deviation?