202 …Statistical Methods

5.9 Test of Significance for large samples (Z test)

In this section we discuss the tests of significance when the samples are
large. For practical purposes, the sample is considered as large if n ≥  .
The large sample is generally desirable when the units in the population
under study are not homogeneous or uniform. To get more reliable results
about the population parameter, small sample is not sufficient for
heterogeneous population, so large sample test has to be carried out.
5.9.1 Assumptions of Z test
The Z test is used under the following assumptions:
1. The sample size is large, i.e., n ≥  .
2. The population from which the samples are drawn is normally
distributed.
3. The population standard deviation is known.
4. The samples are independent.

5.9.2 Applications of Z test

The Z test has a large number of applications in management science and
of them are:
1. Test of Significance of sampling of variables
i. Test of significance of a single mean
ii. Test of significance of difference between two means
2. Test of significance of sampling of attributes
i. Test of significance of single sample proportion
ii. Test of significance of difference between two proportions

5.9.3 Test of significance of a single mean

Suppose that the sample of size n drawn from normal population with
mean μ and variance σ  . The sample mean X is also a normal variate with
σ
mean μ and variance . Hence, the standardized normal variate
n
Z corresponding to the statistic X is given by
X − E(X )
Z=
S.E.( X )
X−μ
= ~ N(,) … (5.1)
σ n
Equation (5.1) is used to test whether the population mean has a specified
value or not. The procedure for testing the significance of a single mean is
as follows:
Step 1: Setting up Hypotheses
 Testing of Hypothesis… 203
Null Hypothesis H  : μ = μ  i.e., the population has a specified value μ0 . In
other words, there is no significant difference between sample mean and
population mean, or, the sample has been drawn from a normal population
with mean μ  and standard deviation σ.
Alternative hypothesis Any one of the following alternative hypothesis will
be set while solving the problems.
i. H : μ  μ  , i.e., the population has not a specified value μ0 . In other
words, there is significant difference between the sample mean and
the population mean, or, the sample has not been drawn from
normal population with mean μ  and standard deviation σ.
[Two-tailed test]
ii. H  : μ  μ  , i.e., the population mean is greater than a specified
value μ0 . [Right-tailed test]
iii. H  : μ  μ  , i.e., the population mean is less than a specified
value μ0 . [Left-tailed test]
Step 2: Level of significance (α)
Choose the appropriate level of significance in advance. The most
commonly used is  = 5% unless otherwise stated.
Step 3: Test Statistic
Under H  , the test statistic is
X−μ
Z=
S.E.(X )
X−μ
= ~ N(,) … (5.2)
σ n
Where, S.E.( X ) = standard error of mean = σ / n
X = Sample mean
 = Population mean
 = Population Standard deviation
n = Sample size
If the population standard deviation σ is known, then (5.2) is used.
However if σ is unknown, then we use estimate of population standard
deviation provided by the sample standard deviation, i.e., σ̂ = s .
Then,
X−μ
Z= ~ N(,) … (5.3)
s/ n
204 …Statistical Methods
Step 4: Critical value
The critical or tabulated value of the test statistic Z at the pre-specified
level of significance is obtained from the area under normal table.
Table of the Normal Distribution
(Critical Values Zα of Z)
Nature of Level of confidence (1 - α)
Alternative 99% 98% 96% 95% 90%
Hypothesis Level of significance (α)
1% 2% 4% 5% 10%
Two tailed test ± 2.576 ± 2.326 ± 2.054 ± 1.96 ± 1.645
Right tailed test 2.326 2.054 1.751 1.645 1.282
Left tailed test - 2.326 - 2.054 - 1.751 - 1.645 - 1.282
Step 5: Decision
i. If the calculated value of Z is less or equal to the tabulated value of
Z, then we accept H 0 , i.e., the population mean has a specified
value  0 . In other words, there is no significant difference between
sample mean and the population mean, or, the sample has drawn
from a normal population with population mean  0 .
ii. If the calculated value of Z is greater than the tabulated value of Z,
then we reject H 0 , i.e., the population mean has not a specified
value  0 . In other words, there is significant difference between
sample mean and the population mean, or, the sample has not
drawn from a normal population with population mean  0 .
Remarks:
Confidence limits for μ : ( − α)% confidence limits for the population mean
 is given by
σ
( − α)% C.I. for μ = X  Z α S.E.(X ) = X  Z α  … (5.4)
n
For example, 95% confidence limits for  is given by
σ
% C.I. for  = X  Z α S.E.(X ) = X  .  … (5.5)
n
Note! While setting up alternative hypothesis, theoretically we discussed
two-tailed alternative, right-tailed alternative and left-tailed alternative.
But while solving a particular problem, we have only one alternative
hypothesis. It may be two tailed, right tailed, or left tailed. Whether the
alternative is one tailed or two tailed, it all depends on the nature of the
problems.
 Testing of Hypothesis… 205
Example 1
A sample of 50 pieces of a certain type of string was tested. The mean
breaking strength tuned out to be 14.5 Kgs. Test whether the sample is
from a batch of strings having a mean breaking strength 15.6 Kgs. and
standard deviation of 2.2 Kgs.
Solution: We are given,
n = 50 , X = 14.5Kgs ,  = 15.6 kgs ,  = 2.2 kgs
Setting up Hypotheses:
Null Hypothesis H 0 :  = 15 .6 Kgs, i.e., the mean breaking strength of a
batch of strings is 15.6 Kgs.
Alternative hypothesis H : μ  . Kgs, i.e., the mean breaking strength
of a batch of strings is not 15.6 Kgs. [Two-tailed test]
Level of significance: Since the level of significance is not given we
take  = 0.05 .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
σ n
. −.
= = −.
. 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for two tailed test is . , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that the mean breaking strength of a batch of strings is
not 15.6 Kgs or the sample is not from a batch of strings having a mean
breaking strength of 15.6 Kgs.
Example 2
A random sample of 900 items is taken from a normal distribution whose
mean and the standard deviation are 4 and 0.8 respectively. Can the
sample with mean 4.5 be regarded as truly random sample at 1% level of
significance?
Solution: We are given,
n =  , μ =  , σ = ., X = .
Setting up Hypotheses:
Null Hypothesis H  : μ =  , i.e., the population mean is 4. In other words,
the sample is drawn from a normal population with mean 4 or the sample
can be regarded as truly random sample.
206 …Statistical Methods
Alternative hypothesis H : μ   , i.e., the population mean is not equal to
4. In other words, the sample is not drawn from a normal population with
mean 4 or the sample can not be regarded as truly random sample. [Two-
tailed test]
Level of significance: It is given that the level of significance α = % .
Test Statistic Under H  , the test statistic is
X−μ
Z=
σ n
4.5 − 4
= = 18.75
0.8 900
Critical value: The critical or tabulated value of the test statistic Z at 1%
level of significance for two tailed test is . , i.e., Z . = . .
Decision: Since the calculated value of test statistic is greater than the
critical value of test statistic, H  is rejected and H is accepted. Hence we
conclude that the sample can not be regarded as truly random sample.
Example 3
A sample of 900 members has a mean 3.4 cm and standard deviation 2.61
cm. Can the sample be regarded as one drawn from a population with
mean 3.25 cm. Using the level of significance as 0.05, is the claim is
acceptable? Also calculate the 95% confidence limits for the population
mean.
Solution: We are given,
n =  , X = . cm , s = .cm, μ = .
Setting up Hypotheses:
Null Hypothesis H  : μ = . , i.e., the sample is regarded as a random
sample drawn from a population with mean 3.25 cm.
Alternative hypothesis H : μ  . , i.e., the sample is not regarded as a
random sample drawn from a population with mean 3.25 cm. [Two-tailed
test]
Level of significance: It is given that the level of significance α = % .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
s n
. − .
= = .
. 
 Z = .
 Testing of Hypothesis… 207
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for two tailed test is . , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is less than
the critical value Z . = . , H  is accepted. Hence we conclude that the
sample is regarded as a random sample drawn from a population with
mean 3.25 cm.
For 95% confidence limits for μ :
s
% C.I. for  = X  Z . S.E.(X ) = X  . 
n
.
= .  . 

= .  .
Lower confidence limit = . − . = .
Upper confidence limit = . + . = .

Example 4
A moped manufacturer hypothesized that the mean miles per gallon for its
moped is 115.2. It takes a sample of 49 mopeds and finds that sample
mean to be 117.4 per gallon. If the population standard deviation is known
to be 8.4, test the hypothesis that the true mean miles per gallon is 115.2
against alternative hypothesis that it is greater than 115.2 using the 0.05
significance level. [MBA 2052]
Solution: We are given,
μ = . , n =  , X = . , σ = .
Setting up Hypotheses:
Null Hypothesis H  : μ = . miles per gallon, i.e., the true mean mileage
per gallon of moped is 115.2 miles per gallon.
Alternative hypothesis H : μ  . Kgs, i.e., the true mean mileage per
gallon of moped is greater than 115.2 miles per gallon. [Right-tailed test]
Level of significance: It is given that the level of significance α = % .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
σ n
. −.
= = .
. 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for right tailed test is 1.645, i.e., Z . = . .
208 …Statistical Methods
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that the true mean mileage per gallon of moped is
greater than 115.2 miles per gallon.

Example 5
It is claimed that a random sample of 100 tyres with a mean tread life of
15,131 Km. is drawn from a population of tyres that has a mean tread life
of 15,200 Km. and standard deviation of 1,248 Km. Test the validity of this
claim.
Solution: We are given,
n =  , X = 15,131km, μ = , km , σ = , km
Setting up Hypotheses:
Null Hypothesis H  : μ = , km, i.e., the tread life of the tyres is 15,200
km. In other words, the tyres are drawn from population with mean tread
life of 15,200 km.
Alternative hypothesis H : μ  , km, i.e., the tread life of the tyres is
less than 15,200 km. [Left-tailed test]
Level of significance: Since the level of significance is not given we
take  = 0.05 .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
σ n
15131− 15200
= = −0.5529
1248 100
 Z = 0.5529
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for left- tailed test is −. ,i.e., Z . = . .
Decision Since the calculated value of test statistic Z = . is less than
the critical value Z . = . , H  is accepted. Hence we conclude that
the tread life of the tyres is 15,200 km. In other words, the tyres are drawn
from population with mean tread life of 15,200 km.

Example 6
The management of priority Health Club claims that its member lose an
average of 10 pounds or more within the first month after joining the club.
A consumer agency that wanted to check this claim took a random sample
 Testing of Hypothesis… 209
of 36 members of this health club and found that they lost an average of
9.2 pounds within the first month of membership with a standard deviation
of 2.4 pounds. What would be your decision?
Solution: We are given,
μ =  pounds , n =  , X = . pounds , s = . pounds
Setting up Hypotheses:
Null Hypothesis H  : μ =  pounds, i.e., the mean weight lost is 10 pounds.
Alternative hypothesis H : μ   pounds, i.e., the mean weight lost is less
than 10 pounds. [Left-tailed test]
Level of significance: Since the level of significance is not given we
take  = 0.05 .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
s n
. − 
= = −.
. 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for left tailed test is −. , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that the mean weight lost within the first month of
membership by the members of this club is less than 10 pounds.
Example 7
A study claims that all the adults spend an average of 14 hours or more on
chores during a weekend. A researcher wanted to check if this claim is true.
A random sample of 200 adults taken by this researcher showed that these
adults spend an average of 13.75 hours on chores during a weekend with a
standard deviation of 3.0 hours. Test the claim is true at 5% level of
significance.
Solution: We are given,
μ =  hours , n =  , X = . hours , s =  hours
Setting up Hypotheses:
Null Hypothesis H  : μ =  hours, i.e., the average time spent by adults on
chores during a weekend is 14 hours.
210 …Statistical Methods
Alternative hypothesis H : μ   hours, i.e., the average time spent by
adults on chores during a weekend is less than 14 hours. [Left-tailed test]
Level of significance: It is given that the level of significance α = % .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
s n
. − 
= = −.
 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for left tailed test is −. , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is less than
the critical value Z . = . , H  is accepted. Hence we conclude that
the average time spent by adults on chores during a weekend is 14 hours.
Note: For the Example 7 the null hypothesis also can be set up as
H  : μ   hours, i.e., the average time spent by adults on chores during a
weekend is 14 hours or more.

Example 8
Nepal Telecom claims that the mean duration of all long- distance phone
calls made by its residential customers is 10 minutes. A random sample of
100 long-distance calls made by its residential customers taken from the
records showed that the mean duration of calls for this sample is 9.25
minutes with a standard deviation of 3.75 minutes. Test the mean duration
of all long- distance calls made by residential customers is less than 10
minutes.
Solution: We are given,
μ =  minutes, n =  , X = . min utes , s = . min utes
Setting up Hypotheses:
Null Hypothesis H  : μ =  minutes, i.e., the mean duration of all long
distance calls made by residential customers is 10 minutes.
Alternative hypothesis H : μ   minutes, i.e., the mean duration of all
long distance calls made by residential customers is less than 10 minutes.
[Left-tailed test]
Level of significance: Since the level of significance is not given we
take  = 0.05 .
 Testing of Hypothesis… 211
Test Statistic: Under H  , the test statistic is
X−μ
Z=
s n
. − 
= = −.
. 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for left tailed test is −. , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that the mean duration of all long distance calls made
by residential customers is less than 10 minutes.

Example 9
An insurance agent claims that the average age of policy-holders who
insure through him is less than the average age for all the agents, which is
30 years. A random sample of 100 policyholders who had insured through
him gave the following age distribution.
Age last birthday (yrs) 16-20 21-25 26-30 31-35 36-40
No. of persons 12 22 20 30 16
Calculate the mean and standard deviation of the sample and use these
values to test his claim at 5% level of significance.
Solution:
Calculation of X and s
No. of
X − 
Age persons X d' = fd ' fd' 
f 
16-20 12 18 -2 -24 48
21-25 22 23 -1 -22 22
26-30 20 28 0 0 0
31-35 30 33 1 30 30
36-40 16 38 2 32 64

N =   fd' =   fd'  = 

Here, A =  , h = 
 fd' 
Now, sample mean (X ) = A +   =  +   = .
N 
212 …Statistical Methods

 fd'    fd' 
Sample Standard deviation (s) = −  
N  N 

   
= −  
   
= .
Thus,
X = . years , s = . years , n =  , μ =  years
Setting up Hypotheses:
Null Hypothesis H  : μ =  years, i.e., the average age of the policy holders
who insured through him is 30 years. In other words, the claim of the
insurance agent is not valid.
Alternative hypothesis H : μ   years, i.e., the average age of the policy
holders who insured through him is less than 30 years. In other words, the
claim of the insurance agent is valid. [Left-tailed test]
Level of significance: It is given that the level of significance α = % .
Test Statistic: Under H  , the test statistic is
X−μ
Z=
s n
. − 
= = −.
. 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for left tailed test is −. , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that the average age of the policy holders who insured
through him is less than 30 years. In other words, the claim of the
insurance agent is valid.
5.9.4 Test of significance of difference between two means
Suppose that two independent random samples of size n and n  drawn
from two populations with means μ and μ  and variances σ
and σ   respectively. Let X  and X  be the corresponding sample means.
Then for large samples, X  ~ N( μ , σ / n) and X  ~ N( μ , σ   / n ) .
Hence ( X  − X  ) , the difference is also a normal variate with mean
 Testing of Hypothesis… 213
μ − μ  and variance (σ / n + σ   / n ) . Thus, the standardized variable Z
corresponding to the statistic ( X  − X  ) is given by
(X  − X  ) − E(X  − X  )
Z=
S.E.(X  − X  )
( X  − X  ) − ( μ − μ  )
= ~ N(,) … (5.6)
σ  σ  
+
n n
Equation (5.6) is used to test whether the two independent populations are
same from the point of view of means or not. The steps for testing the
significance of difference between two sample means are as follows:
Step 1: Setting up Hypotheses
Null Hypothesis H  : μ = μ  , i.e., two independent population means are
equal. In other words, there is no significant difference between the
sample means.
Alternative hypothesis: Any one of the following alternative hypothesis will
be set while solving the problems.
i. H : μ  μ  , i.e., two independent population means are not equal.
In other words, there is significant difference between the sample
means. [Two-tailed test]
ii. H : μ  μ , i.e., the mean of the first population is greater than the
mean of the second population. [Right-tailed test]
iii. H : μ  μ  , i.e., the mean of the first population is less than the
mean of the second population. [Left-tailed test]
Step 2: Level of significance (α)
Choose the appropriate level of significance in advance. The most
commonly used is α = % unless otherwise stated.
Step 3: Test Statistic
Under H  : μ = μ  , the test statistic is
( X  − X  ) − E( X  − X  )
Z=
S.E.(X  − X  )
( X  − X  ) − ( μ − μ  )
Z= ~ N(,)
σ  σ  
+
n n
214 …Statistical Methods
X − X 
Z= ~ N(,) … (5.7)
σ σ  
+
n n
Where,
S.E.(X  − X  ) = Standard error of difference of two means
σ  σ  
= +
n n
X  = Sample mean of the 1st population
X  = Sample mean of the 2nd population
σ = Variance of the 1st population
σ   = Variance of the 2nd population
n = Size of the sample taken from 1st population
n  = Size of the sample taken from 2nd population
If the population variances σ and σ   are known, then (5.7) is used. If
σ and σ   are unknown, then we use estimate of population variances
provided by the sample variances, i.e., σˆ = s and σˆ   = s  .
Then, the test statistic Z is given by
X − X 
Z= ~ N(,) … (5.8)
s s  
+
n n

Step 4: Critical value

The critical or tabulated value of the test statistic Z at the pre-specified
level of significance is obtained from the area under normal curve.

Step 5: Decision
i. If the calculated value of Z is less or equal to the tabulated value of
Z, then we accept H 0 , i.e., the two population means are equal. In
other words, there is no significant difference between the sample
means.
ii. If the calculated value of Z is greater than the tabulated value of Z,
then we reject H 0 , i.e., the two population means are not equal. In
other words, there is no significant difference between the sample
means.
 Testing of Hypothesis… 215
Remarks: If σ = σ   = σ  and hence we want to test whether two
independent samples have come from the same population then
under H  : μ = μ  , the test statistic is given by
(X  − X  )
Z= ~ N(,) … (5.9)
  
σ   + 
 n n 
If  2 is equation (5.9) is not known, then its estimate is based on both
sample variances and is given by
n1 s1 2 + n2 s 2 2
ˆ 2 = ; for large samples.
n1 + n2
Example 10
In a certain factory there are two independent processes for manufacturing
the same item. The average weight in a sample of 250 items produced from
one process is found to be 120 grams with a standard deviation of 12
grams, while from the other process are 124 grams and 14 grams in a
sample of 400 items. Is the difference between the mean weights
significant at 5% level of significance?
Solution: We are given,
For Process 1
Number of items (n ) = 
Average sample weight (X  ) =  grams
Sample Standard deviation (s1) = 12 grams
For Process 2
Number of items (n ) = 
Average sample weight (X  ) =  grams
Sample Standard deviation (s2) = 14 grams
Setting up Hypotheses:
Null Hypothesis H  : μ = μ  , i.e., there is no significant difference between
the mean weights of items manufactured by two independent processes.
Alternative Hypothesis H 1 : 1   2 , i.e., there is significant difference
between the mean weights of items manufactured by two independent
processes. [Two-tailed test]
Level of significance: It is given that the level of significance α = % .
Test Statistic: Under H  , the test statistic is
X − X 
Z=
s s  
+
n n
216 …Statistical Methods
 − 
= = −.
   
+
 
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for two tailed test is . , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that there is significant difference between the mean
weights of items manufactured by two independent processes.
Example 11
The average weekly wages of a sample of 200 workers in an industry A was
Rs. 1150 with standard deviation of Rs. 100. The average weekly wages of a
sample of 300 workers in an industry B was Rs. 1000 with standard
deviation of Rs. 50. Can we consider the weekly wages paid by industry A is
higher than those paid by industry B?
Solution: We are given,
For Industry A
Number of workers (n ) = 200
Average weekly wages ( X  ) = Rs. 1150
S.D. of wages (s ) = Rs. 100
For Industry B
Number of workers (n  ) =300
Average weekly wages ( X  ) = Rs. 1000
S.D. of wages (s  ) = Rs. 50
Setting up Hypotheses:
Null Hypothesis H  : μ = μ  , i.e., the weekly wages paid by industry A and
industry B are equal.
Alternative Hypothesis H 1 : 1   2 , i.e., the weekly wages paid by
industry A is higher than those paid by industry B. [Right-tailed test]
Level of significance: Since the level of significance is not given we
take  = 0.05 .
Test Statistic: Under H  , the test statistic is
 Testing of Hypothesis… 217
X − X   − 
Z= = = .
s s      
+ +
n n  
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for right tailed test is . , i.e., Z . = . .
Decision: Since the calculated value of test statistic Z = . is greater
than the critical value Z . = . , H  is rejected and H is accepted.
Hence we conclude that the weekly wages paid by industry A is higher than
those paid by industry B.
Example 12
A company claims that its light bulbs are superior to those of a competitor
based on study, which showed that a sample of 40 of its bulbs had an
average lifetime of 628 hours of continuous use with a standard deviation
of 27 hours. While a sample of 30 bulbs made by the competitor had an
average lifetime of 619 hours of continuous use with a standard deviation
of 25 hours. Check, at 5% level of significance, whether the claim is
justified.
Solution: We are given,
For concerned company
No. of bulbs (n ) = 40
Average life time of bulbs ( X  ) = 628 hours
S.D. lifetime of bulbs (s ) = 27 hours
For competitor
No. of bulbs (n  ) = 30
Average life time of bulbs ( X  ) = 619 hours
S.D. lifetime of bulbs (s  ) = 25 hours
Setting up Hypotheses:
Null Hypothesis H  : μ = μ  , i.e., the average lifetime of bulbs
manufactured by the company and its competitor are same. In other
words, the claim of the company is not justified.
Alternative Hypothesis H 1 : 1   2 , i.e., the average lifetime of bulbs
manufactured by the company is superior to those of a competitor. In
other words, the claim of the company is justified. [Right-tailed test]
Level of significance: It is given that the level of significance α = % .
Test Statistic: Under H  , the test statistic is
218 …Statistical Methods
X − X   − 
Z= = = .
s s      
+ +
n n  
 Z = .
Critical value: The critical or tabulated value of the test statistic Z at 5%
level of significance for right tailed test is 1.645 i.e., Z 0.05 = 1.645 .
Decision: Since the calculated value of test statistic Z = . is less than
the critical value Z 0.05 = 1.645 , H  is accepted. Hence we conclude that the
average lifetime of bulbs manufactured by the company and competitor
are same. In other words, the claim of the company is not justified.

Exercise 5(A)
Theoretical Problems
1. What is hypothesis and testing of hypothesis? What are the
importances of hypothesis testing in decision making?
2. Discuss different steps used in testing of hypothesis.
3. Define the following terms: (a) Null hypothesis and Alternative
hypothesis (b) Type I error and Type II error (c) Level of significance (d)
one tailed and two tailed tests (e) Acceptance and Rejection region.
Numerical problems
1. An aircraft manufacturer needs to buy aluminum sheets of 0.05 inches
in thickness. Thinner sheets would not be appropriate and the thicker
sheets would be too heavy. The aircraft manufacturer takes a random
sample of 100 sheets and finds that their average thickness is 0.048
inches with a standard deviation of 0.01 inches. Should the
manufacturer buy the aluminum sheets from the supplier if he wants
to make the decision at 5% level of significance?
2. A sample of 100 units is found to have mean 99. Test at 5% level of
significance; whether the sample has been drawn from a normal
population with mean 100 and standard deviation 8.
3. The mean lifetime of a sample of 400 fluorescent light bulb produced
by a company is found to be 1570 hours with a standard deviation of
150 hours. Test the hypothesis that the mean lifetime of the bulbs
produced by the company is at least 1600 hours at 1% level of
significance.
4. A stenographer claims that she can type at the rate of 120 words per
minute. Can we reject her claim based on 100 trials in which she
demonstrates a mean of 116 words with a standard deviation of 15
words? Use 5% level of significance.
5. The mean breaking strength of the cables supplied by a manufacturer
is 1800 pounds (lb) with a standard deviation of 100 lb. By a new
 Testing of Hypothesis… 219
technique in the manufacturing process, it is claimed that the breaking
strength of the cables has increased. In order to test this claim a
sample of 50 cables is tested and it is found that the mean breaking
strength is 1850 lb. Can we support the claim at a 1% level of
significance?
6. The manufactures of a certain brand of auto batteries claims that the
mean life of these batteries is 45 months. A consumer protection
agency wants to check this claim and took a random sample of 36 such
batteries and found that the mean life for this sample is 43.75 months
with a standard deviation of 4.5 months. Test the claim of the
manufacturer at 5% level of significance.
7. The mayor of a large city claims that the average net worth of families
living in this city is at least Rs. 300,000. A random sample of 100
families selected from this city produced a mean net worth of Rs.
288,000 with a standard deviation of Rs. 80,000. Using the 5% level of
significance level, can you conclude that the mayor’s claim is false?
8. A sample of 100 households in a certain community has an average
income of Rs. 628 per week with a standard deviation of Rs. 60. Find
the standard error of the mean and determine 99% confidence limits
within which the income of all the people in this community is
expected to lie. Also, test the hypothesis that the average income was
Rs. 640 per week.
9. A restaurant company has a policy of opening new restaurants only in
those areas that have a mean household income of at least Rs. 35,000
per months. The company is currently considering an area in which to
open a new restaurant. The company’s research department took a
sample of 150 households from this area and found that the mean
income of these households is Rs. 33,400 per months with a standard
deviation of Rs. 5,400. Using the 1% level of significance, would you
conclude that the company should not open a restaurant in this area?
10. A consumer advocacy group suspects that a local supermarket’s 10-
ounce packages of certain kind of Cheese actually weigh less than 10
ounces. The group took a random sample of 36 such packages,
weighted each one, and found that the mean weight for the sample to
be 9.995 ounces with a standard deviation of 0.15 ounce. Using 5%
significance level, would you conclude that the mean weight for all
such packages is less than 10 ounces? What is your decision if you test
at 1% level of significance?
11. The Still company manufacturer steel bars. If the production process is
working properly, it turns out steel bars with mean length of at least
2.8 feet with a standard deviation of 0.20 feet. Longer steel bars can
be used or altered, but shorter bars must be scrapped. A sample of 36
bars is selected from the production line and the sample mean was
220 …Statistical Methods
found to be 2.73 feet. Test whether the production process needs
adjustment.
12. If 60 MA economics students are found to have a mean height of 63.60
inches and a 50 MBS students have a mean height of 69.51 inches.
Would you conclude that management students are taller than
economics students? Assume that standard deviation of height of post
graduate students to be 2.24 inches.
13. A certain college conducts both morning and evening classes intended
to be identical. A random sample of 200-morning class students yields
examination result as average score of 72.4 with a standard deviation
of 14.8. A random sample of 100-night class students yields
examination result as average score of 73.9 with a standard deviation
of 17.9. Is the average score of morning and evening classes
statistically equal at 5% level of significance?
14. In a random sample of 100 electric light tubes of manufacturer A have
a mean lifetime of 1400 hours with a standard deviation of 200 hours,
while in a random sample of 150 of manufacturer B have a mean
lifetime of 1200 hours with a standard deviation of 100 hours. Can we
conclude that the mean lifetime of two manufacturers are significantly
different?
15. A firm believes that the tyres produced by process A on an average last
longer than tyres produced by process B. To test this belief, random
samples of tyres produced by the two processes were tested and the
results are:
Process sample size Average lifetime( in km) S.D. (in km)
A 50 22,400 1000
B 50 21,800 1000
Is there evidence at a 5 per cent level of significance that the firm is
correct in its belief?
16. A person buys 100 electric tubes of each of two well-known makes,
taken at random from stock for testing purpose. He finds that ‘make A’
has a mean life of 1,300 hours with a standard deviation of 82 hours,
and ‘make B’ has a mean life of 1,248 hours with a standard deviation
of 93 hours. Discuss the significance of these results. Which make of
electric tubes should the person buy?
17. Samples of the two types of electric bulbs were tested for length of life
and following results was obtained.
Type I n1 = 50 X 1 = 1234 hrs s1 = 36 hrs
Type II n 2 = 50 X 2 = 1036hrs s 2 = 40 hrs
Is the difference in the means sufficient to warrant that Type I is
superior to Type II regarding to the length of life? [MBS 2063]
 Testing of Hypothesis… 221
18. The mean height of 50 students who showed above average
participation in athletes was 68.2 inches with a standard deviation of
2.5 inches; while 50 students who showed no interest in such
participation had a mean height of 67.5 inches with a standard
deviation of 2.8 inches. Test the hypothesis that students who
participate in athletics are taller than other students.
19. The average numbers of articles produced by two machines per day
are 200 and 210 with standard deviation 20 and 15 respectively, on the
basis of records of 50 days production. Can we regard both machines
are equally efficient.
20. A study on expenditure behavior of tourists in Nepal revealed that the
average expenditure of 100 European tourists per day is NRs. 9,200
with standard deviation of NRs. 600. Also, the average expenditure of
100 American tourists per day is NRs. 10,000 with standard deviation
of NRs. 500. Can you conclude that the expenditure behavior of
European and American tourists are same? [MBS 2059]
21. A college conducts survey to test whether there is any difference of
score in assessment in the subject ‘Research Methodology and
Statistical Methods’ for morning and day-program students. A sample
of 50 students in the morning yield average score in assessment as
80% with s.d. 14%. Similarly, a sample of 50 students in day program
yield average assessment score of 92% with s.d. 25%. Based on the
data what conclusion do you make? [TU 2065]
Answer Sheet
1. Z = . Reject H0, 2. Z = . , accept H 
3. Z = . , reject H  4. Z = . , reject H 
5. Z = . , reject H  6. Z = . , reject H 
7. Z = . , accept H 
8. Z = . , accept H  , limits= (612.54, 643.46), S.E.(X ) = 
9. Z = . , reject H  10. Z = . , accept H 
11. Z = . reject H0 12. Z = 12.45 reject H0
13. Z = . , accept H0, 14. Z = . reject H0
15. Z =  , reject H0, 16. Z = . reject H0
17. Z = . reject H0 18. Z = . , accept H0,
19. Z = . reject H0 20. Z = . reject H0
21. Z = 2.96 reject H0