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Budget lapsing at army hospitals. Budget lapsing occurs when unspent funds do not carry over from one budgeting period to the next. Refer to the Journal of Management Accounting Research (Vol. 19, 2007) study on budget lapsing at U.S. Army hospitals, Exercise 2.113 (p. 126). Because budget lapsing often leads to a spike in expenditures at the end of the fiscal year, the researchers recorded expenses per full-time equivalent employee for each in a sample of 1,751 army hospitals. The sample yielded the following summary statistics:x¯=\(6,563 and s=\)2,484. Estimate the mean expenses per full-time equivalent employee of all U.S. Army hospitals using a 90% confidence interval. Interpret the result.

Short Answer

Expert verified

There is 90% confident that the true mean expense per full-time equivalent employee of all U.S. Army hospitals lies between $6565.35 and $6660.65.

Step by step solution

01

Given information

The researchers recorded expenses per full-time equivalent employee for each in a sample of 1,751 army hospitals. The sample yielded the following summary statistics: x¯=$6,563ands=$2,484.

02

Calculating the confidence interval

Assume that the distribution of expenses per full-time equivalent employee is normally distributed.

Here, the confidence coefficient is 0.90.

Therefore,

1-α=0.90α=0.10α2=0.05

From table, the required value for 90% coefficient level is 1.645.

The 90% coefficient interval is obtained below:

x¯+zα2σn=6563±1.645×24841751=6563±97.65=6563-97.65,6563+97.65=6465.35,6660.65

Therefore, the 90% confidence interval is ($6565.35, $6660.65).

03

Interpretation

There is 90% confident that the true mean expense per full-time equivalent employee of all U.S. Army hospitalsμ lies between $6565.35 and $6660.65.

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Most popular questions from this chapter

Question: A random sample of n measurements was selected from a population with unknown meanμand known standard deviationσ2. Calculate a 95% confidence interval forαfor each of the following situations:

a. n = 75, X = 28,σ2= 12

b. n = 200, X= 102, σ2= 22

c. n = 100, X= 15,σ2=.3

d. n = 100, X= 4.05, σ2= .83

e. Is the assumption that the underlying population of measurements is normally distributed necessary to ensure the validity of the confidence intervals in parts a–d? Explain.

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s = 11.9.

a. Give a point estimate for the average number of latex gloves used per week by all health care workers with a latex allergy.

b. Form a 95% confidence interval for the average number of latex gloves used per week by all health care workers with a latex allergy.

c. Give a practical interpretation of the interval, part b.

d. Give the conditions required for the interval, part b, to be valid.

Suppose you have selected a random sample of n = 5 measurements from a normal distribution. Compare the standard normal z-values with the corresponding t-values if you were forming the following confidence intervals.

a. 80% confidence interval

b. 90% confidence interval

c. 95% confidence interval

d. 98% confidence interval

e. 99% confidence interval

f. Use the table values you obtained in parts a–e to sketch the z- and t-distributions. What are the similarities and differences?

A random sample of 225 measurements is selected from a population, and the sample means and standard deviation are x = 32.5 and s = 30.0, respectively.

a. Use a 99% confidence interval to estimate the mean of the population, μ.

b. How large a sample would be needed to estimate m to within .5 with 99% confidence?

c. Use a 99% confidence interval to estimate the population variance, σ2.

d. What is meant by the phrase99% confidence as it is used in this exercise?

Surface roughness of pipe. Refer to the Anti-corrosion Methods and Materials (Vol. 50, 2003) study of the surface roughness of coated interior pipe used in oil fields, Exercise 2.46 (p. 96). The data (in micrometers) for sampled pipe sections are reproduced in the accompanying table; a Minitab analysis of the data appears below.

a.Locate a 95%confidence interval for the mean surface roughness of coated interior pipe on the accompanying Minitab printout.

b.Would you expect the average surface roughness to beas high as 2.5micrometres? Explain.

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