Question

In: Statistics and Probability

all hypothesis testing problems must include the null and alternative hypotheses and report the p-value of...

all hypothesis testing problems must include the null and alternative hypotheses and report the p-value of the data.

A company is said to be out of compliance if more than 7% of all invoices contain errors, and it is said to be seriously out of compliance if more than 10% of all invoices contain errors. Suppose an auditor randomly selects a sample of 640 invoices and finds that 80 contained errors.
a) Construct a 95% confidence interval for this company's error rate.
b) How should the company be rated if statements about being out of compliance or seriously out of compliance require 5% level of significance?
c) What is the probability a company would be rated as seriously out of compliance by this test if 12% of all invoices at that company contain errors?
d) What sample size should the auditor use to estimate the error rate to within 3% with 99% confidence if it is assumed that the error rate will be no more than 12%?

Solutions

Expert Solution

Part A:

Part B:

For Seriously Out of Compliance

For being Out of Compliance

Part C:

:

Part D:

So, n = (2.56)2*(0.125*0.875)/0.032 = 796.44 or 796

So, the sample size should be 796...

End of the Solution...

orchestra answered 2 years ago
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