Question

For each of the scenarios below, select whether a correct decision, a type I error, or a type II error was made.

1- A marketing manager determines that an increase in expenditure for a particular stream of social-media marketing will not result in an increase in the number of customers reached by that stream. After increasing the expenditure, the manager installs a tracking app that confirms the number of customers reached has not increased.

2-Looking at the results of an employee survey, an HR manager concludes that employees have been negatively impacted financially after their office was relocated to a new building. After further examination by the finance department, it is shown that their employees have been spending more on travelling costs due to the move.

3-A finance manager informs the CEO that the new product they have launched has generated above-average revenue. Further analysis of the data shows that no remarkable change in the average revenue has occurred.

4- After having conducted a customer satisfaction survey, a sales manager determines that customers are less satisfied with the company’s service compared to the same quarter last year. Analysis of the financial results indicates that a significant percentage of customers cancelled their subscription to the company’s service in the last quarter.

5- After an extended period of abnormal weather, a line manager concludes that the weather has had no impact on the production capabilities of the employees he manages. At the end of the financial period, it is shown that there was a decrease in production during the period of abnormal weather.

6-An office manager informs the housekeeping staff that a newly developed cleaning product will not have an impact on their health. A year after implementing the use of the new product, the housekeeping staff undergo routine medical evaluations and the doctor determines that their overall health has deteriorated.

7- A call-centre manager implements a new software system, claiming that it will increase the average number of calls the centre can attend to in rapid succession. In the long run, the data show that there was no change in the average number of calls attended to.

Question 2

A project manager is investigating the impact that a change in production schedule will have on the overall project. She states the null hypothesis as follows: “Extending the project timeline by one week will not result in increased project costs”. The alternative hypothesis is defined as follows: “Extending the project timeline by one week will result in increased project costs”. For each of the four possible scenarios below, select whether a correct decision, a type I error, or a type II error was made.

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1-The project manager determined that the timeline shift would result in increased project costs, when in fact no increase in costs occurred. 2- The project manager determined that the timeline shift would not result in increased project costs, when in fact no increase in costs occurred. 3- The project manager determined that the timeline shift would result in increased project costs, when in fact an increase in costs occurred. 4- The project manager determined that the timeline shift would not result in increased project costs, when in fact an increase in costs occurred.

Choose...Type II error Correct decision Type I error

Answer 1

Solution: Question 1

1. A marketing manager determines that an increase in expenditure for a particular stream of social-media marketing will not result in an increase in the number of customers reached by that stream.

If the determination of the fact is the null hypothesis, the marketing manager proceeds to increase the expenditure on the stream. This implies that, the manager rejects a true null hypothesis. Therefore he commits Type-I error.

2. Looking at the results of an employee survey, an HR manager concludes that employees have been negatively impacted financially after their office was relocated to a new building. After further examination by the finance department, it is shown that their employees have been spending more on travelling costs due to the move.

In this case, the null hypothesis is negative financial impact on employees and study shows that it is true indeed. Hence, the conclusion of the HR manager is correct.

3. A finance manager informs the CEO that the new product they have launched has generated above-average revenue. Further analysis of the data shows that no remarkable change in the average revenue has occurred.

If the null hypothesis in this case is that the new product has generated above average revenue and it is found to be false. Hence the finance manager has committed a type-II error by failing to reject a wrong null hypothesis.

4. After having conducted a customer satisfaction survey, a sales manager determines that customers are less satisfied with the company’s service compared to the same quarter last year. Analysis of the financial results indicates that a significant percentage of customers cancelled their subscription to the company’s service in the last quarter.

If the null hypothesis in this case is that, customers are less satisfied with the company’s service compared to the same quarter last year and further analysis shows that a significant percentage of customers cancelled their subscription to the company’s service in the last quarter. Hence, the sales manager has identfied the hypothesis correctly and hence has made a correct decision.