QM- I Tute Sheet 4| Section a and c August 16, 2010

Q1. Bhavana, an employee of Karuna Lights and Tubes which is a manufacturer of electric bulbs, is trying to estimate the average lifetime of bulbs produced on a particular day. Based on the previous production, she had estimated the standard deviation (sigma) of the lifetime. After taking a sample of 100, she had calculated a two-sided 95% confidence interval whose lower limit turned out to be 830.5 hours. When the management complained that the width of the confidence interval is too large, she simply reduced the confidence level to .90 (still two-sided) and came up with a lower limit of the confidence interval at 836.8 hours. The management is willing to accept an estimate of the mean that is within 19.6 above or below the point estimate but the chances of this estimate being incorrect must be only 1 in 20. 1. What was the original two sided 95% confidence interval of the lifetime? 2. What was the revised confidence interval with a confidence level of .95? 3. What should be the sample size to satisfy the requirements of the management? 4. When Bhavana selected a new sample with size as determined in (3) above, the sample mean turned out to be 30 hours more than the previous sample mean. Calculate the two-sided confidence interval as desired by the management, based on the new sample. Q2. A large group of 6400 students had taken a Statistics test and the percentage scores are found to be normally distributed with mean mu and standard deviation sigma. The coefficient of variation was found to be 20%. The absentminded professor forgot the values of mu and sigma, but nevertheless remembered that a one-sided confidence interval for mu with a confidence level of 78.81% yielded a lower limit of 49. Of course, he remembered that the sample size used was 64. 1. Find the values of mu and sigma. 2. If all the students who scored 70% or more obtained an "A" Grade, what percentage of the entire group did obtain an "A" Grade? 3. If three students from the group are selected at random, what is the probability that all the three obtained an "A" Grade? Q3. The weight of oranges produced by the Money-Worth Orchards is distributed normally with mean mu and standard deviation sigma. 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 Money-Worth Orchards estimated a two-sided 95% confidence interval for mu based on the known value of sigma, 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 sigma? 2. What is the value of mu? 3. What percentage of the production was sold to the local fruit juice factory? Q4. The Indian army, after the recent clashes decided to evaluate a new gun called Bi-fours (it is so called because its range is claimed to be at least16 kms). They have hired the services of Kanaka, who recently graduated from IIMB. Kanaka selected a simple random sample of size 25 and calculated the sample average. Based on the sample average and the as given by the manufacturers, she calculated a 90%, two sided confidence interval for the . When she increased the confidence level to 95%, the width of the interval increased by 504 meters. 1. 2. 3. What is the value of ? What is the standard error of the sample mean? What should be sample size, if she wants to achieve a confidence level of 95% and at the same time retain the width of the 90% confidence interval that she got with a sample size of 25.

4. What percentage of the sample means will fall with in 1000 meters of the population mean () (use sample size 25) 5. Kanaka decided to test the claim of the manufacturers using a one sided hypothesis test. If she has obtained a sample mean (from the sample of 25 observations) of 17,600 meters, what is the maximum possible value for ? State clearly, your null and alternate hypotheses.

Q5. A wholesaler of milk products serves a city with 3 distinctly different market areas. To decide how to allocate sales efforts, the wholesaler wants to obtain an estimate of the mean monthly expenditure on milk products per household in the city. Random samples are to be selected from each of the market areas for this purpose. The number of households and the cost of interviewing (per household) in each market area along with the estimated variance in monthly expenditure on milk products is given below: Area 1 Households Variance Cost (Rs.) 20,000 324 16 Area2 Area3

10,000 50,000 225 4 144 9

If a total of 80 households are to be sampled: 1. Find the number of households to be sampled from each of the market areas if only the varying number of households is to be taken into account. 2. Revise this sampling strategy by taking into consideration the fact that the estimated variances of expenditure on milk products in the three areas is not the same. 3. Is there any advantage in revising the strategy as stated above? Why or why not? Explain. Show all work needed to support your answer. 4. Considering that the total budget allocated for the sampling in only Rs. 700 , determine the sample size and the allocation across the three market areas such that the variance of the overall sample mean is minimized and the expenditure does not cross the budget. Compare this strategy with the two above and comment on which you think is the best. Q6. Citizens for Democracy, a civil society organization wants to find out the extent of errors in voter rolls. Earlier experience shows that there are significant differences between urban and rural populations. Based on past experience they estimate that there are 40% errors in Bangalore and 20% in Bangalore Rural. Bangalore and Bangalore Rural have a population of 40 lakh each.

(i) (ii) (iii) (iv)

What sample size should they choose in Bangalore to ensure that the standard error in Bangalore is 1%? What sample size should they choose in Bangalore Rural to ensure that the standard error in Bangalore Rural is 1%? What is the overall standard error? Their budget is limited to Rs.3000. It costs Rs.1 per person in Bangalore and Rs.2 per person in Bangalore Rural. What is the optimum allocation of money and sample size in each area?

Suppose in a sample of 2000 in Bangalore they found 800 errors. Based on this information alone, what is the 95% confidence interval for proportion of errors in Bangalore? Q7) The Ever Effective advertising company is constructing an aptitude test for a job. Mr. Sukumar, the HRD manager, feels that it is important to plan for a fairly large variance in the test scores so that the best applicants can be easily identified. For a certain test, scores are assumed to be normally distributed with a mean of 80 and a standard deviation of 10. Ten applicants are to take the aptitude test.

1. Find the approximate probability that the sample variance of the scores for these applicants is greater than 200. 2. Give an interval that will contain the sample variances 90% of the time. 3. Is the interval that you obtained in 2. the only interval that will contain the sample variances 90% of the time? Explain. 4. The ten applicants were also required to take another test the company has designed for the purpose of comparison and use in the future. The variance of the scores obtained by the 10 candidates on this test was found to be 50. Can you conclude from this that the variances for the two tests designed are different? State any assumptions that you make. Q8) Many public polling agencies conduct surveys to determine the current consumer sentiment concerning the state of the economy. One such agency randomly sampled 484 consumers and found that 257 were optimistic about the state of the economy.

1. 2. 3.

Develop a 95% confidence interval for the proportion of consumers who are optimistic about the state of the economy. Based on the above, is it possible to conclude that the majority of the consumers are optimistic about the state of the economy? If the true proportion of consumers optimistic about the economy was 0.5, what is the probability that 257 or more in a sample of 484 are optimistic about the state of the economy?