Statistics For Management, 7e Authors: Sanjay Rastogi and Masood H. Siddiqui

Chapter 8
Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.

Testing Hypotheses: One-sample
Tests
Statistics for Management, 7e Authors: Sanjay Rastogi and Masood H. Siddiqui

Testing Hypothesis Procedure
• Hypothesis testing begins with an assumption, called a

hypothesis, that we make about a population parameter.
• Hypothesis testing is about making inferences about a

population from only a small sample.
• The bottom line in hypothesis testing is when we ask whether

a population like we think this one is would be likely to
produce a sample like the one we are looking at.

Testing Hypothesis
• In hypothesis testing, we must state the assumed or

hypothesized value of the population parameter before we
begin sampling.
• The assumption we wish to test is called the null hypothesis.
• Whenever we reject the hypothesis, the conclusion we do

accept is called alternative hypothesis.
• The purpose of hypothesis testing is not to question the

computed value of the sample statistic but to make a
judgment about the difference between that sample statistic
and a hypothesized population parameter.

• 1. Hypothesis Testing of Means When Population Standard

deviation is Know.
• 2. Hypothesis Testing of Means When Population Standard
deviation is not Know
• 3. Hypothesis Testing of Proportions.

When Population Standard
Deviation is Known
• A manufacturer supplies the rear axles for U.S Postal Service

mail trucks. These axles must be able to withstand 80000
pounds per square inch in stress tests, but an excessively
strong raises production costs significantly. Long experience
indicated that the standard deviation of the strength of it axles
is 4000 pounds per square inch. The manufacturer selects a
sample of 100 axles from production, tests them, and finds
that the mean stress capacity of the sample is 79,600 pounds
per square inch. If the axle manufacturer uses a significance
level (Alpha) of 0.05 in testing. Will the axles meet his stress
requirement.

• A company that is evaluating the promotability of its

employees, that is, determining the proportion whose ability,
training and supervisory experience qualify them for
promotion to next level of management. The human resource
director tells the president that roughly 80% of the employees
in the company are “promotable”. The president assembles a
special committee to assess the promotability of all employee.
This committee conducts in-depth interview with 150
employees and find that in its judgment only 70% of the
sample are qualified for promotion. The president wants to
test at the 0.05 significance level the hypothesis that 0.8 of
the employees are promotable.

• S.E for Proportions(σp: √(pH qH )/n

0 0

• A HR manager of a major corporation is recruiting a large

number of employees for an overseas assignment. During the
testing process, management asks how things are going , she
replies,” Fine. I think the average score on the aptitude test
will be around 90.” When management reviews 20 of the test
results compiled, it finds that the mean score is 84, and the
standard deviation of this score is 11.
If management wants to test her hypothesis at the 0.10 level of
significance, what is the procedure?

Hypothesis Testing of Means when σ is
Known

• Decide whether this is a two-tailed or a one-tailed test. State
your hypothesis. Select level of significance appropriate for
this decision.
• Decide which distribution is appropriate t or z, find critical

value for specified level of significance.
• Calculate standard error of the sample statistic. Use standard

error of the sample statistic to a standardized value.
• Compare the value of the standardized sample statistic with

the critical value for this test and interpret the result.

Measuring the Power of a Hypothesis
Test
• Ideally α & β should both be small. Once we decide on the

significance level, there is nothing else we can do about α.
• Rejecting a null hypothesis when it is false is exactly what a

good test should do, a high value of (1 – β) means the test is
working quite well and since (1 – β) is the measure of how
well the test is working, it is known as power of the test.
• Plot of (1 – β) for each value of test statistic for alternate

hypothesis, the resulting curve is known as power curve.

Hypothesis Testing of Proportions:
Large Samples

• When we are doing hypothesis test involving proportions, we
use the binomial distribution as the sampling distribution,
unless n.p and n.q are both at least 5.
• In this case use normal distribution as an approximation of

the binomial distribution.

Hypothesis Testing of Means when σ is
Not Known
• Decide whether this is a two-tailed or a one-tailed test. State

your hypothesis. Select level of significance appropriate for
this decision.
• Decide which distribution is appropriate t or z, find critical

value for specified level of significance.
• Estimate population standard deviation using sample

standard deviation.
• Compare the value of the standardized sample statistic with

the critical value for this test and interpret the result.

One Sample t-test

• The one-sample t-test compares the mean score of a sample
to a known value. Usually, the known value is a population
mean.
• The underlying assumption is that dependent variable is

normally distributed.
• Hypothesis
H0: There is no significant difference between the sample
mean and the population mean.
H1: There is a significant difference between the sample
mean and the population mean.

Statistics For Management, 7e Authors: Sanjay Rastogi and Masood H. Siddiqui

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Chapter 8

Copyright © 2013 Dorling Kindersley (India) Pvt. Ltd.