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    Hypothesis Testing - Heating and Oil Company

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    The director of Heating and Oil at Superior Oil Company is concerned about the high cost of home heating oil being offered to their customers for the upcoming Fall season in Philadelphia, PA. The company has no possibility of modifying the oil price under the current economic conditions. He believes that the company should offer a low cost maintenance contract to foster good will. The director decides to survey a sample of the surrounding towns to see what people are paying for similar home maintenance contracts. The telephone sample of 25 homes indicated that the customers are paying X (bar) = $225.4 and s = $25.20 for a yearly contract.

    a. Using the 0.01 level of significance, is there evidence that the population mean is above $225?
    b. What is your answer in (a) if s = $50 and the 0.10 level of significance is used?
    c. What is your answer in (a) if X (bar) = $279.00 and s = $20.20?

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    Solution Preview

    Hi there,

    Thanks for letting me work on your post. Here is my explanation:

    a. Ho: mu<=225
    Ha: mu>225
    This is a one tailed t test.
    The degree of freedom is 25-1=24.
    The critical t value is ...

    Solution Summary

    The expert examines heating and oil company for hypothesis testing.