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Flordia Homes

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Scenario 1
The vice president of operations for a veterinary supply company has designed a new quality control process that she believes will significantly reduce the reject rate in the packing line for bottles of equine glucosamine from its historical level of 32 units per 1,000. She now wants to implement a pilot of this process and use it to see whether the data support her belief.
• What is the null hypothesis for this test?
H0: the reject rate in the packing line for bottles of equine glucosamine is equal to or greater than 32 units per 1,000.
Numerically, we write: H0: u => 32 units/1,000
• In the context of this scenario, what would be the consequences of making a Type I error?
A Type I error occurs when we reject H0, when it is true. In this case, a Type I would result from concluding that the reject rate in the packing line is not equal to or greater than 32 units per 1,000, when in reality it is actually equal to or greater than 32 units per 1,000.
The consequences, would be that the VP of operations would implement the new process, when in reality it would not reduce the rate. Customers may feel deceived and could impact on revenue.
• In the context of this scenario, what would be the consequences of making a Type II error?
A Type II error occurs when we do not reject H0 when it is false. In this case, a Type II error would result from concluding that the reject rate in the packing line is equal to or greater than 32 units per 1,000. The consequences of the Type II error would be that the VP of operations would not implement the new process, when in fact it improves the process. The company would not be advertising an improvement in process.

Scenario 2
Playbill Magazine had reported that the mean annual household income of its readers is $119,155. The most recent random sample of 80 households taken from its subscription list had a

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