The admitting office at Sisters of Mercy Hospital wants to be able to inform pat

Question

The admitting office at Sisters of Mercy Hospital wants to be able to inform patients of the average level of expenses they can expect per day. Historically, the average has been approximately $ 1, 240. The office would like to know if there is evidence of an increase in the average daily billing. 20 randomly selected patients have an average daily charge of $ 1, 491. with a standard deviation of $ 342 a) Conduct the hypothesis test to determine whether there is evidence that average daily charges have increased at alpha = 0.1 b) What assumption did you make in performing the test in part b?

Explanation / Answer

Part-a

Null hypothesis H0; =1240 versus alternative H1: >1240

Test statistic t= (xbar-1240)/(s/sqrt(n))

=(1491-1240)/(342/sqrt(20))

=3.2822

Degree of freedom =n-1=20-1=19

p-value=0.0020 using excel function =TDIST(3.2822,19,1)

As calculate p-value<0.10 we reject the null hypothesis and conclude that there is a evidence of an increase in the average daily billing

Part-b

We need to assume normality of sample for test to be valid.

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