Please provide explanation of the process followed to solve, step by step. The G

Question

Please provide explanation of the process followed to solve, step by step.

The General Accounting Ofice (GAO) is responsible for evaluating the per- that as an yee of GAO you have been asked to evaluate the performance of four major defense contractors with respect to cost overruns. The government selects the lowest competitive bid that meets the specification required for the formance of various components of the federal government. Assume emplo project assuming that the firm also meets certain other standards Since many of the projects commissioned by the Department of Defense nique, new, and unproved technologies, accurate cost projections are involve u difficult. Therefore, the government often pays for cost o verruns by the con- costs to ensure getting the contracts. They hope that the government will cover tractors. Your agency is concerned that some of the firms are underestimating their overrun t this, you randomly select 10 percent of the contracts awarded to ch of the four major firms in the past two years and record the number of m- any A completed 25 of 36 within budget. Company B completed 32 of 44 within budget. Company C had 11 of 15 within budget, while D had 20 of 29 To test contracts involving overruns and the number completed within budget. Co within budget What conclusion, if any. can you draw from these data?

Explanation / Answer

Here, the Null hypothesis is: The contractor firm underestimates the costs to ensure getting contracts.

Alternate hypothesis is: The contractor firm does not underestimate the costs to ensure getting contracts.

In order to test the hypothesis, the data is collected for 4 of the contractor firms.

Under the assumption, that the randomly selected 10% of the projects, for each of the firm, is sufficiently representative of the true population data i.e. full set of projects carried out by each firm, we observe the follwoing :

Company       % of projects completed within budget

   A                             69.44

    B                            72.72

    C                             73.33

   D                             68.96

Since, the % of projects completed within budget is greater than 65% for each of the companies, it is sufficient evidence to reject the null hypothesis. Therefore, we conclude that - The contractor firm does not underestimate the costs to ensure getting contracts.

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