Paying high prices? A retailer entered into an exclusive agreement with a supplier who

Chapter 9, Problem 68

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QUESTION:

Paying high prices? A retailer entered into an exclusive agreement with a supplier who guaranteed to provide all products at competitive prices. The retailer eventually began to purchase supplies from other vendors who offered better prices. The original supplier filed a lawsuit claiming violation of the agreement. In defense, the retailer had an audit performed on a random sample of 25 invoices. For each audited invoice, all purchases made from other suppliers were examined and compared with those offered by the original supplier. The percent of purchases on each invoice for which an alternative supplier offered a lower price than the original supplier was recorded.21 For example, a data value of 38 means that the price would be lower with a different supplier for 38% of the items on the invoice. A histogram and some computer output for these data are shown below. Explain why we should not carry out a one-sample t test in this setting. 0 14 Frequency 12 10 8 6 4 2 0 20 40 60 80 100 120 Percent lower Summary statistics Column n Mean Std. Dev. Std. Err. Median Min Max Q1 Q3 pctlower 25 77.76 32.6768 6.5353603 100 0 100 68 100

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QUESTION:

Paying high prices? A retailer entered into an exclusive agreement with a supplier who guaranteed to provide all products at competitive prices. The retailer eventually began to purchase supplies from other vendors who offered better prices. The original supplier filed a lawsuit claiming violation of the agreement. In defense, the retailer had an audit performed on a random sample of 25 invoices. For each audited invoice, all purchases made from other suppliers were examined and compared with those offered by the original supplier. The percent of purchases on each invoice for which an alternative supplier offered a lower price than the original supplier was recorded.21 For example, a data value of 38 means that the price would be lower with a different supplier for 38% of the items on the invoice. A histogram and some computer output for these data are shown below. Explain why we should not carry out a one-sample t test in this setting. 0 14 Frequency 12 10 8 6 4 2 0 20 40 60 80 100 120 Percent lower Summary statistics Column n Mean Std. Dev. Std. Err. Median Min Max Q1 Q3 pctlower 25 77.76 32.6768 6.5353603 100 0 100 68 100

ANSWER:

Problem 68

Paying high prices? A retailer entered into an exclusive agreement with a supplier who guaranteed to provide all products at competitive prices. The retailer eventually began to purchase supplies from other vendors who offered better prices. The original supplier filed a lawsuit claiming violation of the agreement. In defense, the retailer had an audit performed on a random sample of 25 invoices. For each audited invoice, all purchases made from other suppliers were examined and compared with those offered by the original supplier. The percent of purchases on each invoice for which an alternative supplier offered a lower price than the original supplier was recorded.21 For example, a data value of 38 means that the price would be lower with a different supplier for 38% of the items on the invoice. A histogram and some computer output for these data are shown below. Explain why we should not carry out a one-sample t test in this setting. 0 14 Frequency 12 10 8 6 4 2 0 20 40 60 80 100 120 Percent lower Summary statistics Column n Mean Std. Dev. Std. Err. Median Min Max Q1 Q3 pctlower 25 77.76 32.6768 6.5353603 100 0 100 68 100

Step by Step Solution

Step 1 of 2

Conditions for Performing a Significance Test about a Mean is given as,

     1. Random: The data come from a well-designed random sample or randomized experiment.

     2. Normal/Large Sample: The population has a Normal distribution or the sample size is large (n ? 30). If the population distribution has unknown shape and n < 30, use a graph of the sample data to assess the. Normality of the population. Do not use t procedures if the graph shows strong skewness or outliers.

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