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Steps in Hypothesis Testing

The document outlines the steps for hypothesis testing which include: 1) stating the null and alternative hypotheses, 2) specifying the level of significance, 3) determining the degrees of freedom, 4) finding the critical value, 5) calculating the test statistic, and 6) making a decision by comparing the test statistic to the critical value. It then provides an example where a company wants to test if historical sales percentages still apply by taking a random sample and applying a chi-square test at a 5% significance level.

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Christian Job Reniedo
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53 views1 page

Steps in Hypothesis Testing

The document outlines the steps for hypothesis testing which include: 1) stating the null and alternative hypotheses, 2) specifying the level of significance, 3) determining the degrees of freedom, 4) finding the critical value, 5) calculating the test statistic, and 6) making a decision by comparing the test statistic to the critical value. It then provides an example where a company wants to test if historical sales percentages still apply by taking a random sample and applying a chi-square test at a 5% significance level.

Uploaded by

Christian Job Reniedo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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STEPS IN HYPOTHESIS TESTING

Steps to be considered in conducting test of significance of the observed measurements:


1. Initially, make an assertion regarding the nature of the distribution of the data. GENERALLY, it is assumed that the data under
consideration is normally distributed.
2. Formulate the NULL HYPOTHESIS ( Ho) and ALTERNATIVE HYPOTHESIS ( Ha ).
3. Specify the Level of Significance (α ). The most commonly used values are 1% and 5 %.
4. Determine the degree of freedom, df = (n-1) , for one-sample case and df = ( r – 1 ) ( c – 1 ), for two – variables.
5. Determine the TABULAR VALUE or CRITICAL VALUE from the table.
6. Determine the computed value using statistical tool/formula.
7. Make the decision. Compare the computed value to the critical value.
Take Note: a. If the computed value is LESS THAN the critical value , ACCEPT the Null Hypothesis.
b. If the computed value is GREATER THAN the critical value, REJECT the Null Hypothesis.

PARTIAL TABLE FOR THE TABULAR VALUE or CRITICAL VALUE OF THE CHI-SQUARE TEST
AT 1% AND 5% LEVEL OF SIGNIFICANCE
df 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
0.01(1% 6.634 9.210 11.345 13.277 15.086 16.812 18.475 20.090 21.666 23.209 24.725 26.217 27.688 29.141 30.578
)
0.05(5% 3.841 5.992 7.815 9.488 11.070 12.592 14.067 15.507 16.919 18.307 19.675 21.026 22.363 23.685 24.996
)

HB1. Historically, Mariano-Garcia Company, a manufacturer of LED TV sets is making the following percentage of its sale.
LED Screen Size SMALL MEDIUM LARGE
Sale (%) 40% 40% 20%

To ascertain appropriate production of units for the next production cycle, the production manager took a random sample of
100 purchases during the current period and found out the following:
LED Screen Size SMALL MEDIUM LARGE
Sale (%) 55% 35% 10%
Test the null hypothesis that the historical sales still prevails. Use 5 % level of significance.
Chi-Square ( χ ¿¿ 2)¿
2
χ =Σ ¿ ¿
fo = observed frequency
fe= expected frequency
SOLUTION
1. Null Hypothesis, Ho = _______________________________________________________________
2. Alternative Hypothesis, Ha = __________________________________________________________
3. Degree of Freedom, df = _____________________________________________________________
4. Level of Significance, (α ) = ___________________________________________________________
5. Critical Value = ____________________________________________________________________
6. Computed Value = _________________________________________________________________
Computation:
LED SCREEN SIZE
Small Medium Large
fO 55 35 10
fe 40 40 20
fo – fe = ____________ _____________ _________
( fo – fe )2= ____________ _____________ _________
¿¿ = ____________ _____________ _________
2
χ =Σ ¿ ¿
7. Decision: _________________________________________________________________
8. Compare: _________________________________________________________________

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