Question

A company manager plans to purchase a machine. The company requires a high quality machine. The manager is currently considering two companies that supply this machine. The machine from company A can produce approximately1050 units in average per day, but the standard deviation of this machine is about 250 units per day; while the machine from company B can produce approximately 900 units in average per day, but the standard deviation of this machine is about 100 units per day. Both of these two companies guarantee at least 10 years life. In addition, both prices are similar although machine A is a little bit higher. Price is not the main concern for the manager because both prices are under their budget. However, the manager cannot decide which machine should be purchased, because he is not sure what test he needs to conduct. Can you recommend the manager what test the manager should conduct? Should the manager conduct the test about the difference between two population means or the test about the difference between two population variances or both? Discuss and explain your reasons. You must provide your statistical analysis and reasons.

Answer 1

The manager should conduct both tests: (i) the test about the difference between two population variances.AND (ii) the test about the difference between two population means.

Explanation:

We note that there is vast difference between standard deviation of Company A: 250 and standard deviation of Company B: 100. For Hypothesis Test of significance of difference between 2 independet means, the methodlogy of calculating the Test Statistic is different from whether there is significance difference between standard deviation of the 2 samples or not.