Question 2

The Botswana Revenue service has been quoted as claiming that the mean income for residents in Gaborone is BWP 15,000. HMDC is an HR consultancy that wants to test this claim. A sample of 90 residents was taken and the average income was found to be BWP 15,300 with a population standard deviation of BWP1, 000.

Test this claim at a 5% significance level.

i. Test this claim at a 5% significance level. [8]

ii. What would be the effect of testing the claim at 1% significance level? [2]

ii) Due to the war in Ukraine, wheat manufacturing plants in South Africa are considering various options to streamline their manufacturing processes. Currently, the business expects to make a revenue of ZAR 160 000. TIMVO , a business development firm, has been contracted to observe the manufacturing process and has listed the following possible suggestions.

a. Continue to operate at the current capacity.b. Upgrade the entire operating machinery for ZAR 8000. If implemented successfully , an increase in revenue of ZAR 220 000 is expected . If unsuccessful an increase in revenue of ZAR 80 000 is expected. The probability ofsuccessis 0.6.

c. Upgrade the machinery partially focusing only on essential machinery, costing ZAR 4000. If implemented successfully the expected revenue would be expected to be ZAR 200 000 and if unsuccessful revenue would be ZAR 30 000. The probability of successful implementation is 0.8

. Given this information determine the best course of action for the business to undertake and comment on your findings [10]