Question

Some accounting firms give the client an option to pay a fee when the tax return is completed that guarantees tax advices and support from the accountant if the client were audited. A large accounting firm is trying to determine what fee to charge for next year's returns. In previous years, the actual mean cost to the firm for attending a client audit session was $730. To determine if this cost has changed, the firm randomly samples 35 client audit fees. The sample mean audit cost was $710 with a standard deviation of $65. Complete parts a and b below.

a) Develop a 99% confidence interval estimate for the mean audit cost. The 99% confidence interval for the mean audit cost is (SDO (Round to the nearest dollar as needed.) b) Based on your confidence interval, what do you think of the claim that the mean cost has changed? 0 A. The interval contains the historical mean $730, which supports the claim that the mean cost has changed ° C. The interval does not contain the historical mean $730, which supports claim that the mean cost has changed D. The interval does not contain the historical mean $730, which does not support the claim that the mean cost has changed

Answer 1

Date: 22/05/2019 Answer a) The 99% confidence interval for the mean audit cost is. First, compute t-critical value then find confidence interval. The t critical value for the 99% confidence interval is. The sample size is small and two-tailed test. Look in the column headed α-001 and the row headed in the t distribution table by using degree of freedom is, d.f.-n-1 35-1 -34 The t critical value for the 99% confidence interval is 2.728. -$710 t 2.728 x $65/v35 -$710 + $29.98 - $680.02 to $739.98 $680 to $740

interval for the mean audit costs S650 to $740 The 99% confidence interval for the mean audit cost is $680 to $740 b) Based on confidence interval, the 99% confidence interval for the mean audit cost is between S680 and $740 does contain the historical mean $730, it does not think of claim that the mean cost changed $730 The answer is B