Tax-exempt charities. Donations to tax-exempt organizations such as the Red Cross, the Salvation Army, the YMCA, and the American Cancer Society not only go to the stated charitable purpose, but are used to cover fundraising expenses and overhead. The accompanying table lists the charitable commitment (i.e., the percentage of expenses that goes toward the stated charitable purpose) for a sample of 30 charities.
CHARITY
Organization | Charitable Commitment |
American Cancer Society | 62% |
American National Red Cross | 91 |
Big Brothers Big Sisters of America | 77 |
Boy Scouts of America National Council | 81 |
Boys &Girls Clubs of America | 81 |
CARE | 91 |
Covenant House | 15 |
Disabled American Veterans | 65 |
Ducks Unlimited | 78 |
Feed The Children | 90 |
Girl Scouts of the USA | 83 |
Goodwill Industries International | 89 |
Habitat for Humanity International | 81 |
Mayo Foundation | 26 |
Mothers Against Drunk Drivers | 71 |
Multiple Sclerosis Association of America | 56 |
Museum of Modern Art | 79 |
Nature Conservancy | 77 |
Paralyzed Veterans of America | 50 |
Planned Parenthood Federation | 81 |
Salvation Army | 84 |
Shriners Hospital for Children | 95 |
Smithsonian Institution | 87 |
Special Olympics | 72 |
Trust for Public Land | 88 |
United Jewish Appeal/Federation–NY | 75 |
United States Olympic Committee | 78 |
United Way of New York City | 85 |
WGBH Educational Foundation | 81 |
YMCA of the USA | 80 |
Source: “Look Before You Give,” Forbes, Dee. 27,1999, pp. 206-216.
a. Give a point estimate for the mean charitable commitment of tax-exempt organizations.
b. Construct a 98% confidence interval for the mean charitable commitment.
c. What assumption(s) must hold for the method of estimation used in part b to be appropriate?
d. Why is the confidence interval of part b a better estimator of the mean charitable commitment than the point estimator of part a?
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