Lecture 7: Hypothesis Testing about

population variance

S. Nakale
University of Namibia
(School of Accounting)

Summer Term 2021

 Learning outcome
At the end of this lecture, you must be able to:

 Perform hypothesis tests for population variance.

 Interpret the results of a hypothesis test and translate them
into practical conclusions to guide decision making.

Summer Term 2021

Hypothesis Testing about Population Variance
Critical value approach
(𝑛−1)𝑠 2
• Test statistic: 𝜒 2 = has a chi-square distribution with df = n-1.
𝜎02

• For a lower tail test: the chi-square distribution tables can be used to find the
2
critical value 𝜒(1−𝛼) , a chi-square value with an area of 𝛼 in the lower tail.

• For an upper tail test: the chi-square distribution tables can be used to find the
critical value 𝜒𝛼2 , a chi-square value with an area of 𝛼 in the upper tail.
• For a two tailed test: the chi-square distribution tables can be used to find the
2 2 𝛼
critical values 𝜒(1−𝛼/2) 𝑎𝑛𝑑 𝜒(𝛼/2) , chi-square values with areas of in the lower
2
and upper tails.
• Rejection rule:
2
Lower tail: Reject 𝐻0 𝑖𝑓𝜒 2 𝑡𝑒𝑠𝑡 𝑠𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 ≤ 𝜒(1−𝛼)

Upper tail: Reject 𝐻0 𝑖𝑓𝜒 2 𝑡𝑒𝑠𝑡 𝑠𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 ≥ 𝜒𝛼2

2 2
Two-tailed: Reject 𝐻0 𝑖𝑓𝜒 2 𝑡𝑒𝑠𝑡 𝑠𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 ≤ 𝜒(1−𝛼/2) or 𝜒 2 𝑡𝑒𝑠𝑡 𝑠𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 ≥ 𝜒(𝛼/2)

Summer Term 2021

Exercise 22
A machine is set to fill hand sanitizers with 500 ml. To meet quality
standards, the standard deviation of the fills of all the bottles should not
be more than 5ml.

To test this requirement, a random sample of 20 filled bottles is selected

and their volumes measured. The standard deviation is found to be 5.8
ml.

Required:

a) Conduct the hypothesis test at a 5% level of significance and

determine whether the filling machine is operating within the quality
standards.

Summer Term 2021

Exercise 23
Historically, the standard deviation in test scores for individuals
applying for driver’s licenses has been 10. A new examination with new
test questions has been developed. Administrators of the bureau of
motor vehicles would like the variability in the test scores for the new
examination to remain at the historical level.

A sample of 30 applicants for driver’s licenses were given the new

version of the examination and a sample variance of 144 was
recorded.

Required:

Use hypothesis test (critical value approach) to evaluate the variance

of the test scores at a 1% level of significance.

Summer Term 2021

Exercise 24 (Past Exam)
An automotive part must be machined to close tolerances to be
acceptable to customers. Production specifications call for a
maximum variance in the length of the parts of 0.0005. Suppose the
sample variance for 26 parts turns out to be 0.00055.

Required:

Use the critical value approach and test at a 10% level of significance
whether the population variance specification is being violated. Show
all the hypothesis test steps.

Summer Term 2021

 Reference
 Anderson D.R, Sweeney D.J and Williams T.A, 2011.
Statistics for Business and Economics, eleventh edition.

 Wegner T, 2016. Applied Business Statistics: Methods

and Excel-Based Applications, fourth edition.

Summer Term 2021