The LEE’s insurance Co. Claims Dept. report the mean cost to process a claim is $60. An industry comparison ...

  

The LEE’s insurance Co. Claims Dept. report the mean cost to process a claim is $60. An industry comparison showed this amount to be larger than most other insurance companies, so they instituted cost-cutting measures. To evaluate the effect of the cost-cutting measure, the Supervisor of the Claims Department selected a random sample of 26 claims processed last month. The sample mean was $56.42 and the sample standard deviation $10.42. The Supervisor is interested in testing whether it is reasonable to conclude that mean cost to process a claim is now less than $60 (i.e, Ho: µ ≥$60; Ha < $60) at the 0.01 level of significance level.
 

A. What is the critical value for this test at the 0.01 significance level (i.e., tabulated Z-or t-value for this level?
 

B. . What is the calculated (computed) value for this test?
 

C. What is your final decision about the average cost of claims to process?