Cindy Ho, VP of Finance at Discrete Components, Inc. (DCI), theorizes that the d
ID: 3338146 • Letter: C
Question
Cindy Ho, VP of Finance at Discrete Components, Inc. (DCI), theorizes that the discount level offered to credit customers affects the average collection period on credit sales. Accordingly, she has designed an experiment to test her theory using four sales discount rates (0%, 2%, 4%, and 6%) by randomly assigning five customers to each sales discount rate. An analysis of Cindy's data produced the following ANOVA table.
Source of Variation
SS
df
MS
F
Treatment
1844.2
3
614.7333
7.568277
Error
1299.6
16
81.225
Total
3143.8
19
Based on these results, using a 5% significance level __________
a. There is sufficient evidence to conclude that the average collection period on credit sales is not the same for the different discount levels.
b. There is insufficient evidence to conclude that the average collection period on credit sales is not the same for the different discount levels.
c. There is insufficient evidence to conclude that credit sales increase depending on the discount levels offered.
d. There is sufficient evidence to conclude that credit sales increase depending on the discount levels offered.
Source of Variation
SS
df
MS
F
Treatment
1844.2
3
614.7333
7.568277
Error
1299.6
16
81.225
Total
3143.8
19
Explanation / Answer
Degrees of freedom between = k - 1 = 4 - 1 = 3
Degrees of freedom Within = n - k = 20 - 4 = 16
Degrees of freedom Total F( k-1,n - k,) at 0.05 is = F Crit = 3.239
F Cal = MS Between / Ms Within = 614.7333/81.225 = 7.568277
We got |F cal| = 7.568277 & |F Crit| =3.239
MAKE DECISION
Hence Value of |F cal| > |F Crit|and Here We Reject Ho
a. There is sufficient evidence to conclude that the average collection period
on credit sales is not the same for the different discount levels.