A Retired Statistician Was Interested in Determining the Average Cost

question 27

Multiple Choice

A retired statistician was interested in determining the average cost of a $200,000.00 term life insurance policy for a 60-year-old male non-smoker. He randomly sampled 65 subjects
(60-year-old male non-smokers) and constructed the following 95 percent confidence interval for the mean cost of the term life insurance: ($850.00, $1050.00) . Explain what the phrase "95 percent confident" means in this situation.

• A) 95 percent of all the life insurance costs will fall within the specified interval.
• B) In repeated sampling, 95 percent of the intervals constructed would contain the value of the true population mean.
• C) 95 percent of all retired statisticians are underinsured.
• D) In repeated sampling, the mean of the population will fall within the specified intervals 95 percent of the time.

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Definitions:

Conversion Costs

Expenses for labor and overhead that transform raw materials into finished goods.

FIFO Method

An inventory valuation method where the first items purchased or produced are the first ones to be sold or used, standing for "First In, First Out."

Conversion Costs

The combination of direct labor costs and manufacturing overheads that are incurred in converting raw materials into finished goods.

Total Costs

The complete sum of all expenses, direct and indirect, incurred in producing a good or delivering a service.