The Owner of a Small Clothing Store Is Concerned That

question 54

Essay

The owner of a small clothing store is concerned that only 28% of people who enter her store actually buy something. A marketing salesman suggests that she invest in a new line of celebrity mannequins (think Seth Rogan modeling the latest jeans…). He loans her several different "people" to scatter around the store for a two-week trial period. The owner carefully counts how many shoppers enter the store and how many buy something so that at the end of the trial she can decide if she'll purchase the mannequins. She'll buy the mannequins if there is evidence that the percentage of people that buy something increases.
-In this context describe a Type I error and the impact such an error would have on the store.

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Definitions:

Assembly Department

Assembly Department is a specific section within a manufacturing company where components are assembled into final products.

Costs Per Equivalent Unit

A method used in process costing that assigns costs to partially completed units of production.

Process Costing

An accounting methodology used for homogeneous products, which assigns average costs to units of output on the basis of the process they undergo.

Weighted-Average Method

An inventory valuation method averaging the cost of goods available for sale and assigning an average cost to each unit.