Instruction 10-6
a Buyer for a Manufacturing Plant Suspects That

question 51

Short Answer

Instruction 10-6
A buyer for a manufacturing plant suspects that his primary supplier of raw materials is overcharging.In order to determine if his suspicion is correct,he contacts a second supplier and asks for the prices on similar various materials.He wants to compare these prices with those of his primary supplier.The data collected is presented in the table below,with some summary statistics presented (all of these might not be necessary to answer the questions which follow).The buyer believes that the differences are normally distributed and will use this sample to perform an appropriate test at a level of significance of 0.01.
$$\begin{array} { c c c r } \text { Material } & \begin{array} { c } \text { Primary } \\\text { Supplier }\end{array} & \begin{array} { c } \text { Secondary } \\\text { Supplier }\end{array} & \text { Difference } \\\hline 1& \$ 55 & \$ 45 & \$ 10 \\2 & \$ 48 & \$ 47 & \$ 1 \\3 & \$ 31 & \$ 32 & - \$ 1 \\4 & \$ 83 & \$ 77 & \$ 6 \\5 & \$ 37 & \$ 37 & \$ 0 \\6& \$ 55 & \$ 54 & \$ 1 \\\hline \hline \text { Sum: } &\$309&\$292&\$17\\\text { Sum of Squares. } & \$ 17,573 & \$ 15,472 & \$ 139\end{array}$$
-Referring to Instruction 10-6,what is the 90% confidence interval estimate for the mean difference in prices?

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Definitions:

Conceptual Framework

A system of ideas and objectives that guides the development of standards and practices in financial reporting and accounting.

Financial Reporting

Financial reporting involves the disclosure of financial information to various stakeholders about the financial performance and position of an organization over a specific period of time.

Measurement

The process of quantifying qualitative financial data in monetary terms through various accounting methods.

Going Concern Assumption

The assumption that the entity will continue to operate for the foreseeable future.