1. Currently health care expenditures are growing past 20% of GDP. Health care expenditures represent an increasingly large portion of the economy. Part of the increase in expenditures relates to the choices patients make about the type of care they receive. For example, C-section deliveries are more expensive than vaginal deliveries, yet C-section deliveries are becoming more common.
Using a sample of 643 observations from the Health Care Cost and Utilization project, test the hypothesis that the proportion of C-section births is equal to 32.8%. The Center for Disease Control and Prevention estimate that 32.8% of all deliveries are C-Section.
2. The financial statements, auditors test internal controls over financial reporting to make sure they are operating effectively in auditing public companies. You are assigned to audit internal controls of the sales and collection cycle in an audit of Xylem Electronics Company. One internal control you are assigned to test is the control that sales over the $10,000 have a manager's approval. Your audit team has decided that if the proportion of sales transactions over $10,000 in the sample that does not have management approval is 5% or less, then the control is considered to be operating effectively. You examine a sample of 100 sales transactions over $10,000 to see if there is management approval. Test the hypothesis that the proportion of the sample where the control was not operating effectively was 5% or less. In other words, test that the proportion of transactions over $10,000 that do not have management approval was 5% or less. Use an α = 0.05. Based upon you test, is the control operating effectively?