Hypothesis Test

Home Office Hypothesis Test

Statistical analysis has proved to be an essential tool towards gaining a better understanding of many business needs. The interpretations are reliable information that can be used to make decisions and justify systematic approaches. This approach uses a sample of the population of whatever needs to be tested. The most reliable and definite way to conclude would be to test the population completely. That is not convenient when dealing with a large amount and the expense could be too great.

A small random selection is often sufficient when using a statistical analysis. There is importance when sampling the population. Inputs must be carefully examined to determine a correct output. When the computations are correct, a probable or non-probable outcome will be determined, or maybe both will be determined or not be determined at the same time. This outcome does not always prove or disprove the hypothesis as a definite answer depending on what criteria is being looked at. Testing a random sample of a population will save time and money.

Adam just started a new career as a real estate broker and he is currently using his guest bedroom as an office. The bedroom is small and needed modifications to allow access to fax and computer connections. A consideration to expand the room or remodel the garage may be another option. Customers will need an appropriate room to engage in business with a comfortable atmosphere and Adam will need an accommodating area to work in.

The home office decision waivers on the probability of finding an outside office within a practical distance from the area with a cost effective rent or lease margin. If null analysis of the market mean to rent or lease office space is hypothetically correct, then Adam cannot afford to move the office to a new destination.

Business startup costs and downtime are major concerns to be factored into the investment. The housing market boom has declined and the mortgage wave is at the decline portion of the average seven year trend. The veteran sales agents may be the competition in the sales market along with poor mortgage allocations that require more money down for homebuyers. Probably not the best time to enter this market on a down slope. However, with startup costs and slow sales to consider AdamÐŽ¦s larger office may contribute to increased production.

The primary business tools are his experience, cell phone, laptop/PC, and the office room in his home. Adam's clientele is growing large enough that he feels he is ready to move his home business into an office space. Adam scoured the local on-line real estate listings (Officelist.com, 2007) and found that the mean price of leasing an accommodating office room in Sacramento area is at least $680 a month, and that the standard deviation of is $150. Adam believes he can afford to move out of his cramped office room in his home and into a new office space but feel, the mean of $680 is high. To verify this report, Adam collected the listings of 50 office spaces in Sacramento area and decided to use sample of 20. At the 0.05 significance level, Adam wants to determine if his experience is different from that claimed by specific on-line listings.

If the results of the statistical analysis show that the mean of $680 is high, Adam will start searching for a new office location. If the results of the analysis show that the report is correct, Adam will continue to work out of his home and wait for the market deviance to lessen and drop even further before considering the move. The only other option would be to wait for business profits to increase and market changes to mean out. At that point in time, another statistical evaluation could be addressed to run the costs of profit to business expenses and determine the margin of effectiveness.

AdamÐŽ¦s quest of moving his home based business into an office setting; he compared the mean price from various on-line real estate listings to the price information from his sample of 20 office buildings. Adam will formulate a hypothesis statement and perform the five-step hypothesis test on the data he collected and will use the five-step hypothesis test to determine the possibility of his move.

Step 1: State the null hypothesis and the alternate hypothesis. Adam decides to formulate both a verbal and numerical hypothesis statement.

Verbal:

- Null hypothesis: The mean price for office space in Sacramento area is greater than or equal to $680.

- Alternate hypothesis: The mean price for office space in Sacramento area is less than $680.

Numerical:

- Null hypothesis: H0: Ñ"Э > $680