[email protected]Office 351 Aliber Phone 271-1897Statistics for Managers Hypothesis Testing Hypothesis Testing:Select confidence level, α and sample size n. Remember α is the probability that you will reject a null hypothesis that is true. Based on the Central Limit Theorem a sample size of 30 or more is best if possible.1.State null and alternate hypothesis: H0: µ = 0, H1:µ ≠ 0 (two-sided hypothesis test).H0: µ ≤ 0, H1:µ > 0 orH0: µ ≥ 0, H1: µ < 0 (one-sided tests). Remember H0 represents the status quo and H1 represents what you are trying to prove.2.Calculate the test statistic from the sample (or observed) data. Be sure to use the appropriate formula.3.Find critical value(s) for α. This gives the outer boundary(s) for the test statistic. Be sure to use the right critical value (usually based on whether standard deviation is known from the population, σ, or estimated from the sample, S).