Clint Barton is a self-employed consultant who runs hiscompany, Hawkeye Solutions, out of a house that he owns that hedoes not live in. He uses the main floor for his work and rents outthe second floor to a tenant. Since he uses a fair amount ofcomputing in his work, he wants to make sure that he writes off arepresentative portion of the electrical bill for the house againstthe business. In the past, he estimated that 70% of the electricityin the house goes towards the business.
Since the Canada Revenue Agency might want to seedocumentation about his expenses, Barton wants to sample some ofthe power use to provide support for his case. Since the buildinghas central heating and cooling, these electrical costs are sharedevenly as utilities and Barton has already accounted for themseparately.
Barton connected monitors to lines going to each floorfor non-utility power. Because he has had disagreements aboutproper expenses in the past, he wants to provide strong evidence tothe Canada Revenue Agency to support his claim that he uses 70% ofthe non-utility power for the business.
Design a test for Barton where he will record the valuesof the power going upstairs and to the main floor every day for amonth (30 days). And answer the following questions (use completesentences and exact equations where possible):
Barton does the test as you outline above. He finds overthe course of the sample that the business used $320 of power andthe upstairs used $80.
f) What is the value of the test statistic in thiscase?
g) What is the decision of the test in this case?Explain your reasoning.
h) What does this mean for Barton’s attempt to getsufficient documentation?
A month later, Barton does a test with a sample of 2months (60 days). He finds over the course of the sample that thebusiness used $720 of power and the upstairs used$180.
i) What is the value of the test statistic in thiscase?
j) What is the decision of the test in this case?Explain your reasoning. Â
k) What does this mean for Barton’s attempt to getsufficient documentation? Â
