Introduction and Objectives:

There are 3 parts to this tutorial exercise. You will be asked to submit this week's tutorial exercises for assessment via Bl
work, you will be required to sign a Submission Declaration attesting:
- This work is original and has been undertaken wholly in this tutorial
- You have and will continue to take proper care of safeguarding this work and make all reasonable efforts to ensure it cannot
- You have not plagiarised the work of others or participated in unauthorised collusion when preparing this work, pursuant to
cheating and plagiarism.

Part 1:
In this part of the tutorial exercise you will perform a test for the difference between means using regression

Part 2:
In this part of the tutorial exercise you will perform a test for the difference between means using

Part 3:
In this part of the tutorial exercise you will look deeper into what is meant by Between and Within Groups variation.



Instructions:

As indicated above, there are 3 parts to this exercise. The exercises for each part are in separate worksheets. Click on each
Exercises" and "Part 3 Exercises" worksheet tabs and complete the tasks outlined within them. Be sure to paste the appropriat
provided. You can use additional worksheets for any working if needed.

Once you have completed both parts, save your work for future reference - be sure to put your authcate username in the filename of your saved file. U
this saved file to Blackboard: to do this, from the ETC1000 blackboard homepage, click Assignments from the left
named "Tutorial Exercise 11 (Week 12)", then click the button "Add Attachment" to select your completed workbook for upload.

Marks and feedback on the exercise will be provided on Blackboard in approximately 2 weeks.
There are 3 parts to this tutorial exercise. You will be asked to submit this week's tutorial exercises for assessment via Blackboard. When you submit your
You have and will continue to take proper care of safeguarding this work and make all reasonable efforts to ensure it cannot be copied.
You have not plagiarised the work of others or participated in unauthorised collusion when preparing this work, pursuant to the University's statement on
In this part of the tutorial exercise you will perform a test for the difference between means using regression.
In this part of the tutorial exercise you will perform a test for the difference between means using Analysis of Variance (ANOVA).
deeper into what is meant by Between and Within Groups variation.
As indicated above, there are 3 parts to this exercise. The exercises for each part are in separate worksheets. Click on each of the "Part 1 Exercises", "Part 2
Exercises" and "Part 3 Exercises" worksheet tabs and complete the tasks outlined within them. Be sure to paste the appropriate Excel output in the spaces
sure to put your authcate username in the filename of your saved file. Upload
this saved file to Blackboard: to do this, from the ETC1000 blackboard homepage, click Assignments from the left-hand margin. Select the assignment
named "Tutorial Exercise 11 (Week 12)", then click the button "Add Attachment" to select your completed workbook for upload.
Marks and feedback on the exercise will be provided on Blackboard in approximately 2 weeks.
Graduate ID State Salary NSW VIC QLD
101 NSW $40,500 1 0 0
102 NSW $41,500 1 0 0
103 NSW $40,000 1 0 0
104 NSW $41,000 1 0 0
105 NSW $41,500 1 0 0
201 VIC $41,000 0 1 0
202 VIC $39,500 0 1 0
203 VIC $39,000 0 1 0
204 VIC $38,000 0 1 0
205 VIC $39,500 0 1 0
301 QLD $35,500 0 0 1
302 QLD $33,500 0 0 1
303 QLD $35,000 0 0 1
304 QLD $36,500 0 0 1
305 QLD $36,000 0 0 1
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.936902
R Square 0.877786
Adjusted R Square 0.857416
Standard Error 987.4209
Observations 15
ANOVA
df SS MS F Significance F
Regression 2 84033333 42016667 43.09402 3.33E-06
Residual 12 11700000 975000
Total 14 95733333
Coefficients Standard Error t Stat P-value Lower 95% Upper 95%Lower 95.0%Upper 95.0%
Intercept 40900 441.588 92.62026 1.68E-18 39937.86 41862.14 39937.86 41862.14
VIC -1500 624.4998 -2.401922 0.033401 -2860.668 -139.3318 -2860.668 -139.3318
QLD -5600 624.4998 -8.967177 1.15E-06 -6960.668 -4239.332 -6960.668 -4239.332
1. Given the different social and business conditions across states of Australia, it seems logical that the
starting salaries of new accounting graduates would differ in different states of Australia. A random
selection of accounting firms is taken from three states, and each is asked to specify the starting salary
for a new accounting graduate who is going to work in auditing. The data obtained are provided below.
Create 3 dummy variables for state of employment by completing the highlighted parts in columns D:F
below.
1.a. Estimate a regression model with Y=Salary , X1=VIC and X2=QLD. Paste your output below.
NSW VIC QLD
$40,900 $39,400 $35,300
-2.4019223
3.0545396
Upper 95.0%
Est. mean income
test statistic:
critical value:
1.b. Use the output to estimate mean income for graduates in each state.
1.c. Complete the blanks below to test whether there is a difference in mean income between graduates
in NSW and VIC. Use a 1% significance level.

Step 1: Define H
0
and H
1

H
0
:
NSW
_ = _
VIC
(i.e.
1
_=0_) Mean income is _ the same _ in NSW and VIC.
H
1
:
NSW
_ _
VIC
(i.e.
1
_0_) Mean income is _ different__ in NSW and VIC.


Step 2: Significance level

a = _ 0.01 _


Step 4: Conclusion

The decision rule is to reject H
0
if if _the absolute test statistic is greater than the absolute critical value
(i.e. |t
stat
| > |t
crit
| )_. In this case, _|t
stat
| < |t
crit
|_ so we _do not reject H
0
_ and conclude
insufficient evidence, at the 1% significance level, that the mean income of New South Wales is different
to the mean income of Victoria_.
1.d. Now suppose you have an a-priori opinion that salaries in NSW are higher than in VIC. Perform a test
to see whether mean income of graduates in NSW is higher than in VIC. Use a 1% significance level.

Step 1: Define H
0
and H
1

H
0
:
NSW
_ = _
VIC
(i.e.
1
_=0_) Mean income is _ the same _ in NSW and VIC.
H
1
:
NSW
_ > _
VIC
(i.e.
1
_<0_) Mean income is _ _higher___ in NSW than VIC.


Step 2: Significance level

a = _ 0.01 _


Step 3: Test statistic and critical value(s)
-2.4019223
-2.680998
test statistic:
critical value:
End of Part 1 Exercises
Step 3: Test statistic and critical value(s)
Step 4: Conclusion

The decision rule is to reject H
0
if if _the test statistic is less than the critical value (i.e. t
stat
case, _t
stat
> t
crit
_ so we _do not reject H
0
_ and conclude _that there is insufficient evidence, at the 1%
significance level, that the mean income of New South Wales is higher than the mean income

Complete the blanks below to test whether there is a difference in mean income between graduates
in NSW and VIC.
in NSW and VIC.
than the absolute critical value
and conclude _that there is
insufficient evidence, at the 1% significance level, that the mean income of New South Wales is different
priori opinion that salaries in NSW are higher than in VIC. Perform a test
whether mean income of graduates in NSW is higher than in VIC. Use a 1% significance level.
in NSW and VIC.
in NSW than VIC.
End of Part 1 Exercises
than the critical value (i.e. t
stat
< t
crit
)_. In this
that there is insufficient evidence, at the 1%
significance level, that the mean income of New South Wales is higher than the mean income of Victoria_.
NSW VIC QLD
$40,500 $41,000 $35,500
$41,500 $39,500 $33,500
$40,000 $39,000 $35,000
$41,000 $38,000 $36,500
$41,500 $39,500 $36,000
Anova: Single Factor
SUMMARY
Groups Count Sum Average Variance
NSW 5 204500 40900 425000
VIC 5 197000 39400 1175000
QLD 5 176500 35300 1325000
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 84033333 2 42016667 43.09402 3.33E-06 3.885294
Within Groups 11700000 12 975000
Total 95733333 14
2. Now let's do the equivalent analysis with ANOVA. We re-arrange the data so it looks like this:
2.a. Obtain single-factor ANOVA output for the income data using Excel. Paste your output in the space below.
As a self-check, verify that the values in E23:E25 correspond with your calculations in part 1.b.

(exercises continue to the right)
43.094017
6.9266081
End of Part 2 Exercises
test statistic:
critical value:
Paste your output in the space below.
2.b. Complete the blanks below to test whether there is a difference in mean income depending on state
of employment. Use a 1% significance level.

Step 1: Define H
0
and H
1

H
0
:
NSW
_=_
VIC
_=_
QLD
Mean income is __the same
H
1
: At least one of the means differ Mean income is __different


Step 2: Significance level

a = _0.01_


Step 3: Test statistic and critical value(s)
Step 4: Conclusion

The decision rule is to reject H
0
if _the test statistic is greater than the critical value (i.e.
this case, _F stat > F crit_ so we _reject H
0
_ and conclude _that there is sufficient evidence, at the 1%
significance level, that at least one of the states has a different mean income to the other states

End of Part 2 Exercises
Complete the blanks below to test whether there is a difference in mean income depending on state
the same_ _ across states.
different___ across states.
than the critical value (i.e. F stat > F crit)_. In
that there is sufficient evidence, at the 1%
significance level, that at least one of the states has a different mean income to the other states_.
NSW VIC QLD
$40,500 $41,000 $40,500
$41,500 $39,500 $38,500
$40,000 $39,000 $40,000
$41,000 $38,000 $41,500
$41,500 $39,500 $41,000
Original output:
Anova: Single Factor
SUMMARY
Groups Count Sum Average Variance
NSW 5 204500 40900 425000
VIC 5 197000 39400 1175000
QLD 5 176500 35300 1325000
ANOVA
Source of Variation SS df MS F P-value F crit Source of Variation
Between Groups 84033333 2 42016667 43.09402 3.33E-06 3.885294
Within Groups 11700000 12 975000
Total 95733333 14
3. Suppose that, in effort to attract good accounting graduates, firms in QLD universally increased starting salaries by $5,000. That is, th
3.b. Compare the SUMMARY sections of the ANOVA outputs. Which means and variances have changed, and which have remained the same? Briefly
the case.
3.a. Produce ANOVA output for the above income data, and compare it to the original ANOVA output. To do this, first p
2.a. in cell B19. Next to it in cell J19, paste the new ANOVA output for the above income data.

(exercises continue below)
Those that have changed: The mean income for QLD has increased by $5000. This is because if all datapoints increase by $5000, then the average increase is also $5000.
(ie. we have 5 datapoints, each increasing by $5000, so the total increase is 5x5000=25000, and if we divide this by 5 to get
Those that have not changed: The mean income and variance for NSW and VIC are the same because none of the incomes within those two groups have changed. The
variance for QLD has also not changed. This is because if all the data points and the mean have increased by the same amount,
same deviation), with the variance being the sum of the squared deviations.
End of Part 3 Exercises
3.c. What has happened to the Between Groups variation? Why is this the case?
3.d. What has happened to the Within Groups variation? Why is this the case?
The Between Groups variation has decreased. This is because the mean income for QLD is now closer to the mean incomes of NSW
(ie both NSW and VIC had higher mean incomes than QLD, so an increase in the mean income for QLD has brought it closer to the
3.e. At 1% significance, there has been a change in ANOVA test outcome. Why is this result not surprising, given your answer
The Within Groups variation has remained the same. This is because (as is mentioned in 2.b.) the variances of each group have
Because the mean income for QLD has increased, it is now closer to the mean incomes for NSW and VIC. As a result there is no
means and therefore it is not surprising that we would conclude there isn't a significant difference between the means.
Output for income with $5,000 extra in QLD:
Anova: Single Factor
SUMMARY
Groups Count Sum Average Variance
NSW 5 204500 40900 425000
VIC 5 197000 39400 1175000
QLD 5 201500 40300 1325000
ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 5700000 2 2850000 2.923077 0.092431 3.885294
Within Groups 11700000 12 975000
Total 17400000 14
, in effort to attract good accounting graduates, firms in QLD universally increased starting salaries by $5,000. That is, the data now looks like this:
the SUMMARY sections of the ANOVA outputs. Which means and variances have changed, and which have remained the same? Briefly explain why this is
roduce ANOVA output for the above income data, and compare it to the original ANOVA output. To do this, first paste a copy of your original ANOVA output from
has increased by $5000. This is because if all datapoints increase by $5000, then the average increase is also $5000.
(ie. we have 5 datapoints, each increasing by $5000, so the total increase is 5x5000=25000, and if we divide this by 5 to get the average increase, we would get $5000)
are the same because none of the incomes within those two groups have changed. The
variance for QLD has also not changed. This is because if all the data points and the mean have increased by the same amount, they will be the same distance apart (ie
End of Part 3 Exercises
The Between Groups variation has decreased. This is because the mean income for QLD is now closer to the mean incomes of NSW and VIC.
(ie both NSW and VIC had higher mean incomes than QLD, so an increase in the mean income for QLD has brought it closer to the other two states)
3.e. At 1% significance, there has been a change in ANOVA test outcome. Why is this result not surprising, given your answers to 3.b. - 3.d. above?
The Within Groups variation has remained the same. This is because (as is mentioned in 2.b.) the variances of each group have remained the same.
Because the mean income for QLD has increased, it is now closer to the mean incomes for NSW and VIC. As a result there is no longer such a big difference between the
means and therefore it is not surprising that we would conclude there isn't a significant difference between the means.