The Association of Business Executives

QCF

Quantitative Methods for

Business Management
5 December 2012, Afternoon
1.

Time allowed: 3 hours.

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2. 
Read the instructions at the top of each section carefully.
The number of questions you have to answer is marked clearly at the top of each section.
Do not answer more questions than instructed.
3. The number of marks per question may vary. Marks for subdivisions of questions and the
total marks for each question are shown in brackets after the question.
4. 
No books, dictionaries, notes or any other written materials are allowed in this
examination.
5. 
Calculators, including scientific calculators, are allowed providing they are not
programmable and cannot store or recall information. Electronic dictionaries and
personal organisers are NOT allowed. All workings must be shown.
6. Formulae sheets and tables for the Normal and Chi-Squared distributions are provided on
pages 7-11.
7. Candidates who break ABE Examination Regulations (Conduct during the Examinations), or
commit any misconduct, will be disqualified from the examinations.
8.

Question papers must not be removed from the Examination Hall.

STRUCTURE OF PAPER: Answer BOTH sections
SECTION A: Answer ALL EIGHT questions

Q1-Q8

40 marks

Maximum marks for Section A

SECTION B: Answer ANY FOUR questions

Q9-Q13

15 marks
each
60 marks

Maximum marks for Section B

TOTAL MARKS AVAILABLE FOR THE PAPER

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5 marks
each

ABE 2012

100 marks

K/502/4800

This paper consists of TWO SECTIONS.

Follow the instructions at the top of EACH section.
SECTION A
You must answer ALL EIGHT questions in this section.
Each question carries 5 marks.
Section A is worth 40% of the total marks available for the paper.

Q1 Distinguish between a simple random sample and a cluster sample.

(5 marks)

Q2 
The following measurements represent the actual weights of flour sold in ten randomly
selected bags:

2.72.93.33.02.93.02.62.93.02.7(Kg)

Calculate the arithmetic mean and standard deviation of this data.

Q3 (a) 
Define the term standard error of the mean.

(b)

(5 marks)

(3 marks)

Weekly household incomes in a country have a standard deviation equal to 1,500.

Calculate the standard error of the mean for random samples of 144 households.
(2 marks)
(Total 5 marks)

Q4 (a) Find the area under the standard normal curve between z1 5 21 and z2 5 2. (3 marks)

(b) 
If the area under the standard normal curve to the left of z3 is 0.0344, find the value
ofz3.
(2 marks)
(Total 5 marks)

Q5 
Fifty per cent of the banking executives in a country read the Financial News. If four banking
executives are chosen at random, use the binomial distribution to calculate the probability
that at least two of them read the Financial News.
(5 marks)

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Q6 
Change the base of the following index number series from 2009 to 2006:
Year

2006

2007

2008

2009

2010

2011

Index

85.6

94.5

97.0

100.0

105.0

110.0
(5 marks)

Q7 
In the following set of data, y represents ten companies annual sales (in million) and x
represents the companies annual marketing budgets as a percentage of total expenses (%).
y

3.5

15

10

25

10

12

Plot a scatter diagram of this data on the graph paper at the front of your answer book, and
comment on the likely relationship between y and x.
(5 marks)

Q8 A firm produces computers. It incurs fixed costs of 1,600,000 per month and a variable cost
of 240 per computer. It sells its product at a price of 400 per unit, regardless of the number
of units sold.
If the firm is making a loss of 320,000 per month, calculate the increase in production that
would be required to break even. 
(5 marks)

END OF SECTION A
MAXIMUM MARKS FOR SECTION A: 40

Turn over to Section B

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[Turn over

SECTION B
You must answer ANY FOUR questions in this section.
Each question carries 15 marks.
Section B is worth 60% of the total marks available for the paper.

Q9 The mean and median values of the annual bonuses earned by a sample of 1,000 bank
employees in a country are 3,500 and 1,200 respectively. The standard deviation is
4,000.
(a)
Calculate the coefficient of skewness and comment on the result.

(5 marks)

(b) 
Calculate 90 and 95 per cent confidence intervals for the population mean. (5 marks)

(c) 
Test the claim made by the countrys banking association that bank employees earn
onaverage 3,000 per year in bonuses. Use a 5% level of significance. 
(5 marks)
(Total 15 marks)

Q10 
To investigate the relationship between profitability and the age of a firm, a sample of 100
firms was taken and the following sums were calculated from the sample data:
x
x2
y
y2
xy

5 1,310
5 28,000
5 5,700
5 927,000
5 65,500

where y represents annual profit (in 000) and x represents the age of each firm (in years).
Required:
(a)
Use this sample information to calculate the mean and standard deviation of x and y.

(5 marks)

(b) 
Taking annual profit (y) as the dependent variable and age (x) as the independent
variable, calculate the equation of the least-squares regression line. 
(5 marks)

(c) 
Calculate the Pearson correlation coefficient between the two variables and comment
on the result.
(5 marks)
(Total 15 marks)

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Q11 
A companys sales are shown quarterly over three years in the following table:
Year

Qtr

Time

Sales (000)

2009

1
2
3
4

1
2
3
4

50
22
36
10

2010

1
2
3
4

5
6
7
8

76
45
65
24

2011

1
2
3
4

9
10
11
12

85
60
84
40

Required:

(a) 
Plot a time-series graph of this data on the graph paper at the front of your answer
book, and comment on the trend and seasonal pattern over the three years. (5 marks)

(b) 
A linear trend for this data is given by the equation y 5 30 1 3t, where y represents
the trend values for each quarter and t represents time (from 1 to 12). Use this trend
equation and the additive model to estimate the seasonal factors in each quarter (to
two decimal places). 
(5 marks)

(c) 
Use your results from (b) to forecast the companys sales in the first quarter of 2012
(tothe nearest whole number). Comment on the likely accuracy of your forecast.
(5 marks)
(Total 15 marks)

Q12 (a) 
Explain the difference between one-tailed and two-tailed hypothesis tests.

(5 marks)

(b) 
A pharmaceutical company has produced a new drug for the treatment of arthritis
intended to provide faster pain relief to more patients than traditional drugs. Of 500
patients treated with traditional drugs, 260 reported faster pain relief. Of 400 patients
treated with the new drug, 250 reported faster pain relief. You are asked to test the
manufacturers claim that the new drug provides faster pain relief to more patients than
traditional drugs.

(i) State the null and alternative hypotheses and determine the critical value of z for
a one-tailed test at the 5% level of significance.
(4 marks)

(ii) Calculate the test statistic and draw an appropriate conclusion.

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(6 marks)
(Total 15 marks)

[Turn over

Q13 There is a 0.5 probability that a company will restructure its management team during the
coming year. However, the company must decide now which of three business strategies
(A,B or C) to adopt.
A market research study has estimated the probabilities of different levels of long-run profit
or loss for the three strategies, recognising that the estimated probabilities for Strategy C
depend on whether the proposed management restructuring occurs or not. [The estimated
probabilities for Strategies A and B are assumed to be unaffected by the restructuring.]

The market research results are shown below:

Profit/Loss

Strategy A

Strategy B

Strategy C
without
restructuring

StrategyC
with
restructuring

500,000

0.6

0.4

0.6

200,000

0.3

0.6

0.9

0.4

2150,000

0.1

0.1

Required:

(a) 
Construct a decision tree for this problem.

(b) 
Calculate the expected monetary values for each strategy and advise the firm which
strategy to adopt.
(7 marks)
(Total 15 marks)

END OF SECTION B
MAXIMUM MARKS FOR SECTION B: 60

TOTAL MAXIMUM MARKS: 100

END OF QUESTION PAPER

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(8 marks)

FORMULAE
Mean of ungrouped data:

Geometric mean of ungrouped data:

where:

= "the product of "

Mean of grouped data:

Median of grouped data:

where:

L
F
f
i

=
=
=
=

lower boundary of the median class

cumulative frequency up to the median class
frequency of the median class
width of the median class

Mode of grouped data:

where:

L
fm
fm1
fm+1
i

2
=
=
=
=
=

lower boundary of the modal class

frequency of the modal class
frequency of the pre-modal class
frequency of the post-modal class
width of the modal class

Standard deviation of ungrouped data:

( )

=

Standard deviation of grouped data:

( )

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[Turn over

oefficient of s ewness:

where:

( )

= median
s = standard deviation

egression:

( )

earson correlation:

( )

( )

Spearman s ran correlation:

( 1)

Laspeyres price inde :

aasche price inde :

inomial distribution:

() =

oisson distribution:

() =

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Standard normal distribution:

onfidence interval for a mean:

onfidence interval for a proportion:

est statistic for a single mean:

est statistic for a difference between means:

est statistic for a single proportion:

est statistic for a difference between proportions:

where:

=
=

hi-squared test statistic:

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( )

[Turn over

Areas in the Right-Hand Tail of the Normal Distribution

.00

0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0

.5000
.4602
.4207
.3821
.3446
.3085
.2743
.2420
.2119
.1841
.1587
.1357
.1151
.0968
.0808
.0668
.0548
.0446
.0359
.0287
.02275
.01786
.01390
.01072
.00820
.00621
.00466
.00347
.00256
.00187
.00135
.00097
.00069
.00048
.00034
.00023
.00016
.00011
.00007
.00005
.00003

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.01
.4960
.4562
.4168
.3783
.3409
.3050
.2709
.2389
.2090
.1814
.1562
.1335
.1132
.0951
.0793
.0655
.0537
.0436
.0351
.0281
.02222
.01743
.01355
.01044
.00798
.00604
.00453
.00336
.00248
.00181

.02

.03

.04

.4920
.4522
.4129
.3745
.3372
.3015
.2676
.2358
.2061
.1788
.1539
.1314
.1112
.0934
.0778
.0643
.0526
.0427
.0344
.0274
.02169
.01700
.01321
.01017
.00776
.00587
.00440
.00326
.00240
.00175

.4880
.4483
.4090
.3707
.3336
.2981
.2643
.2327
.2033
.1762
.1515
.1292
.1093
.0918
.0764
.0630
.0516
.0418
.0336
.0268
.02118
.01659
.01287
.00990
.00755
.00570
.00427
.00317
.00233
.00169

.4840
.4443
.4052
.3669
.3300
.2946
.2611
.2296
.2005
.1736
.1492
.1271
.1075
.0901
.0749
.0618
.0505
.0409
.0329
.0262
.02068
.01618
.01255
.00964
.00734
.00554
.00415
.00307
.00226
.00164

10

.05
.4801
.4404
.4013
.3632
.3264
.2912
.2578
.2266
.1977
.1711
.1496
.1251
.1056
.0885
.0735
.0606
.0495
.0401
.0322
.0256
.02018
.01578
.01222
.00939
.00714
.00539
.00402
.00298
.00219
.00159

.06
.4761
.4364
.3974
.3594
.3228
.2877
.2546
.2236
.1949
.1685
.1446
.1230
.1038
.0869
.0721
.0594
.0485
.0392
.0314
.0250
.01970
.01539
.01191
.00914
.00695
.00523
.00391
.00289
.00212
.00154

.07

.08

.09

.4721
.4325
.3936
.3557
.3192
.2843
.2514
.2206
.1922
.1660
.1423
.1210
.1020
.0853
.0708
.0582
.0475
.0384
.0307
.0244
.01923
.01500
.01160
.00889
.00676
.00508
.00379
.00280
.00205
.00149

.4681
.4286
.3897
.3520
.3156
.2810
.2483
.2177
.1894
.1635
.1401
.1190
.1003
.0838
.0694
.0571
.0465
.0375
.0301
.0239
.01876
.01463
.01130
.00866
.00657
.00494
.00368
.00272
.00199
.00144

.4641
.4247
.3859
.3483
.3121
.2776
.2451
.2148
.1867
.1611
.1379
.1170
.0985
.0823
.0681
.0559
.0455
.0367
.0294
.0233
.01831
.01426
.01101
.00842
.00639
.00480
.00357
.00264
.00193
.00139

Chi-Squared Critical Values

p value
df
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
40
50
60
80
100

0.25
0.20 0.15 0.10 0.05 0.025 0.02 0.01 0.005 0.0025 0.001 0.0005
1.32 1.64 2.07 2.71 3.84 5.02 5.41 6.63 7.88 9.14 10.83 12.12
2.77 3.22 3.79 4.61 5.99 7.38 7.82 9.21 10.60 11.98 13.82 15.20
4.11 4.64 5.32 6.25 7.81 9.35 9.84 11.34 12.84 14.32 16.27 17.73
5.39 5.59 6.74 7.78 9.49 11.14 11.67 13.23 14.86 16.42 18.47 20.00
6.63 7.29 8.12 9.24 11.07 12.83 13.33 15.09 16.75 18.39 20.51 22.11
7.84 8.56 9.45 10.64 12.53 14.45 15.03 16.81 13.55 20.25 22.46 24.10
9.04 9.80 10.75 12.02 14.07 16.01 16.62 18.48 20.28 22.04 24.32 26.02
10.22 11.03 12.03 13.36 15.51 17.53 18.17 20.09 21.95 23.77 26.12 27.87
11.39 12.24 13.29 14.68 16.92 19.02 19.63 21.67 23.59 25.46 27.83 29.67
12.55 13.44 14.53 15.99 18.31 20.48 21.16 23.21 25.19 27.11 29.59 31.42
13.70 14.63 15.77 17.29 19.68 21.92 22.62 24.72 26.76 28.73 31.26 33.14
14.85 15.81 16.99 18.55 21.03 23.34 24.05 26.22 28.30 30.32 32.91 34.82
15.93 16.98 18.90 19.81 22.36 24.74 25.47 27.69 29.82 31.88 34.53 36.48
17.12 18.15 19.40 21.06 23.68 26.12 26.87 29.14 31.32 33.43 36.12 38.11
18.25 19.31 20.60 22.31 25.00 27.49 28.26 30.58 32.80 34.95 37.70 39.72
19.37 20.47 21.79 23.54 26.30 28.85 29.63 32.00 34.27 36.46 39.25 41.31
20.49 21.61 22.98 24.77 27.59 30.19 31.00 33.41 35.72 37.95 40.79 42.88
21.60 22.76 24.16 25.99 28.87 31.53 32.35 34.81 37.16 39.42 42.31 44.43
22.72 23.90 25.33 27.20 30.14 32.85 33.69 36.19 38.58 40.88 43.82 45.97
23.83 25.04 26.50 28.41 31.41 34.17 35.02 37.57 40.00 42.34 45.31 47.50
24.93 26.17 27.66 29.62 32.67 35.48 36.34 38.93 41.40 43.78 46.80 49.01
26.04 27.30 28.82 30.81 33.92 36.78 37.66 40.29 42.80 45.20 48.27 50.51
27.14 28.43 29.98 32.01 35.17 38.08 38.97 41.64 44.18 46.62 49.73 52.00
28.24 29.55 31.13 33.20 36.42 39.36 40.27 42.98 45.56 48.03 51.18 53.48
29.34 30.68 32.28 34.38 37.65 40.65 41.57 44.31 46.93 49.44 52.62 54.95
30.43 31.79 33.43 35.56 38.89 41.92 42.86 45.64 48.29 50.83 54.05 56.41
31.53 32.91 34.57 36.74 40.11 43.19 44.14 46.96 49.64 52.22 55.48 57.86
32.62 34.03 35.71 37.92 41.34 44.46 45.42 48.28 50.99 53.59 56.89 59.30
33.71 35.14 36.85 39.09 42.56 45.72 46.69 49.59 52.34 54.97 58.30 60.73
34.80 36.25 37.99 40.26 43.77 46.98 47.96 50.89 53.67 56.33 59.70 62.16
45.62 47.27 49.24 51.81 55.76 59.34 60.44 63.69 66.77 69.70 73.40 76.09
56.33 53.16 60.35 63.17 67.50 71.42 72.61 76.15 79.49 82.66 86.66 89.56
66.98 68.97 71.34 74.40 79.08 83.30 84.58 88.38 91.95 95.34 99.61 102.70
88.13 90.41 93.11 96.58 101.90 106.60 108.10 112.30 116.30 120.10 124.80 128.30
109.10 111.70 114.70 118.50 124.30 129.60 131.10 135.80 140.20 144.30 149.40 153.20

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