MB0040 – Statistics for Management – 4 Credits

Assignment Set-2

Q.1 A random sample of 6 sachets of mustard oil was examined and two were
found to be leaking. A wholesaler receives seven hundred twenty six packs,
each containing 6 sachets. Find the expected number of packets to contain
exactly one sachet leaking?
Ans. 1

n=6
Probability of leaking p is given by:

P = 2/6 = 1/3 and N = 726

q = 1 – (1/3) =2/3

6
Binominal distribution is (q+p) n = (2/3 + 1/3)

6 6-1 1
P (X = 1) = C1 (2/3) * (1/3)

P (X = 1) = 6 * 32 / 243 * 1/3

= 64 / 243

The expected number of packets to contain exactly one leaking sachet is given by:

N * [P(X = 1)] = 243 * 64 / 243

= 64

Hence, the expected number of packets to contain exactly one leaking sachet is
64.

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Q.2 What do you mean by errors in statistics? Mention the measures to do so.
 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2
Ans. 2

In statistics an error is different from a mistake. The mistakes in counting,

weighing, measuring, or reporting are not errors in statistical sense and should be
regarded as mistakes only. Error in statistical sense means the difference between
the actual value and the value under consideration, generally an estimated value.
An absolute error (A.E.) is the absolute difference between the actual value (X)
and its estimated value (x).

A.E. = |X - x|

The relative error (R.E) is the ratio of the absolute error to the actual value i.e,

| X – x|
R.E. = __________
X

Very often the relative error is given in per cent,

| X – x|
R.E. = __________ X 100
X

The smaller the relative error, the better is the result.

Measures of Error

The goal of most experiments is to calculate numerical results from measured

data. The goal of error analysis is to determine the reliability of these results. Just
as we must take data from which to calculate a result, so we must also know the
uncertainties in the data to calculate the uncertainty of a result.

The first step in any error analysis is to determine the error in each data quantity.
In some cases this information may be known from past experience, or it may be
supplied by the manufacturer of the measuring device.

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 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2

The experimenter confronted with an unfamiliar measuring device must

experimentally determine its reliability. This will often occupy a large fraction of
the laboratory time. Laboratory manuals usually do not spell out this procedure,
but it must be done anyway. Do not assume that data is scale-limited until you
have shown it to be (by repeated measurements). Many common measuring
procedures are not scale-limited.

One of the best ways to estimate the precision of a measurement is to make a

number of independent measurements. As we have illustrated, in the example of
section 2.1, these values will show a distribution, or scatter. The distribution may
be graphed. If only a few measurements are made, a bar-graph like Fig. 2.1 may
be appropriate. If very many measurements are made, the distribution usually
approaches a smooth curve. Figs. 2.2, 2.3, and 2.4 illustrate only a few of the
many possible distribution curves. In all cases the graphs are a plot of the number
of occurrences of each value (on the vertical axis) plotted against the values (on
the horizontal axis.)

Error distributions like that of Fig. 2. aren't often encountered in science. Many of
the distributions will resemble Fig. 2.4. This curve is the famous "normal" or
Gaussian curve. Most of the mathematics of statistics, and of error theory, is
based upon this curve.

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 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2

Fig. 2.2 Bar graph representation

Fig. 2.3 A bimodal distribution.
of an error distribution.

Fig. 2.4 A distribution with a Fig. 2.5 Gaussian (normal) distribution very
flattened top. accurately drawn 82
 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2

Q. 3 From a population known to have a standard deviation of 1.4, a sample of

70 individuals is taken. The mean of this sample is found to be 6.2. Find the
standard error of the mean. Also establish an interval estimate around the
sample mean using one standard deviation of the mean.
Ans. 3

 The standard error of the mean = Standard deviation / Square root of the
population size

σm = σ / √n
= 1.4 / √70

= 1.4 / 8.37

σm = 0.1673
 The interval estimate of the mean within one standard deviation is then,

6.2 ± 0.167332 = (6.032668 , 6.367332).

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 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2
Q.4 A machine is designed so as to pack 300ml of a solution with a standard
deviation of 5ml. A sample of 150 bottles when measured had a mean content
of 201.3 ml. Test whether the machine is functioning properly. (Use 5% level of
significance).
Ans. 4

1. Null hypothesis Ho : µ = µs
Alternate hypothesis HA: µ ≠ µs (two-tailed test)
2. Level of significance 5% implies Z tab = 1.96
3. Test Statistics

|µ - µs|
Z = ___________
σ/ √n

4. Given µ = 300, µs = 201.3, σ = 5, n = 150

σ/ √n = 5 / √150 = 0.4

5. Test Zcal = |300 – 201.3| / 0.4

= 246.75

6. Conclusion: Since Zcal (246.75) > Ztab (1.96) H₀ is rejected.

The machine is not functioning properly.

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 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2
Q.5 Out of 2000 people surveyed, 1200 belong to urban areas and rest to semi
urban areas. Among 1000 who visited other regions, 800 belonged to urban
areas. Test at 5% level of significance whether area and visiting other states are
dependent.
Ans. 5

The table displays the information given in solved problem in a tabulated form.

Other Regions Urban Semi Urban Total

Visited 800 200 1000
Not Visited 400 600 1000
Total 1200 800 2000

The table displays the observed and expected values for the calculation of x2

Observed Expected Value (E) (O-E)2 (O-E)2 / E

Value(O)
800 700 10,000 14.29
400 500 10,000 20.00
200 300 10,000 33.33
600 500 10,000 20.00
x2 cal 87.62

The steps followed for calculation of Chi-Square are described below.

1. Null Hypothesis ‘H₀’: Area and visit are independent.

Alternate hypothesis ‘HA’: They are dependent.

2. Level of Significance is 5% and D.O.F. (2-1) (2-1) = 1

Xtab2 = 3.841
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3. Test Statistics

X2 = ∑ (O-E) 2 / E
 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2

4. Test x2 cal = 87.62

Conclusion: Since x2cal (87.62) > x2tab (3.845),’H₀’ is rejected. Hence, the ‘area’
and ‘visit’ are dependent.

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Q.6 How is statistics useful for modern managers? Give examples and explain.
Ans. 6

The way in which businesses compete is rapidly changing. Businesses must

constantly strive to offer “better” products and services than their competitors.
South African Companies on the whole need to improve the quality of their
 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2
products in order to be a player in the global market. Managers must decide
how to overcome the many problems that prevent quality products and
services. One of the aims of this study was to establish whether managers in the
manufacturing industry of KwaZulu Natal are aware of the uses of statistics in
decision making.

It is important for managers to know the statistical techniques that can be

applied in industry and the ways in which these techniques can help them in their
decision making. In order for managers to make sound decisions, they must
be able to extract the necessary information from the data, they must
understand their business, and want to be competitive.

RESEARCH METHODLOGY

The aims of the study”Do Managers Make Decisions using Statistics?” are to
determine:
• Are managers in the manufacturing industry of KwaZulu Natal aware of
the uses of statistics in decision making?

• What are the common statistical process control techniques and charts used by
managers
in the manufacturing industry of KwaZulu Natal?
• Is there a need for statistical consultants in the manufacturing industry of
KwaZulu Natal?

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A questionnaire was designed by the researcher to meet the aims of the study.
The target population was quality managers in the Manufacturing Industry of
KwaZulu Natal.
 MB0040 – Statistics for Management – 4 Credits

Assignment Set-2

Surprisingly, only (9.3%) use Shewhart Control Charts (refer to Table 2), yet, this
chart is known to be the easiest and most widely used chart. This could
mean that very few quality managers are aware of these charts, yet, the
charts control the variability of a product, and thus help to improve the quality
of the product

The correlation coefficient (0.629) for the level of statistical knowledge and
frequency of using statistical process control techniques indicates that the higher
the level of statistical knowledge, the more frequently statistical process control
techniques were used. Hence, if it is desired that quality managers use statistical
process control techniques more often, then there is a need to increase their level
of statistical knowledge.

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The correlation coefficient of 0.59 indicates that the higher the respondents
statistical knowledge, the higher the rating on “statistical quality is important
for producing a quality product”. Hence, there is again an indication that,
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Assignment Set-2
the belief that “statistical quality is important for producing a quality product”
depends on the level of the statistical knowledge of the quality manager. There
seems to be a need to increase the level of statistical knowledge of quality
managers so that their belief that “statistical quality is important for
producing a quality product” is increased.

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