Statistics

Statistics is the body of theory and

methodology employed in analyzing and
using numerical evidence to choose one
among several alternative decisions or actions
when not all relevant facts are known.
• Enables us to deal with unpredictable
situations
• Introduces an objectivity in the process of
decision making.

Slide 1
 USES OF STATISTICS

• Forecasting of Demand or Sales

• Production – Quality Control Charts
• Acceptance Sampling
• Finance – to guide in investment
decisions
• Marketing – salability of a new product
• Opinion Polls

Slide 2
 Data and Data Sets

n Data are the facts and figures that are

collected, summarized, analyzed, and
interpreted.
n The data collected in a particular study are
referred to as the data set.

Slide 3
 Qualitative and Quantitative Data

n Data can be further classified as being

qualitative or quantitative.
n The statistical analysis that is appropriate
depends on whether the data for the variable
are qualitative or quantitative.
n In general, there are more alternatives for
statistical analysis when the data are
quantitative.

Slide 4
 Qualitative Data

n Qualitative data are labels or names used to

identify an attribute of each element.
n Qualitative data use either the nominal or
ordinal scale of measurement.
n Qualitative data can be either numeric or
nonnumeric.
n The statistical analysis for qualitative data are
rather limited.

Slide 5
 Quantitative Data

n Quantitative data indicate either how many

or how much.
• Quantitative data that measure how many
are discrete.
• Quantitative data that measure how much
are continuous because there is no
separation between the possible values for
the data..
n Quantitative data are always numeric.
n Ordinary arithmetic operations are
meaningful only with quantitative data.
Slide 6
 Descriptive Statistics and Inferential Statistics

n Descriptive statistics are the tabular,

graphical, and numerical methods used to
summarize data.
n Inferential Statistics : The process of drawing
inferences about the population from a
sample.

Slide 7
 Descriptive Statistics:
Tabular and Graphical Methods

n Summarizing Qualitative Data

n Summarizing Quantitative Data
n Crosstabulations and Scatter Diagrams

Slide 8
 Summarizing Qualitative Data

n Frequency Distribution
n Relative Frequency
n Percent Frequency Distribution
n Bar Graph
n Pie Chart

Slide 9
 Frequency Distribution

n A frequency distribution is a tabular summary of

data showing the frequency (or number) of items in
each of several nonoverlapping classes.
n The objective is to provide insights about the data
that cannot be quickly obtained by looking only at
the original data.

Slide 10
 Example: Marada Inn

Guests staying at Marada Inn were asked to rate the

quality of their accommodations as being excellent,
above average, average, below average, or poor. The
ratings provided by a sample of 20 guests are shown
below.

Below Average Average Above Average

Above Average Above Average Above Average
Above Average Below Average Below Average
Average Poor Poor
Above Average Excellent Above Average
Average Above Average Average
Above Average Average

Slide 11
 Example: Marada Inn

n Frequency Distribution

Rating Frequency
Poor 2
Below Average 3
Average 5
Above Average 9
Excellent 1
Total 20

Slide 12
 Relative Frequency Distribution

n The relative frequency of a class is the fraction or

proportion of the total number of data items
belonging to the class.
n A relative frequency distribution is a tabular
summary of a set of data showing the relative
frequency for each class.

Slide 13
 Percent Frequency Distribution

n The percent frequency of a class is the relative

frequency multiplied by 100.
n A percent frequency distribution is a tabular
summary of a set of data showing the percent
frequency for each class.

Slide 14
 Example: Marada Inn

n Relative Frequency and Percent Frequency

Distributions

Relative Percent
Rating Frequency Frequency
Poor .10 10
Below Average .15 15
Average .25 25
Above Average .45 45
Excellent .05 5
Total 1.00 100

Slide 15
 Bar Graph

n A bar graph is a graphical device for depicting

qualitative data that have been summarized in a
frequency, relative frequency, or percent frequency
distribution.
n On the horizontal axis we specify the labels that are
used for each of the classes.
n A frequency, relative frequency, or percent frequency
scale can be used for the vertical axis.
n Using a bar of fixed width drawn above each class
label, we extend the height appropriately.
n The bars are separated to emphasize the fact that
each class is a separate category.

Slide 16
 Example: Marada Inn

n Bar Graph
9
8
7
Frequency

6
5
4
3
2
1
Rating
Poor Below Average Above Excellent
Average Average

Slide 17
 Pie Chart

n The pie chart is a commonly used graphical device

for presenting relative frequency distributions for
qualitative data.
n First draw a circle; then use the relative frequencies
to subdivide the circle into sectors that correspond to
the relative frequency for each class.
n Since there are 360 degrees in a circle, a class with a
relative frequency of .25 would consume .25(360) =
90 degrees of the circle.

Slide 18
 Example: Marada Inn

n Pie Chart
Exc.
Poor
5%
10%
Below
Average
Above
15%
Average
45%
Average
25%

Quality Ratings

Slide 19
 Example: Marada Inn

n Insights Gained from the Preceding Pie Chart

• One-half of the customers surveyed gave Marada
a quality rating of “above average” or “excellent”
(looking at the left side of the pie). This might
please the manager.
• For each customer who gave an “excellent” rating,
there were two customers who gave a “poor”
rating (looking at the top of the pie). This should
displease the manager.

Slide 20
 Summarizing Quantitative Data

n Frequency Distribution
n Relative Frequency and Percent Frequency
Distributions
n Dot Plot
n Histogram
n Cumulative Distributions
n Ogive

Slide 21
 Example: Hudson Auto Repair

The manager of Hudson Auto would like to get a

better picture of the distribution of costs for engine
tune-up parts. A sample of 50 customer invoices has
been taken and the costs of parts, rounded to the
nearest dollar, are listed below.

91 78 93 57 75 52 99 80 97 62
71 69 72 89 66 75 79 75 72 76
104 74 62 68 97 105 77 65 80 109
85 97 88 68 83 68 71 69 67 74
62 82 98 101 79 105 79 69 62 73

Slide 22
 Frequency Distribution

n Guidelines for Selecting Number of Classes

• Use between 5 and 20 classes.
• Data sets with a larger number of elements
usually require a larger number of classes.
• Smaller data sets usually require fewer classes.

Slide 23
 Frequency Distribution

n Guidelines for Selecting Width of Classes

• Use classes of equal width.
• Approximate Class Width =
Largest Data Value − Smallest Data Value
Number of Classes

Slide 24
 Example: Hudson Auto Repair

n Frequency Distribution
If we choose six classes:
Approximate Class Width = (109 - 52)/6 = 9.5 ≅ 10
Cost ($) Frequency
50-59 2
60-69 13
70-79 16
80-89 7
90-99 7
100-109 5
Total 50

Slide 25
 Example: Hudson Auto Repair

n Relative Frequency and Percent Frequency

Distributions

Relative Percent
Cost ($) Frequency Frequency
50-59 .04 4
60-69 .26 26
70-79 .32 32
80-89 .14 14
90-99 .14 14
100-109 .10 10
Total 1.00 100

Slide 26
 Example: Hudson Auto Repair

n Insights Gained from the Percent Frequency

Distribution
• Only 4% of the parts costs are in the $50-59 class.
• 30% of the parts costs are under $70.
• The greatest percentage (32% or almost one-third)
of the parts costs are in the $70-79 class.
• 10% of the parts costs are $100 or more.

Slide 27
 Histogram

n Another common graphical presentation of

quantitative data is a histogram.
n The variable of interest is placed on the horizontal
axis and the frequency, relative frequency, or percent
frequency is placed on the vertical axis.
n A rectangle is drawn above each class interval with
its height corresponding to the interval’s frequency,
relative frequency, or percent frequency.
n Unlike a bar graph, a histogram has no natural
separation between rectangles of adjacent classes.

Slide 28
 Example: Hudson Auto Repair

n Histogram
18
16
14
Frequency

12
10
8
6
4
2
Parts
Cost ($)
50 60 70 80 90 100 110

Slide 29
 Cumulative Distribution

n The cumulative frequency distribution shows the

number of items with values less than or equal to the
upper limit of each class.
n The cumulative relative frequency distribution shows
the proportion of items with values less than or equal
to the upper limit of each class.
n The cumulative percent frequency distribution shows
the percentage of items with values less than or equal
to the upper limit of each class.

Slide 30
 Example: Hudson Auto Repair

n Cumulative Distributions
Cumulative Cumulative
Cumulative Relative Percent
Cost ($) Frequency Frequency Frequency
< 59 2 .04 4
< 69 15 .30 30
< 79 31 .62 62
< 89 38 .76 76
< 99 45 .90 90
< 109 50 1.00 100

Slide 31
 Ogive

n An ogive is a graph of a cumulative distribution.

n The data values are shown on the horizontal axis.
n Shown on the vertical axis are the:
• cumulative frequencies, or
• cumulative relative frequencies, or
• cumulative percent frequencies
n The frequency (one of the above) of each class is
plotted as a point.
n The plotted points are connected by straight lines.

Slide 32
 Example: Hudson Auto Repair

n Ogive
• Because the class limits for the parts-cost data are
50-59, 60-69, and so on, there appear to be one-unit
gaps from 59 to 60, 69 to 70, and so on.
• These gaps are eliminated by plotting points
halfway between the class limits.
• Thus, 59.5 is used for the 50-59 class, 69.5 is used
for the 60-69 class, and so on.

Slide 33
 Example: Hudson Auto Repair

n Ogive with Cumulative Percent Frequencies

Cumulative Percent Frequency

100

80

60

40

20
Parts
Cost ($)
50 60 70 80 90 100 110

Slide 34
 Crosstabulations and Scatter Diagrams

n Thus far we have focused on methods that are used

to summarize the data for one variable at a time.
n Often a manager is interested in tabular and
graphical methods that will help understand the
relationship between two variables.
n Crosstabulation and a scatter diagram are two
methods for summarizing the data for two (or more)
variables simultaneously.

Slide 35
 Crosstabulation

n Crosstabulation is a tabular method for summarizing

the data for two variables simultaneously.
n Crosstabulation can be used when:
• One variable is qualitative and the other is
quantitative
• Both variables are qualitative
• Both variables are quantitative
n The left and top margin labels define the classes for
the two variables.

Slide 36
 Scatter Diagram

n A scatter diagram is a graphical presentation of the

relationship between two quantitative variables.
n One variable is shown on the horizontal axis and the
other variable is shown on the vertical axis.
n The general pattern of the plotted points suggests the
overall relationship between the variables.

Slide 37
 Scatter Diagram

n A Positive Relationship
y

Slide 38
 Scatter Diagram

n A Negative Relationship
y

Slide 39
 Scatter Diagram

n No Apparent Relationship
y

Slide 40
 Example: Panthers Football Team

n Scatter Diagram
The Panthers football team is interested in
investigating the relationship, if any, between
interceptions made and points scored.

x = Number of y = Number of
Interceptions Points Scored
1 14
3 24
2 18
1 17
3 27

Slide 41
 Example: Panthers Football Team

n Scatter Diagram

Number of Points Scored y

30
25
20
15
10
5
0 x
0 1 2 3
Number of Interceptions
Slide 42
 Example: Panthers Football Team

n The preceding scatter diagram indicates a positive

relationship between the number of interceptions
and the number of points scored.
n Higher points scored are associated with a higher
number of interceptions.
n The relationship is not perfect; all plotted points in
the scatter diagram are not on a straight line.

Slide 43
 Tabular and Graphical Procedures
Data
Qualitative Data Quantitative Data

Tabular Graphical Tabular Graphical

Methods Methods Methods Methods

•Frequency •Bar Graph

•Histogram
Distribution •Pie Chart •Frequency
•Ogive
•Rel. Freq. Dist. Distribution
•Scatter
•% Freq. Dist. •Rel. Freq. Dist.
Diagram
•Crosstabulation •Cum. Freq. Dist.
•Cum. Rel. Freq.
Distribution
•Crosstabulation

Slide 44