eGM03 / GM03

BUSINESS STATISTICS

(Special Assignment)

Assignment Code: SC2021/GM03 Last Date of Submission: 25 th April 2021

Maximum Marks: 100

Attempt all the questions. All the questions are compulsory and carry 10 marks.

Section-A
1. Prof. Hardtack gave four Friday quizzes last semester in his 10-student senior tax accounting
class as follows:

Quiz 1 60 60 60 60 71 73 74 75 88 99
Quiz 2 65 65 65 65 70 74 79 79 79 79
Quiz 3 66 67 70 71 72 72 74 74 95 99
Quiz 4 10 49 70 80 85 88 90 93 97 98

a) Find the mean, median, mode for each quiz.

Solution: Mean
Mean can be calculated by the following formula

Mean of Quiz 1, =

Mean of Quiz 2, =

Mean of Quiz 3, =

Mean of Quiz 4, =

MEDIAN
Median and

Median = for even n

Median for Quiz 1 =

 Median for Quiz 2 =

Median for Quiz 3 =

Median for Quiz 4 =

MODE
The mode, symbolized Mo, is the most frequent score. That’s it. No calculation is
needed.

Mode of Quiz 1 = 60

Mode of Quiz 2 = 65

Mode of Quiz 3 = 72

Mode of Quiz 4 = None

b) Based on the results obtained in (a) above, indicate the measure of

central tendency you would like to use for each of the quizzes with reasons.
Solution: Measure of Central Tendency
A measure of central tendency (also referred to as measures of centre or central location)
is a summary measure that attempts to describe a whole set of data with a single value
that represents the middle or centre of its distribution.

There are three main measures of central tendency: the mode, the median and the mean.
Each of these measures describes a different indication of the typical or central value in
the distribution. 
Measure of central tendency of Quiz 1 = Mean = 72, Median = 72, Mode = 60

Measure of central tendency of Quiz 2 = Mean = 72, Median = 72, Mode = 65

Measure of central tendency of Quiz 3 = Mean = 76, Median = 72, Mode = 72

Measure of central tendency of Quiz 4 = Mean = 76, Median = 86.5, Mode = none

2. A biometric security devise using fingerprints erroneously refuses to admit 1 in 1000

authorized persons from a facility containing classified information. The device will
erroneously admit 1 in 10,00,000 unauthorized persons. Assume that 95% of those who seek
access are authorized. If the alarm goes off and a person is refused admission, what is the
probability that really authorized?
Solution: Given, out of X persons, 95% are authorized
 Out of X persons, 5% are unauthorized

So,

So there is a 1.9% chance that the person was really authorized.

3. Suppose the waiting time to get food after placing an order at a fast-food restaurant is
exponentially distributed with a mean of 60 seconds. If a randomly selected customer orders
food at the restaurant, what is the probability that the customer will have to wait at least two
minutes?
Solution: The given problem is a poison distribution with a mean of 60 seconds = 1 minute
Therefore,

The Poisson probability is:

P(x; μ) = (e-μ) (μx) / x!

Where x is the actual number of successes that result from the experiment, and e is
approximately equal to 2.71828.

Probability that the customer will have to wait at least 2 minutes

=
 as (e =2.71828)

4. A family has two children – one male child and the other a female child. Both the children are
grown up and their daily expenditure is believed to be normally distributed with a mean of
Rs.80 and Rs.60 for the male and the female child with standard deviation of Rs.20 and Rs.10
respectively. Find the probability that the two children together have an expenditure
of more than Rs. 160.

Solution: Given, Mean of Male = Rs. 80

Mean of Female = Rs. 60
Total Mean, = Rs. 140

Standard deviation of Male = Rs. 20

Standard deviation of Female = Rs. 10
Variance =

= 22.36

For normal distribution

We will find that probability that the tow child together have an expenditure of more than Rs.
160.
 (Value taken from normal distribution table)

= 0.184

5. Last year television stations WXYZ’s share of the 11pm news audience was approximately
equal to 25%. The station’s management believes that the current audience share is higher
than last year’s 25% figure. In an attempt to substantiate this belief, the station surveyed 400
11pm viewers and found that 146 watched WXYZ. Set up the null and alternative hypothesis
and test the same at 5% level of significance. What is your conclusion?
Solution: Given
Sample

Test of

The value of test statistic is

Since z > 0.25 so at 5% level of significance so, we conclude that the station’s management
believes that the current audience share is higher than last years 25% figure.
6. A retailer that sells home entertainment systems accumulated 10451 sales invoices during the
previous year. The total of the sales amount on these invoices as claimed by the company is
Rs.63,84,675. In order to estimate the true total sales for last year, an independent auditor
randomly selects 350 of the invoices and determines the actual sales amounts by
contacting the purchasers. The mean and standard deviation of the 350 samples sales
amounts are Rs. 532 and standard deviation 168. Find the point and interval estimate given
that a 95% confidence is required. Do you think that the sales invoice claimed by the company
is correct?
Solution: Given
Sales invoices, N= 10451
Total sales = Rs. 63, 84, 675
Sample, n = 350
Mean,
Standard deviation,

Here the sample size n = 350 is of the population size N = 10451

Because n is more than 5% of N, we should include the finite population correction in our
confidence interval calculations. It follows a 95% confidence interval for the mean sales
amount per invoice is

The upper limit of this internal is more than the mean amount of 532 claimed by the retailer, so
we have strong evidence that the company invoice sales is not correct. A 95% confidence
interval for the total sales is found by multiplying the lower and upper limits of the 95%
confidence interval for 10451.
Therefore, this interval is or [5740734.30, 5379025.2]
Because the upper limit of this interval is less than the total sales amount of Rs. 63, 84,675
claimed by the retailer, we have strong evidence that the sales invoice claimed by the
company are not correct.
7. One of the questions on the Business Week subscriber study was, “In the past 12 months
when travelling for business, what type of airline ticket you purchased most often”. The data
obtained are shown in the following table.

Type of Flight
Type of Ticket Domestic flights International flights
First Class 29 22
Business / Executive class 95 121
Full fare economy /coach class 518 135

Based on the above can it be concluded that type of ticket is dependent on the type of
flight taken. Use 5% level of significance.

Solution: Hypothesis
Type of ticket and type of flight are independent
Type of ticket and type of flight are Dependent

Reject if p – value
Computation of p value

Observed frequencies

Type of Flight
Type of Ticket Domestic flights International flights Total
First Class 29 22 51
Business / Executive class 95 121 216
Full fare economy /coach class 518 135 653
Total 642 278 920

Expected frequencies
Expected frequencies

Type of Flight
Type of Ticket Domestic flights International flights Total
First Class 35.59 15.41 51
Business / Executive class 150.73 65.27 216
Full fare economy /coach class 455.68 197.32 653
Total 642 278

Thus we reject, at 5% level of significance and

conclude that type of ticket is dependent on the type of flight taken.

8. To study the effect of temperature on yield in a chemical process, five batches were produced
at each of three temperature levels. The results follow. Construct an analysis of variance
table. Use a 5% level of significance to test whether the temperature level has an effect
on the mean yield of the process.

Yield
Temperature
50degC 34 24 36 39 32
60degC 30 31 34 23 27
70degC 23 28 28 30 31

Solution:

Yield 50 deg C 60 deg C 70 deg C Total

34 30 23
24 31 28
 36 34 28
39 23 30
32 27 31
Mean 33 29 28 90
Standard 5.65 4.18 3.08 12.91
deviation
Variance 32 17.5 9.5 59

Computations:
= the sum of squares of all the observations, regardless of which treatment produced
them from the grand mean, where X…represents the grand mean.
 =

Knowing that K (groups ) = 3 and N (total Sample Size) = 15 (n = 5 for each group)

Analysis of varioance for the numbers of words recalled

Source Sum of squares Degrees of Variance F ratio
SS freedom estimate (mean F
df square)
MS
Between 54070 2 27035 1374.66
Within 236 12 19.66
Total 54306 14

Output from SPSS

ANOVA
Source Sum of Degrees of Variance F ratio Sig.
 squares freedom estimate F
SS df (mean
square)
MS
Between 54070 2 27035.000 1374.661 .000
Within 236 12 19.666
Total 54306 14

Showing p < .05

By Using, 5% level of significance to test whether the temperature level has an effect on the
mean yield of the process.
Let the null hypothesis be

Here,
Here,
Here,

Therefore, difference =

S.E. =

Therefore , 3S.E. = 10.29

Conclusion - temperature level has no effect on the mean yield of the process.

Section-B
Case Study
(20 Marks)
A car manufacturer who is producing cars at the rate of 4000 cars a month requires to procure ignition
equipment from vendors. The company has a policy of placing orders for 12000 ignition equipment
every time they order. The vendor has indicated that 3 % of the ignition equipment is likely to be
faulty in each shipment. Since it is not possible to test each and every ignition equipment by the car
manufacturer, the manufacturer decides to randomly sample 200 ignition equipment and if more than
2 of them are found to be defective the entire batch of order shall be returned back.

9. Case Questions:
a) What sampling method would you suggest for the car manufacturer?
Solution: We will suggest Simple Random Sampling method to the car manufacturer. It is
a randomly selected sample from a larger sample or population, giving all the individuals in
the sample an equal chance to be chosen. In a simple random sample, individuals are chosen
at random and not more than once to prevent a bias that would negatively affect
the validity of the result of the experiment.

b) What is the probability that the batch will be returned back to the vendor.
Solution: The above problem is a binomial distribution.
Given that, n = 200, p = 3% = 0.03

To find – Probability that the batch will be returned back to the vendor if more than 2 of
them are found to be defective

By using complement method, we get

By applying binomial distribution,

P(X = r) = nCr p r (1-p)n-r
where,

n = Number of events
r = Number of successful events.
p = Probability of success on a single trial.
nCr = ( n! / (n-r)! ) / r!
1-p = Probability of failure.