Homework Assignment-4 POM 500 Statistical Analysis Note: Attempt all

questions as per rubric. Problems including case study has a weightage of 10

marks each. The maximum you can score is 50. Use Excel function wherever
possible.

Problem-1 Given a standard normal random variable (z values) or

probabilities, compute the following probabilities or z values, as applicable.
a) P (0 ≤ z ≤ 0.73) (Write Excel function) b) P (−0.27 ≤ z < 0.32) (Write
Excel function) c) P (z > 0.64) (Write Excel function) d) The area to the left of
z is 0.95 (Write Excel function) e) The area to the right of z is 0.45 (Write
Excel function)

a) P(0 ≤ z ≤ 0.73):
 Excel function: =NORMDIST(0.73,0,1,TRUE) -
NORMDIST(0,0,1,TRUE)
Explanation: Find the area under the curve to the left of 0.73, then
subtract the area to the left of 0 (which is 0).

b) P(-0.27 ≤ z < 0.32):

 Excel function: =NORMDIST(0.32,0,1,TRUE) - NORMDIST(-
0.27,0,1,TRUE)
Explanation: Find the area under the curve to the left of 0.32, then
subtract the area to the left of -0.27.

c) P(z > 0.64):

 Excel function: =1 - NORMDIST(0.64,0,1,TRUE)
Explanation: Find the area to the left of 0.64, then subtract that area
from 1 to get the area to the right.

d) The area to the left of z is 0.95 (Find z): Excel function:

=NORMSINV(0.95).

Explanation: Use the "NORMSINV" function, which is the inverse of

"NORMDIST", to find the z-score corresponding to an area of 0.95 to
the left.
e) The area to the right of z is 0.45 (Find z): Excel function:
=NORMSINV(0.55).

Explanation: Since the area to the right is 0.45, the area to the left is
0.55 (1 - 0.45). Use "NORMSINV" to find the corresponding z-score.

Problem-2 The average annual amount American households spend for daily
transportation is $6312 (Money, August 2001). Assume that the amount
spent is normally distributed. a) Suppose you learn that 5% of American
households spend less than $1000 for daily transportation. What is the
standard deviation of the amount spent? (Write Excel function) b) What is
the probability that a household spends between $4000 and $6000? (Write
Excel function) c) What is the range of spending for the 3% of households
with the highest daily transportation cost? (Write Excel function)

Calculate the standard deviation

 Find the z-score for 5%:

z=-1.645z equals negative 1.645



 𝑧=−1.645

 Use the z-score formula to find the standard deviation:

z=x−μσz equals the fraction with numerator x minus mu and denominator



sigma end-fraction
𝑧=𝑥−𝜇𝜎

-1.645=1000−6312σnegative 1.645 equals the fraction with numerator



1000 minus 6312 and denominator sigma end-fraction

−1.645=1000−6312𝜎

σ=1000−6312-1.645sigma equals the fraction with numerator 1000 minus



6312 and denominator negative 1.645 end-fraction

𝜎=1000−6312−1.645

σ≈3229.18sigma is approximately equal to 3229.18



𝜎≈3229.18

Step 2 …Calculate the probability of spending between

$4000$ 4000
$4000

and

$6000$ 6000
$6000

 Use the NORM.DIST function in Excel to find the cumulative

probabilities:

P(X<6000)=NORM.DIST(6000,6312,3229.18,TRUE)cap P open paren cap X



is less than 6000 close paren equals NORM.DIST open paren 6000 comma
6312 comma 3229.18 comma TRUE close paren
𝑃(𝑋<6000)=NORM.DIST(6000,6312,3229.18,TRUE)

P(X<4000)=NORM.DIST(4000,6312,3229.18,TRUE)cap P open paren cap X



is less than 4000 close paren equals NORM.DIST open paren 4000 comma
6312 comma 3229.18 comma TRUE close paren
𝑃(𝑋<4000)=NORM.DIST(4000,6312,3229.18,TRUE)

 Subtract the probabilities:

P(4000<X<6000)=P(X<6000)−P(X<4000)cap P open paren 4000 is less



than cap X is less than 6000 close paren equals cap P open paren cap X is
less than 6000 close paren minus cap P open paren cap X is less than 4000
close paren
𝑃(4000<𝑋<6000)=𝑃(𝑋<6000)−𝑃(𝑋<4000)

P(4000<X<6000)≈0.431−0.206=0.225cap P open paren 4000 is less than



cap X is less than 6000 close paren is approximately equal to 0.431 minus
0.206 equals 0.225
𝑃(4000<𝑋<6000)≈0.431−0.206=0.225

Step 3 …Calculate the range for the top 3%

 Find the z-score for the top 3% (or 97%):

z=NORM.INV(0.97,0,1)≈1.88z equals NORM.INV open paren 0.97 comma 0



comma 1 close paren is approximately equal to 1.88

𝑧=NORM.INV(0.97,0,1)≈1.88

 Use the z-score formula to find the spending amount:

x=μ+zσx equals mu plus z sigma



𝑥=𝜇+𝑧𝜎

x=6312+1.88⋅3229.18x equals 6312 plus 1.88 center dot 3229.18



𝑥=6312+1.88⋅3229.18
x≈12382.97x is approximately equal to 12382.97


𝑥≈12382.97

 The average annual amount American households spend on daily

transportation is $6312 (Money, August 2001). Assume that the
amount spent is normally distributed. a) Suppose you learn that 5% of
American households spend less than $1000 for daily transportation.
What is the standard deviation of the amount spent? (Excel function)
Answer To solve this problem, we need to use the properties of the normal
distribution. Specifically, we'll use the fact that the ...
 The average annual amount American households spend for daily
transportation is \(\$ 6312\) (Money, August 2001). Assume that the
amount spent is normally distributed. a. Suppose you learn that \(5 \
%\) of American households spend less than \(\$ 1000\) for daily
transportation. What is the standard deviation of the amount spent? b.
What is the probability that a household spends between \(\$ 4000\)
and \(\$ 6000 ?\) c. What is the range of spending for the \(3 \%\) of
households with the highest daily transportation cost?
(a) σ≈3221.64; (b) Probability ≈22.44%; (c) Spend over 12374.1 dollars.
Vaia
Solution
 Standard deviation: STDEV.S()

σ≈$3229.18sigma is approximately equal to $ 3229.18

𝜎≈$3229.18

 Probability of spending between Range()

$4000$ 4000
$4000

and

$6000$ 6000
$6000

P(4000<X<6000)≈0.225cap P open paren 4000 is less than cap X is less

than 6000 close paren is approximately equal to 0.225
𝑃(4000<𝑋<6000)≈0.225

 Range for the top 3%:

x≈$12382.97x is approximately equal to $ 12382.97

𝑥≈$12382.97


Answer To solve this problem, we need to use the properties of the normal
distribution. Specifically, we'll use the fact that the ...

 The average annual amount American households spend for daily

transportation is \(\$ 6312\) . Assume that the amount spent is
normally distributed. a. Suppose you learn that \(5 \%\) of American
households spend less than \(\$ 1000\) for daily transportation. What is
the standard deviation of the amount spent? b. What is the probability
that a household spends between \(\$ 4000\) and \(\$ 6000 ?\) c. What
is the range of spending for the \(3 \%\) of households with the highest
daily transportation cost?
(a) σ≈3221.64; (b) Probability ≈22.44%; (c) Spend over 12374.1 dollars.
Vaia
 The average annual amount American households spend on daily
transportation is $6312 (Money, August 2001). Assume that the
amount spent is normally distributed. a) Suppose you learn that 5% of
American households spend less than $1000 for daily transportation.
What is the standard deviation of the amount spent? (Excel function)
Answer To solve this problem, we need to use the properties of the normal
distribution. Specifically, we'll use the fact that the ...
Studocu
 The average annual amount American households spend for daily
transportation is \(\$ 6312\) (Money, August 2001). Assume that the
amount spent is normally distributed. a. Suppose you learn that \(5 \
%\) of American households spend less than \(\$ 1000\) for daily
transportation. What is the standard deviation of the amount spent? b.
What is the probability that a household spends between \(\$ 4000\)
and \(\$ 6000 ?\) c. What is the range of spending for the \(3 \%\) of
households with the highest daily transportation cost?
(a) σ≈3221.64; (b) Probability ≈22.44%; (c) Spend over 12374.1 dollars.
Vaia

Problem-3 Conde Nast Traveler publishes a Gold List of the top hotels all over
the world. The Broadmoor Hotel in Colorado Springs contains 700 rooms and
is on the 2004 Gold List (Conde Nast Traveler, January 2004). Suppose
Broadmoor's marketing group forecasts a mean demand of 670 rooms for
the coming weekend. Assume that demand for the upcoming week-end is
normally distributed with a standard deviation of 30. a) What is the
 probability all the hotel's rooms will be rented? (Write Excel function) b)
What is the probability 50 or more rooms will not be rented? (Write Excel
function) c) Would you recommend the hotel consider offering a promotion to
increase demand? What considerations would be important?

To calculate the probability all the hotel's rooms will be rented, use
the Excel function =NORMSDIST((700-670)/30) which gives a result
of 0.1587; meaning there is a 15.87% chance all rooms will be
booked.

b) To calculate the probability that 50 or more rooms will not be

rented, first find the demand level where 50 rooms are not rented
(650 rooms) and use the Excel function =1 - NORMSDIST((650-
670)/30) which gives 0.2524; meaning there is a 25.24% chance 50
or more rooms will not be rented.

Explanation:
Normal Distribution:
We are assuming the demand follows a normal distribution with a mean
of 670 rooms and a standard deviation of 30 rooms.
Standardizing the values:
To use the normal distribution table (or Excel function), we need to
standardize the values by subtracting the mean and dividing by the
standard deviation.

c) Recommendation:
Based on the calculations, there is a significant chance that not all
rooms will be booked (around 84%). Therefore, it would be advisable
for the hotel to consider offering promotions to increase demand.

Problem-4 Suppose interarrival times at a hospital emergency room during

weekday are exponentially distributed, with an average interarrival time of
10 minutes. If the arrivals are Poisson distributed, what would the average
number of arrivals per hour be? What is the probability that less than 5
minutes will elapse between any two arrivals? (Write Excel function) 2

…Calculate the average number of arrivals per hour

 Convert the average interarrival time to hours:

10 minutes60 minutes/hour=16 hoursthe fraction with numerator



10 minutes and denominator 60 minutes/hour end-fraction equals



one-sixth hours
 10 minutes60 minutes/hour=16 hours

 .
 Calculate the average number of arrivals per hour:

λ=116=6lambda equals 1 over one-sixth end-fraction equals 6

𝜆=116=6

arrivals per hour.

…Calculate the probability that less than

55
5

minutes will elapse between any two arrivals

 Convert

55
5

minutes to hours:

560=1125 over 60 end-fraction equals 1 over 12 end-fraction

560=112

hours.
 Calculate the probability using the CDF:

P(T<112)=1−e-6⋅112cap P open paren cap T is less than 1 over 12 end-

fraction close paren equals 1 minus e raised to the negative 6 center dot 1
over 12 end-fraction power
𝑃(𝑇<112)=1−𝑒−6⋅ 112
.
 Simplify:
P(T<112)=1−e−12cap P open paren cap T is less than 1 over 12 end-
fraction close paren equals 1 minus e raised to the negative one-half power
𝑃(𝑇<112)=1−𝑒− 12
.
 Approximate:

P(T<112)≈1−0.6065=0.3935cap P open paren cap T is less than 1 over 12

end-fraction close paren is approximately equal to 1 minus 0.6065 equals
0.3935
𝑃(𝑇<112)≈1−0.6065=0.3935

.
Suppose interarrival times at a hospital emergency room during

weekday are exponentially distributed, with an average interarrival
time of 10 minutes. If the arrivals are Poisson distributed, what would
the average number of arrivals per hour be? What is the probability
that less than 5 minutes will elapse between any two arrivals?
Nov 13, 2021 — A.) Average number of arrivals = 6B.) P (X<5) = 0.3935
The average number of arrivals per hour is

66
6

, and the probability that less than

55
5

minutes will elapse between any two arrivals is approximately

0.39350.3935
0.3935

Case Study: how many units of a new toy should be purchased to meet
anticipated sales demand. If too few are purchased, sales will be lost; if too
many are purchased, profits will be reduced because of low prices realized in
clearance sales. For the coming season, Specialty plans to introduce a new
product called Weather Teddy. This variation of a talking teddy bear is made
by a company in Taiwan. When a child presses Teddy's hand, the bear
begins to talk. A builtin barometer selects one of five responses that predict
the weather conditions. The responses range from "It looks to be a very nice
day! Have fun." to "I think it may rain today. Don't forget your umbrella."
Tests with the product show that, even though it is not a perfect weather
predictor, its predictions are surprisingly good. Several of Specialty's
managers claimed Teddy gave predictions of the weather that were as good
as many local television weather forecasters. As with other products,
Specialty faces the decision of how many Weather Teddy units to order for
the coming holiday season. Members of the management team suggested
order quantities of 15 000, 18 000, 24 000, or 28 000 units. The wide range
of order quantities suggested indicating considerable disagreement
concerning the market potential. The product management team asks you
for an analysis of the stock-out probabilities for various order quantities, an
estimate of the profit potential, and to help make an order quantity
recommendation. Specialty expects to sell Weather Teddy for $24 based on
a cost of $16 per unit. If inventory remains after the holiday season,
Specialty will sell all surplus inventory for $5 per unit. After reviewing the
sales history of similar products, Specialty's senior sales forecaster predicted
an expected demand of 20 000 units with a 0.95 probability that demand
would be between 10 000 units and 30 000 units. Managerial Report Prepare
a managerial report that addresses the following issues and recommends an
order quantity for the Weather Teddy product. 1.Use the sales forecaster's
prediction to describe a normal probability distribution that can be used to
approximate the demand distribution. Sketch the distribution and show its
mean and standard deviation. (Write Excel function) (2.5 points) 2.Compute
the probability of a stock-out for the order quantities suggested by members
of the management team. (Write Excel function) (2.5 points) 3.Compute the
projected profit for the order quantities suggested by the management team
under three scenarios: worst case in which sales = 10 000 units, most likely
case in which sales = 20000 units, and best case in which sales = 30 000
units. (2.5 points) 3 4.One of Specialty's managers felt that the profit
potential was so great that the order quantity should have a 70% chance of
meeting demand and only a 30% chance of any stock-outs. What quantity
would be

Based on the sales forecaster's prediction and the analysis of stock-out

probabilities and projected profits, Specialty should order 24,000 units of We
1
A. SPECIALTY TOYS CASE
Managerial Report
1. Use the sales
forecaster’s prediction to
describe a normal
probability distribution to
approximate the demand
distribution. Sketch the
distribution and show its
mean and standard
deviationFrom the case, we can
know： demand distribution can
approximate a normal probability
distribution.
6
B. MARION’S CASE
1. Calculate the probability
that the mean score of
Blugert given by the simple
random sample of
Marion Dairies customers
will be 75 or less.

Given: µ=80 σ=25 𝑥 = 75

• Find the value of z.

n=50
• By using the standard
normal table for the value
1.41, we get .42073
Hence, the probability that
the mean score of 50
random customers is 75 or
less is 7.93%.
Therefore, the possibility
that Strawgurt becomes a
potential product for those
who don’t
like Blugurt is low.
2. If the Marketing
Department increases the
sample size to 150, what is
the probability that the
mean
score of Blugert given by
the simple random sample
of Marion Dairies customers
will be 75 or less?
• If n= 150
• By using the standard
normal table for the value

𝑧 = 𝑥−𝜇
2.45, we get .49286

𝜎
√𝑛
= 75 − 80

25
√50
𝑷( 𝒛 ≤ −𝟏. 𝟒𝟏) = 0.5 –
= −1.41421

0.42073 = 0.07927

𝑧=
0.07927
𝑥−𝜇

𝜎
√𝑛
=75 − 80
25
√150

𝑷( 𝒛 ≤ −𝟐. 𝟒𝟓) = 0.5 –

= −2.45

0.49286 = 0.00714
-3 -1 1