Series 2 Examination 2010

BUSINESS STATISTICS
Level 3 Wednesday 19 May Subject Code: 3009/M Time allowed: 3 hours

INSTRUCTIONS FOR CANDIDATES Answer 5 questions. All questions carry equal marks. There are statistical tables and a list of formulae at the end of the paper. Graph paper is provided within the answer book. Write your answers in blue or black ink/ballpoint. Pencil may be used only for graphs, charts, diagrams, etc. All answers must be correctly numbered but need not be in numerical order. Workings must be shown. Your work should be accurate and neat. You may use a calculator, provided the calculator gives no printout, has no word display facilities, is silent and cordless. The provision of batteries and their condition is your responsibility.

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ASE 3009 2 10 3

QUESTION 1 A motor insurance company bases the premiums it charges to customers partly on the region of the country where the driver lives and partly on the age of the driver. Details of the insurance claims made in 2008 were: Age of driver (years) <30 30 (a) A 36 10 B 24 6 Home region C D 28 18 22 34 E 16 6

Examine whether there is a significant relationship between the age of the driver and the region of the country where the driver lives. (12 marks)

As a check on the quality of service provided, the company agrees to conduct a survey using a sample of customers taken from the list of 320 claimants in 2009. The following three methods of sample selection were proposed: A: B: C: (b) to ask for volunteers to take every 5 name from the list of those making a claim in 2009 to use the 2008 data to select a stratified random sample based on driver age and home region.
th

Give one advantage and one disadvantage in using each of the three sampling methods suggested. (6 marks) State two factors to consider when deciding the size of sample to take in this type of study. (2 marks) (Total 20 marks)

(c)

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QUESTION 2 (a) Explain, using in each case a suitable business example to illustrate your answer, the meaning of the following terms: (i) (ii) subjective probability dependent events. (4 marks) ITC assemble a home computer system which has a processing unit with three main components, a CD drive, a system board and a hard drive. The probability of any of the three main components requiring replacement in any particular month is 0.02, 0.01 and 0.05 respectively. The components are liable to fail independently and more than one component may fail in a given month. Replacement times are negligible and it may be assumed that any particular component will not fail more than once in a month. (b) Calculate the probability that in a randomly chosen month (i) (ii) (iii) (iv) (c) no component fails the system board and hard drive both fail but not the CD drive exactly one component fails the CD drive fails, given that one component fails. (8 marks) What is the probability that no component fails in a randomly chosen year? (2 marks) ITC is shortly to introduce a more advanced home computer system into the market. Presently 9 design options are being considered. Two staff from the company, Ibrahim and Sally, were asked to rank these alternatives in terms of market acceptability. Ibrahim placed model E first on the list followed by A G I C B D F and H. Sally put model G first followed by E H A B C F D and I. (d) (e) Calculate the value of Spearmans rank correlation coefficient. (5 marks) What does your answer in (d) suggest about the level of agreement between the two members of staff? (1 mark) (Total 20 marks)

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QUESTION 3 (a) Describe the main difference between a 95% confidence interval estimate and a statistical test carried out at a 5% level of significance. (4 marks)

A company manufacturing 1.5v batteries for domestic use claims that the mean lifetime of the product is 570 hours. A random sample of 10 batteries was selected from a days output and tested to failure. The lifetime, in hours, recorded for each battery was: 481 624 (b) 595 456 446 573 547 485 499 464

Test whether there is evidence that the mean lifetime of the sample is significantly less than the 570 hours quoted by the company. (9 marks)

At a later date, testing of a further randomly selected sample of 400 batteries included 120 that lasted for more than 590 hours. (c) Use these results to set up a 95% confidence interval for the proportion of all batteries that will last for more than 590 hours. (5 marks) The manufacturer states that one third of batteries last for more than 590 hours.

(d)

Use the confidence interval in part (c) to explain whether this claim is justified. (2 marks) (Total 20 marks)

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QUESTION 4 In an aptitude test, a random sample of 100 trainee engineers were timed to see how long they took to dismantle, clean and reassemble a piece of machinery. The results were: Time, x (mins) 5 x < 10 10 x < 12 12 x < 14 14 x < 15 15 x < 17 17 x < 22 (a) (b) (c) (d) (e) (f) Draw a histogram to represent these data. (6 marks) Describe the shape of the distribution. (1 mark) Using your histogram, estimate the modal value. (2 marks) Calculate estimates of the arithmetic mean and variance of the times. (6 marks) What assumption is made when making the estimates in part (d)? (1 mark) Set up a 99% confidence interval estimate for the mean time taken by all trainee engineers to complete the task. (4 marks) (Total 20 marks) Frequency 10 15 24 21 18 12

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QUESTION 5 (a) (b) Explain what is meant by the term rate of inflation. (2 marks) State the main steps involved in the construction of an index to measure the rate of inflation. (4 marks) The following data shows the 6 main groups that make up the UK index of retail prices, together with their weights and price relatives. All item retail price index Group Housing and household goods Fuel and light Food and catering Clothing and footwear Alcohol and tobacco Travel and leisure (c) Weights 367 49 168 39 90 287 Price relative January 2009 (January 1987 = 100) 259.5 267.0 213.2 164.4 280.1 161.0 Source ONS 2009

State which group shows the largest increase in retail prices over the period giving a possible reason. (2 marks) Calculate the index of retail prices for January 2009 with January 1987 = 100. (5 marks)

(d)

The values of the index of retail prices, with January 1987 = 100, for January 2001 and January 2004 were 198.5 and 210.6 respectively. (e) (i) If the base period is changed to January 2001, calculate the values of the index for January 1987 and January 2004 with reference to the new base year. (5 marks) Give two reasons why it is necessary to update the base year of an index series periodically. (2 marks) (Total 20 marks)

(ii)

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QUESTION 6 The time taken by a bank to process a business loan application is normally distributed with mean of 4 hours and standard deviation of 2.5 hours. (a) What is the probability that for three applications, chosen at random, the processing time will be less than 7.5 hours in each case? (5 marks) (b) What is the time taken to process a loan application that is exceeded on about 3% of the occasions? (4 marks)

If a loan is processed in under 2 hours the charge to the customer is 50. If the processing time is between 2 and 10 hours, the charge is 75 and for an application taking over 10 hours the charge is 95. (c) Calculate the mean processing charge per customer. (5 marks) Loan applications are processed in batches of 6 at a time. (d) Find the probability that a randomly selected batch has a total processing time under 21 hours. (6 marks) (Total 20 marks)

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QUESTION 7 (a) Explain why normally a range chart is drawn in addition to a mean chart to monitor process quality. (2 marks)

Krispies plc process and package breakfast cereals in boxes ready for dispatch to retail outlets. The companys quality control procedures involve the use of control charts where warning limits are set at the 0.025 probability point and action limits at the 0.001 probability point. This means, for example, that the upper action line is set so that the probability of the mean weight exceeding this line is 0.001. The weights of the cereal boxes when filled are normally distributed with a mean weight of 385 grams and a known standard deviation of 5 grams. To check on the process, randomly selected samples of size 4 are taken from the production line and weighed. The mean weight of each sample is then found. (b) (i) Draw up a control chart to monitor this process. (8 marks) The first eight samples recorded at the start of last week had the following mean weights: 376.5 378.2 381.0 385.9 382.5 388.5 385.0 384.2 (ii) Plot these values on your control chart, giving a possible explanation for any instability that may be present. (4 marks) Assuming the process is working satisfactorily, find the probability that a single item taken from the production line will be above the upper warning limit. (4 marks) Comment on the implication of your result in part (c) (i). (2 marks) (Total 20 marks)

(c)

(i)

(ii)

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QUESTION 8 Over a period of ten consecutive quarters a company has been monitoring the number of units of output produced per quarter together with the total cost of producing those units. The table summarises the results. Units of output (00s) Total cost (00s)

14 29 55 74 11 23 47 18 36 63

35 50 73 93 31 42 65 38 54 89

(a) (b)

Draw a scatter diagram for these data. (4 marks) Calculate the regression equation for total cost on output and plot this line on your scatter diagram. (10 marks)

The selling price of each unit of output is 1.60 (c) Use your graph to estimate the level of output at which total income and total costs are equal. (2 marks) Is it likely that the linear model found in part (b) will continue to be appropriate no matter what level of output is achieved in the future? Justify your answer in full. (4 marks) (Total 20 marks)

(d)

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BLANK PAGE

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Education Development International plc 2010

LEVEL 3

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Education Development International plc 2010