The Association of Business Executives

QCF

Quantitative Methods for

Business Management
30 May 2012, Afternoon
1.

Time allowed: 3 hours.

5QMBM0612

2. 
Read the instructions at the top of each section carefully.
The number of questions you have to answer is marked clearly at the top of each section.
Do not answer more questions than instructed.
3. The number of marks per question may vary. Marks for subdivisions of questions and the
total marks for each question are shown in brackets after the question.
4. 
No books, dictionaries, notes or any other written materials are allowed in this
examination.
5. 
Calculators, including scientific calculators, are allowed providing they are not
programmable and cannot store or recall information. Electronic dictionaries and
personal organisers are NOT allowed. All workings must be shown.
6. Formulae sheets and tables for the Normal and Chi-Squared distributions are provided on
pages 7-11.
7. Candidates who break ABE Examination Regulations (Conduct during the Examinations), or
commit any misconduct, will be disqualified from the examinations.
8.

Question papers must not be removed from the Examination Hall.

STRUCTURE OF PAPER: Answer BOTH sections
SECTION A: Answer ALL EIGHT questions

Q1-Q8

40 marks

Maximum marks for Section A

SECTION B: Answer ANY FOUR questions

Q9-Q13

15 marks
each
60 marks

Maximum marks for Section B

TOTAL MARKS AVAILABLE FOR THE PAPER

5QMBM0612

5 marks
each

ABE 2012

100 marks

K/502/4800

This paper consists of TWO SECTIONS.

Follow the instructions at the top of EACH section.
SECTION A
You must answer ALL EIGHT questions in this section.
Each question carries 5 marks.
Section A is worth 40% of the total marks available.

Q1 (a) Define the term simple random sample.

(b)
Explain how a simple random sample can be selected in practice.

(2 marks)
(3 marks)
(Total 5 marks)

Q2 
Outline the advantages and disadvantages of the mode and median as measures of location.

(5 marks)

Q3 
On average, a salesperson succeeds in making a sale with one in every four potential
customers contacted. During a particular week, five new potential customers are contacted.
Use the binomial distribution to calculate the probability that the salesperson will succeed in
making more than one sale.
(5 marks)

Q4 
The following set of measurements shows the actual weights of grain sold in ten randomly
selected 10kg sacks:

8911910111012109(kg)

(a)
Find the range.

(1 mark)

(b)
Calculate the standard deviation.

(4 marks)
(Total 5 marks)

Q5 Distinguish between the trend and seasonal variations in a time series.

5QMBM0612

(5 marks)

Q6 
A firm has commissioned an analyst to predict the probabilities of different profit and loss
levels resulting from two strategies (A and B). The results are shown below:

Profit/Loss
1.5 million profit
500,000 profit
1 million loss

Probabilities
Strategy A
Strategy B
0.5
0.7
0.4
0
0.1
0.3

Calculate the expected monetary values (EMVs) of each strategy (A and B) and advise the
firm on the better strategy to follow.
(5 marks)

Q7 In a competitive market, the supply function for a particular good is given by the equation:
P 100 2QS

where P is the price of the good (in per unit) and QS is the quantity supplied per time
period.

The demand function is given by the equation:

P 400 QD
where QD is the quantity demanded per time period.

Calculate the equilibrium price and quantity.

(5 marks)

Q8 A researcher is using a chi-squared test of independence to investigate a possible link

between three age groups (18-25, 26-40 and over 40) and three political affiliations (social
democrat, conservative and independent). Using a large sample, the calculated chi-squared
value is found to be 5.2.
Use the chi-squared tables to find the critical value at the 5% level of significance and
interpret the researchers result.
(5 marks)

END OF SECTION A
MAXIMUM MARKS FOR SECTION A: 40

TURN OVER TO SECTION B

5QMBM0612

[Turn over

SECTION B
You must answer ANY FOUR questions in this section.
Each question carries 15 marks.
Section B is worth 60% of the total marks available for the paper.

Q9 The numbers of visitors to a large leisure and sports centre are shown quarterly over three
years in the following table:
Year

Quarter

Visitors
(000s)

2009

1
2
3
4
1
2
3
4
1
2
3
4

9
11
25
7
11
15
29
9
15
17
33
13

2010

2011

(a)
Calculate a centred four-point moving average trend.

(5 marks)

(b) 
Using the additive model and the trend calculated in part (a), estimate the seasonal
factors in each quarter (to 3 decimal places).
(5 marks)

(c) 
Use your results to forecast the number of visitors in the first quarter of 2012.
Commenton the likely accuracy of your forecast.
(5 marks)
(Total 15 marks)

5QMBM0612

Q10 
The following table shows the prices of three popular fruits sold in a country and the
quantities sold in the two years 2010 and 2011:

Fruit
Apples
Peaches
Pears

2010
Price per kg Quantity sold
()
(millions)
1.40
2.00
1.60

2011
Price per kg Quantity sold
()
(millions)

50
30
11

2.20
1.50
2.00

45
40
15

(a)
Construct a Laspeyres price index for 2011, using 2010 as the base year.

(5 marks)

(b)
Construct a Paasche price index for 2011, using 2010 as the base year.

(5 marks)

(c) 
Explain why the Laspeyres price index is usually larger than the Paasche price index.
(5 marks)
(Total 15 marks)

Q11 (a) 
Explain what is meant by a significance test and give an example of how significance
testing could be used in business decision-making.
(5 marks)

(b) 
In a simple random sample of 500 households in Glasgow, 25 per cent stated that they
would be interested in participating in a car-sharing scheme. In a similar survey of 400
households in Manchester, 30 per cent expressed an interest in participating in such a
scheme. To test whether the difference between the two sample results is statistically
significant, you are required to:

(i)

State the appropriate null and alternative hypotheses for your test.

(2 marks)

(ii)

Find the critical value of z for a two-tailed test at the 5% level.

(2 marks)

(iii) Calculate the test statistic and interpret the result.

5QMBM0612

(6 marks)
(Total 15 marks)

[Turn over

Q12 In the following set of data, y represents the annual costs of maintaining and repairing ten of
a manufacturing companys machines (in 000) and x represents the age of each machine
(in years).

4
1
1
3
3
2
2
2
1
3

10
5
5
15
20
20
8
6
1
10

(a) 
Find the equation of the least-squares regression line, assuming that maintenance and
repair costs depend on the age of the machine.
(5 marks)

(b)
Calculate the Pearson correlation coefficient and comment on the result.

(5 marks)

(c) 
Use the results of parts (a) and (b) to predict the maintenance and repair costs of a
12year-old machine and a 25-year-old machine. Comment on the likely accuracy of
your predictions.
(5 marks)
(Total 15 marks)

Q13 A small firm manufactures laptops with a projected selling price of 1,000. The firm has fixed
costs of 90,000 per month and variable costs per laptop are 400.

(a) 
Find the firms break-even level of monthly output.

(b) 
If the firm plans to sell 200 laptops per month, calculate its expected monthly profit.
(5 marks)

(c) 
If the firm is making a loss of 54,000 per month, calculate the increase in production
that would be required to make a profit of 18,000.
(5 marks)
(Total 15 marks)

END OF SECTION B
MAXIMUM MARKS FOR SECTION B: 60
TOTAL MAXIMUM MARKS: 100
END OF QUESTION PAPER

5QMBM0612

(5 marks)

FORMULAE
Mean of ungrouped data:

Geometric mean of ungrouped data:

where:

= "the product of "

Mean of grouped data:

Median of grouped data:

where:

L
F
f
i

=
=
=
=

lower boundary of the median class

cumulative frequency up to the median class
frequency of the median class
width of the median class

Mode of grouped data:

where:

L
fm
fm1
fm+1
i

2
=
=
=
=
=

lower boundary of the modal class

frequency of the modal class
frequency of the pre-modal class
frequency of the post-modal class
width of the modal class

Standard deviation of ungrouped data:

( )

=

Standard deviation of grouped data:

( )

5QMBM0612

[Turn over

oefficient of s ewness:

where:

( )

= median
s = standard deviation

egression:

( )

earson correlation:

( )

( )

Spearman s ran correlation:

( 1)

Laspeyres price inde :

aasche price inde :

inomial distribution:

() =

oisson distribution:

() =

5QMBM0612

Standard normal distribution:

onfidence interval for a mean:

onfidence interval for a proportion:

est statistic for a single mean:

est statistic for a difference between means:

est statistic for a single proportion:

est statistic for a difference between proportions:

where:

=
=

hi-squared test statistic:

5QMBM0612

( )

[Turn over

Areas in the Right-Hand Tail of the Normal Distribution

.00

0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0

.5000
.4602
.4207
.3821
.3446
.3085
.2743
.2420
.2119
.1841
.1587
.1357
.1151
.0968
.0808
.0668
.0548
.0446
.0359
.0287
.02275
.01786
.01390
.01072
.00820
.00621
.00466
.00347
.00256
.00187
.00135
.00097
.00069
.00048
.00034
.00023
.00016
.00011
.00007
.00005
.00003

5QMBM0612

.01
.4960
.4562
.4168
.3783
.3409
.3050
.2709
.2389
.2090
.1814
.1562
.1335
.1132
.0951
.0793
.0655
.0537
.0436
.0351
.0281
.02222
.01743
.01355
.01044
.00798
.00604
.00453
.00336
.00248
.00181

.02

.03

.04

.4920
.4522
.4129
.3745
.3372
.3015
.2676
.2358
.2061
.1788
.1539
.1314
.1112
.0934
.0778
.0643
.0526
.0427
.0344
.0274
.02169
.01700
.01321
.01017
.00776
.00587
.00440
.00326
.00240
.00175

.4880
.4483
.4090
.3707
.3336
.2981
.2643
.2327
.2033
.1762
.1515
.1292
.1093
.0918
.0764
.0630
.0516
.0418
.0336
.0268
.02118
.01659
.01287
.00990
.00755
.00570
.00427
.00317
.00233
.00169

.4840
.4443
.4052
.3669
.3300
.2946
.2611
.2296
.2005
.1736
.1492
.1271
.1075
.0901
.0749
.0618
.0505
.0409
.0329
.0262
.02068
.01618
.01255
.00964
.00734
.00554
.00415
.00307
.00226
.00164

10

.05
.4801
.4404
.4013
.3632
.3264
.2912
.2578
.2266
.1977
.1711
.1496
.1251
.1056
.0885
.0735
.0606
.0495
.0401
.0322
.0256
.02018
.01578
.01222
.00939
.00714
.00539
.00402
.00298
.00219
.00159

.06
.4761
.4364
.3974
.3594
.3228
.2877
.2546
.2236
.1949
.1685
.1446
.1230
.1038
.0869
.0721
.0594
.0485
.0392
.0314
.0250
.01970
.01539
.01191
.00914
.00695
.00523
.00391
.00289
.00212
.00154

.07

.08

.09

.4721
.4325
.3936
.3557
.3192
.2843
.2514
.2206
.1922
.1660
.1423
.1210
.1020
.0853
.0708
.0582
.0475
.0384
.0307
.0244
.01923
.01500
.01160
.00889
.00676
.00508
.00379
.00280
.00205
.00149

.4681
.4286
.3897
.3520
.3156
.2810
.2483
.2177
.1894
.1635
.1401
.1190
.1003
.0838
.0694
.0571
.0465
.0375
.0301
.0239
.01876
.01463
.01130
.00866
.00657
.00494
.00368
.00272
.00199
.00144

.4641
.4247
.3859
.3483
.3121
.2776
.2451
.2148
.1867
.1611
.1379
.1170
.0985
.0823
.0681
.0559
.0455
.0367
.0294
.0233
.01831
.01426
.01101
.00842
.00639
.00480
.00357
.00264
.00193
.00139

Chi-Squared Critical Values

p value
df
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
40
50
60
80
100

0.25
0.20 0.15 0.10 0.05 0.025 0.02 0.01 0.005 0.0025 0.001 0.0005
1.32 1.64 2.07 2.71 3.84 5.02 5.41 6.63 7.88 9.14 10.83 12.12
2.77 3.22 3.79 4.61 5.99 7.38 7.82 9.21 10.60 11.98 13.82 15.20
4.11 4.64 5.32 6.25 7.81 9.35 9.84 11.34 12.84 14.32 16.27 17.73
5.39 5.59 6.74 7.78 9.49 11.14 11.67 13.23 14.86 16.42 18.47 20.00
6.63 7.29 8.12 9.24 11.07 12.83 13.33 15.09 16.75 18.39 20.51 22.11
7.84 8.56 9.45 10.64 12.53 14.45 15.03 16.81 13.55 20.25 22.46 24.10
9.04 9.80 10.75 12.02 14.07 16.01 16.62 18.48 20.28 22.04 24.32 26.02
10.22 11.03 12.03 13.36 15.51 17.53 18.17 20.09 21.95 23.77 26.12 27.87
11.39 12.24 13.29 14.68 16.92 19.02 19.63 21.67 23.59 25.46 27.83 29.67
12.55 13.44 14.53 15.99 18.31 20.48 21.16 23.21 25.19 27.11 29.59 31.42
13.70 14.63 15.77 17.29 19.68 21.92 22.62 24.72 26.76 28.73 31.26 33.14
14.85 15.81 16.99 18.55 21.03 23.34 24.05 26.22 28.30 30.32 32.91 34.82
15.93 16.98 18.90 19.81 22.36 24.74 25.47 27.69 29.82 31.88 34.53 36.48
17.12 18.15 19.40 21.06 23.68 26.12 26.87 29.14 31.32 33.43 36.12 38.11
18.25 19.31 20.60 22.31 25.00 27.49 28.26 30.58 32.80 34.95 37.70 39.72
19.37 20.47 21.79 23.54 26.30 28.85 29.63 32.00 34.27 36.46 39.25 41.31
20.49 21.61 22.98 24.77 27.59 30.19 31.00 33.41 35.72 37.95 40.79 42.88
21.60 22.76 24.16 25.99 28.87 31.53 32.35 34.81 37.16 39.42 42.31 44.43
22.72 23.90 25.33 27.20 30.14 32.85 33.69 36.19 38.58 40.88 43.82 45.97
23.83 25.04 26.50 28.41 31.41 34.17 35.02 37.57 40.00 42.34 45.31 47.50
24.93 26.17 27.66 29.62 32.67 35.48 36.34 38.93 41.40 43.78 46.80 49.01
26.04 27.30 28.82 30.81 33.92 36.78 37.66 40.29 42.80 45.20 48.27 50.51
27.14 28.43 29.98 32.01 35.17 38.08 38.97 41.64 44.18 46.62 49.73 52.00
28.24 29.55 31.13 33.20 36.42 39.36 40.27 42.98 45.56 48.03 51.18 53.48
29.34 30.68 32.28 34.38 37.65 40.65 41.57 44.31 46.93 49.44 52.62 54.95
30.43 31.79 33.43 35.56 38.89 41.92 42.86 45.64 48.29 50.83 54.05 56.41
31.53 32.91 34.57 36.74 40.11 43.19 44.14 46.96 49.64 52.22 55.48 57.86
32.62 34.03 35.71 37.92 41.34 44.46 45.42 48.28 50.99 53.59 56.89 59.30
33.71 35.14 36.85 39.09 42.56 45.72 46.69 49.59 52.34 54.97 58.30 60.73
34.80 36.25 37.99 40.26 43.77 46.98 47.96 50.89 53.67 56.33 59.70 62.16
45.62 47.27 49.24 51.81 55.76 59.34 60.44 63.69 66.77 69.70 73.40 76.09
56.33 53.16 60.35 63.17 67.50 71.42 72.61 76.15 79.49 82.66 86.66 89.56
66.98 68.97 71.34 74.40 79.08 83.30 84.58 88.38 91.95 95.34 99.61 102.70
88.13 90.41 93.11 96.58 101.90 106.60 108.10 112.30 116.30 120.10 124.80 128.30
109.10 111.70 114.70 118.50 124.30 129.60 131.10 135.80 140.20 144.30 149.40 153.20

5QMBM0612

11

5QMBM0612

12

691230