ASSIGNMENT DRIVE SUMMER 2014

MB0040- STATISTICS FOR MANAGEMENT

Q1 Distinguish between Classification and Tabulation. Explain the structure and components of a
Table with an example.
(Meaning of Classification and Tabulation, Differences between Classification and Tabulation, Structure and
Components of a Table with an example)
Answer.
Meaning of Classification and Tabulation
Classification
According to Secrist, Classification is the process of arranging data into sequences and groups according to their
common characteristics or separating them into different but related parts. According to Stockton and Clark, The
process of grouping large number of individual facts and observations, on the basis of similarity among the items is
called Classification.
Tabulation
Tabulation follows classification. It is a logical or systematic listing of related data in rows and columns. The row of a
table represents the horizontal arrangement of data and column represents the vertical arrangement of data. The
presentation of data in tables should be simple, systematic and unambiguous.
The objectives of tabulation are to:
Simplify complex data
Highlight important characteristics
Present data in minimum space
Facilitate comparison
Bring out trends and tendencies

Facilitate further analysis

Differences between Classification and Tabulation

Table depicts the few differences between classification and tabulation.
Table: Differences between Classification and Tabulation

Structure and Components of a Table with an example

Table and figure depict the parts of a table along with the explanation of each tab (tabs from 1 to 10).

Tab 1: Table number

Table number is to identify the table for reference. When there are many tables in an analysis, then table numbers are
helpful in identifying the tables.
Tab 2: Title
Title indicates the scope and the nature of contents in a concise form. In other words, title of a table gives information
about the data contained in the body of the table. Title should not be lengthy.
Tab 3 and Tab 4: Captions
Captions are the headings and subheadings describing the data present in the columns.
Tab 5 and Tab 6: Stubs
Stubs are the headings and subheadings of rows.
Tab 7: Body of the table
Body of the table contains numerical information.
Tab 8: Totals
The sub-totals for each separate classification and a general total for all combined classes should be given at the
bottom or right side of the figures whose totals are taken. Ruling and spacing separate columns and rows. However,
totals are separated from main body by thick lines.
Tab 9: Head note
Head note is given below the title of the table to indicate the units of measurement of the data and is enclosed in
brackets.
Tab 10: Source note
Source note indicates the source from which data is taken. The source note related to table is placed at the bottom on
the left hand corner.

Q2 a) Describe the characteristics of Normal probability distribution.

b) In a sample of 120 workers in a factory, the mean and standard deviation of wages were Rs. 11.35
and Rs.3.03 respectively. Find the percentage of workers getting wages between Rs.9 and Rs.17 in the
whole factory assuming that the wages are normally distributed.
(Characteristics of Normal probability distribution, Formula/Computation/Solution to the problem)
Answer.
a) Characteristics of Normal probability distribution
The following are some of the characteristics of Normal distribution:
1. Normal distribution is a Continuous probability distribution
2. Its probability density function is given by:

3. Its mean is and standard deviation is , where and are the parameters of the distribution
4. It is a bell-shaped curve and is symmetric about its mean, as depicted in figure.

Fig.: Normal Distribution Curve

a. It is symmetrical (Non-skew). That is 1 = 0

b. The mean, median and mode are equal
5. The Mean divides the curve into two equal portions
6. Its quartile deviation, Q.D. = 2/3
7. Its mean deviation, M.D. 4/5
8. The X axis is an asymptote to the curve [Asymptote is a straight line that touches the curve at infinity]
9. The point of inflexion occurs at
10. It is a unimodal distribution
11. Mean, Median and Mode coincide
12. The area under normal curve within certain limits is depicted in table. The graphical representation of the table is
depicted in figure.

Fig. : Areas under the Normal Distribution Curve

b) Formula/Computation/Solution to the problem

Z1= (x1-)/
= (9-11.35)/3.03
=0.078
Z2= (17-11.35)/3.03
=1.86
From tables
Area between z=0 and z=0.78 is 0.2823
Area between z=0 and z= 1.86 is 0.4686
Area covered by the workers getting wages between rs 9 and rs 17
= 0.2823+0.4686
=0.7509
Required percentage =
= 75%

(0.7509*120)/120 *100

Q3 a) The procedure of testing hypothesis requires a researcher to adopt several steps. Describe in
brief all such steps.
b) Distinguish between:
i. Stratified random sampling and Systematic sampling
ii. Judgment sampling and Convenience sampling
(Hypothesis testing procedure, Differences)
Answer.
Steps for procedure of testing hypothesis
Five Steps in Hypothesis Testing:
1.

Specify the Null Hypothesis

2. Specify the Alternative Hypothesis

3. Set the Significance Level (a)
4. Calculate the Test Statistic and Corresponding P-Value
5. Drawing a Conclusion
Step 1: Specify the Null Hypothesis
The null hypothesis (H0) is a statement of no effect, relationship, or difference between two or more groups or factors.
In research studies, a researcher is usually interested in disproving the null hypothesis.
Examples:
There is no difference in intubation rates across ages 0 to 5 years.

The intervention and control groups have the same survival rate (or, the intervention does not improve
survival rate).

There is no association between injury type and whether or not the patient received an IV in the prehospital
setting

Step 2: Specify the Alternative Hypothesis

The alternative hypothesis (H1) is the statement that there is an effect or difference. This is usually the hypothesis the
researcher is interested in proving. The alternative hypothesis can be one-sided (only provides one direction, e.g.,
lower) or two-sided. We often use two-sided tests even when our true hypothesis is one-sided because it requires
more evidence against the null hypothesis to accept the alternative hypothesis.
Examples:
The intubation success rate differs with the age of the patient being treated (two-sided).

The time to resuscitation from cardiac arrest is lower for the intervention group than for the control (onesided).

There is an association between injury type and whether or not the patient received an IV in the prehospital
setting (two sided).

Step 3: Set the Significance Level (a)

The significance level (denoted by the Greek letter alpha a) is generally set at 0.05. This means that there is a 5%
chance that you will accept your alternative hypothesis when your null hypothesis is actually true. The smaller the
significance level, the greater the burden of proof needed to reject the null hypothesis, or in other words, to support
the alternative hypothesis.
Step 4: Calculate the Test Statistic and Corresponding P-Value
In another section we present some basic test statistics to evaluate a hypothesis. Hypothesis testing generally uses a
test statistic that compares groups or examines associations between variables. When describing a single sample
without establishing relationships between variables, a confidence interval is commonly used.
The p-value describes the probability of obtaining a sample statistic as or more extreme by chance alone if your null
hypothesis is true. This p-value is determined based on the result of your test statistic. Your conclusions about the
hypothesis are based on your p-value and your significance level.
Example:

P-value = 0.01 This will happen 1 in 100 times by pure chance if your null hypothesis is true. Not likely to
happen strictly by chance.

Step 5: Drawing a Conclusion

1.

P-value <= significance level (a) => Reject your null hypothesis in favor of your alternative hypothesis. Your
result is statistically significant.

2. P-value > significance level (a) => Fail to reject your null hypothesis. Your result is not statistically significant.
Hypothesis testing is not set up so that you can absolutely prove a null hypothesis. Therefore, when you do not find
evidence against the null hypothesis, you fail to reject the null hypothesis. When you do find strong enough evidence
against the null hypothesis, you reject the null hypothesis. Your conclusions also translate into a statement about your
alternative hypothesis. When presenting the results of a hypothesis test, include the descriptive statistics in your
conclusions as well. Report exact p-values rather than a certain range. For example, "The intubation rate differed
significantly by patient age with younger patients have a lower rate of successful intubation (p=0.02)." Here are two
more examples with the conclusion stated in several different ways.
Example:
H0: There is no difference in survival between the intervention and control group.

H1: There is a difference in survival between the intervention and control group.

a = 0.05; 20% increase in survival for the intervention group; p-value = 0.002

Conclusion:
Reject the null hypothesis in favor of the alternative hypothesis.

The difference in survival between the intervention and control group was statistically significant.

There was a 20% increase in survival for the intervention group compared to control (p=0.001).

Difference between Stratified random sampling and Systematic sampling & Judgement sampling and
Convenience sampling
Stratified random sampling
This sampling design is most appropriate if the population is heterogeneous with respect to characteristic under study
or the population distribution is highly skewed. We subdivide the population into several groups or strata such that:
i) Units within each stratum is more homogeneous
ii) Units between strata are heterogeneous
iii) Strata do not overlap, in other words, every unit of the population belongs to one and only one stratum
The criteria used for stratification are geographical, sociological, age, sex, income etc. The population of size N is
divided into k strata relatively homogenous of size N1, N2.Nk such that N1 + N2 + + Nk = N.
Then, we draw a simple random sample from each stratum either proportional to size of stratum or equal units from
each stratum.

Systematic sampling
This design is recommended if we have a complete list of sampling units arranged in some systematic order such as
geographical, chronological or alphabetical order.
Suppose the population size is N. The population units are serially numbered 1 to N in some systematic order and
we wish to draw a sample of n units. Then we divide units from 1 to N into K groups such that each group has n
units. This implies nK = N or K = N/n. From the first group, we select a unit at random. Suppose the unit selected is
6th unit, thereafter we select every 6 + Kth units. If K is 20, n is 5 and N is 100 then units selected are 6, 26, 46, 66,
86.

Judgment sampling
The choice of sample items depends exclusively on the judgment of the investigator. The investigators experience and
knowledge about the population will help to select the sample units. It is the most suitable method if the population
size is less. The table depicts the merits and demerits of judgement sampling.

2. Convenience sampling
The sample units are selected according to the convenience of the investigator. It is also called chunk which refers to
the fraction of the population being investigated, which is selected neither by probability nor by judgment. Moreover,
a list or framework should be available for the selection of the sample. It is used to make pilot studies. However, there
is a high chance of bias being introduced.

Q4 a) What is regression analysis? How does it differ from correlation analysis?

b) Calculate Karl Pearsons coefficient of correlation between X series and Y series.

x
y

110
12

120
18

130
20

120
15

140
25

135
30

155
35

160
20

165
25

155
10

Meaning of Regression and Correlation

Differences
Formula/ Computation/ Solution to the problem
Answer.
Meaning of Regression and Correlation
Regression analysis
According to M. M. Blair, Regression is defined as, the measure of the average relationship between two or more
variables in terms of the original units of the data. Regression analysis in statistics, this includes any technique for
learning about the relationship between one or more dependent variables Y and one or more independent variables X.
Regression analysis is used to estimate the values of the dependent variables from the values of the independent
variables. Regression analysis is used to get a measure of the error involved while using the regression line as a basis
for estimation. The regression coefficient Y on X is the coefficient of the variable X in the line of regression Y on X.
Regression coefficients are used to calculate the correlation coefficient. The square of correlation is the product of
regression coefficients.
Correlation
Correlation analysis attempts to study the relationship between the two variables X and Y. In regression, it is
attempted to quantify the dependence of one variable on the other. For example, if there are two variables X and Y
and Y depends on X, then the dependence is expressed in the form of the equations. When two or more variables
move in sympathy with the other, then they are said to be correlated. If both variables move in the same direction,
then they are said to be positively correlated. If the variables move in the opposite direction, then they are said to be
negatively correlated. If they move haphazardly, then there is no correlation between them. Correlation analysis deals
with the following:
Measuring the relationship between variables.
Testing the relationship for its significance.
Giving confidence interval for population correlation measure.
The correlation between two variables may be due to the following causes:
Due to small sample sizes, Correlation may be present in sample and not in population.
Due to a third factor, like in the case, Correlation between yield of rice and tea may be due to a third factor rain.
Differences
Correlation and regression analysis are related in the sense that both deal with relationships among variables.
The correlation coefficient is a measure of linear association between two variables. Values of the correlation
coefficient are always between -1 and +1. A correlation coefficient of +1 indicates that two variables are perfectly
related in a positive linear sense, a correlation coefficient of -1 indicates that two variables are perfectly related in a
negative linear sense, and a correlation coefficient of 0 indicates that there is no linear relationship between the two
variables. The correlations term is used when
1) Both variables are random variables, and
2) The end goal is simply to find a number that expresses the relation between the variables
Regression analysis involves identifying the relationship between a dependent variable and one or more independent
variables. The regression term is used when

1) One of the variables is a fixed variable, and

2) The end goal is use the measure of relation to predict values of the random variable based on values of the fixed
variable
Formula/ Computation/ Solution to the problem
S. No
1
2
3
4
5
6
7
8
9
10
N=10

r=

X
110
120
130
120
140
135
155
160
165
155
X=1390

Y
12
18
20
15
25
30
35
20
25
10
Y=210

XY
1320
2160
2600
1800
3500
4050
5425
3200
4125
1550
XY= 29730

X2
12100
14400
16900
14400
19600
18225
24025
25600
27225
24025
X2=196500

Y2
144
324
400
225
625
900
1225
400
625
100
Y2=4968

nXY-(X)( Y)
-------------------------------[nX2-(X)2] [nY2-(Y)2]
10(29730)-(1390x210)
r= ---------------------------------------[10(196500)-(1390)2 ] [10(4968)-(210)2]
297300-291900
5400
r= ---------------------=
-------------------- [1965000-1932100] [49680-44100]
32900 5580
r=0.3987

Answer.

Q5 Briefly explain the methods and theories of Business forecasting.

Meaning of Business forecasting
Methods of Business forecasting
Theories of Business forecasting
Answer.
Meaning of Business forecasting
Business forecasting provides a guide to long-term strategic planning and helps to inform decisions about scheduling
of production, personnel and distribution. These are common statistical tasks in business that are often done poorly
and frequently confused with planning and setting of goals. Forecasting of USB-ED introduces participants to
forecasting techniques and provides a practical understanding of the main forecasting tools used by economists, and
business, marketing and financial analysts.
This unique program is designed to provide a balanced mix of theory and practice with the aim of equipping
participants to become operational forecasters, capable of designing, implementing and evaluating their own

forecasting projects. The theories discussed will be cemented by hands-on sessions in the computer laboratory using
industry-standard forecasting software packages.
Methods of Business forecasting
The following are the main methods of business forecasting.
1. Business barometers
2. Time series analysis
3. Extrapolation
4. Regression analysis
5. Modern econometric methods
6. Exponential smoothing method
Business Barometers
Business indices are constructed to study and analyse the business activities on the basis of which future conditions
are predetermined. As business indices are the indicators of future conditions, they are also known as business
barometers or economic barometers. With the help of these business barometers the trend of fluctuations in business
conditions are understood and a decision can be taken relating to the problem by forecasting.
Time series analysis
Time series analysis is also used for the purpose of making business forecasting. The forecasting through time series
analysis is possible only when the business data of various years are available which reflects a definite trend and
seasonal variation. By time series analysis the long term trend, secular trend, seasonal and cyclical variations are
ascertained, analyzed and separated from the data of various years.
Extrapolation
Extrapolation is the simplest method of business forecasting. By extrapolation, a businessman finds out the possible
trend of demand of his goods and also about the future price trends. The accuracy of extrapolation depends on two
factors:
Knowledge about the fluctuations of the figures
Knowledge about the course of events relating to the problem under consideration
Regression analysis
The regression approach offers many valuable contributions to the solution of the forecasting problem. It is the means
by which we select from among the many possible relationships between variables in a complex economy, which will
be useful for forecasting.
Regression relationship may involve one predicted or dependent variable and one independent variable under simple
regression, or it may involve relationships between the variable to be forecasted and several independent variables
under multiple regressions.
Modern econometric methods
Econometric techniques, which originated in the eighteenth century, have recently gained popularity for forecasting.
Econometrics refers to the application of mathematical economic theories and statistical procedures to economic data
to verify economic theorems. Models take the form of a set of simultaneous equations. The values of the constants in
such equations are supplied by a study of statistical time series, and a large number of equations may be necessary to
produce an adequate model.
Exponential smoothing method
This method is regarded as the best method of business forecasting as compared to other methods. Exponential
smoothing is a special kind of increasing exponential weighted average assigned to recent observation data and is
found extremely useful in short-term forecasting of inventories and sales.
Theories of Business forecasting

There are many theories, which are usually followed to make business forecasting. In theory of economic rhythm the
available historical data have to be analyzed into their components, i.e. trend, seasonal, cyclical, and irregular
variations. The propounders of the theory were of the view that the economic phenomenon behaves in a rhythmic
manner and cycles of nearly the same intensity and duration tend to recur.
The secular trend obtained from historical data is projected a number of years into the future on a graph or with the
help of mathematical trend equation. If the phenomenon is cyclical in behavior, the trend should be adjusted for
cyclical movements. When the forecast for a year is to be split into months or quarters then the forecasters should
adjust the projected figure for seasonal variations also with the help of seasonal indices.
Action and Reaction theory is based on the Newtons 3rd law of motion i.e. for every action there is an equal and
opposite reaction. When we apply this law for business forecasting, it implies that if there is depression in a particular
field of business, there is bound to be boom in it sooner or later. It reminds us of the business of cycle, which has four
phases, i.e. prosperity, decline, depression and prosperity.
This theory regards certain levels of business activity as normal and the forecasters have to estimate the normal level
carefully. According to this theory if the price of commodity goes beyond the normal level, it must come down also
below the normal level because of the increased production and supply of that commodity. Sequence theory or time
lag method is based on behavior of different businesses, which show similar movements occurring successively but not
simultaneously.
As such, this method takes into account time lag based on the theory of lead lag relationship, which hold goods in
most cases. The series that usually change earlier serve as forecast for other related series. This way the element of risk
is considerably reduced.
Q6 Construct Fishers Ideal Index for the given information and check whether Fishers formula
satisfies Time Reversal and Factor Reversal Tests.
Item
P0
Q0
P1
Q1
s
A
16
5
20
6
B
12
10
18
12
C
14
8
16
10
D
20
6
22
10
E
80
3
90
5
F
40
2
50
5
Formula of Fishers Ideal Index
Computation of Fishers Ideal Index
Fishers formula satisfies Time Reversal Test
Fishers formula satisfies Factor Reversal Test
Answer.
Formula of Fishers Ideal Index
This method is a combination of Laspeyres and Paasches method. If we find out the geometric average of Laspeyres
index and Paasches index, we get the index suggested by Fisher. Fishers index number is given by:

Where,
LP01 & PP01 is Paasches price index.
(20x5+18x10+16x8+22x6+90x3+50x2)
(20x6+18x12+16x10+22x10+90x5+50x5)
--------------------------------------------------- x -----------------------------------------------------(16x5+12x10+14x8+20x6+80x3+40x2)
(16x6+12x12+14x10+20x10+80x5+40x5)

(100+180+128+132+270+100)
(120+216+160+220+450+250)
---------------------------------------- x ------------------------------------------(80+ 120+112+120+240+80)
(96+144+140+200+400+200)
910
1416
------- x ------752
1180

1288560
1.45212766
-----------887360

= 1.20 Answer
Fishers formula satisfies Time Reversal Test
Time reversal test
This test requires the formula for calculating the index number that should be such that it will give the same ratio
between one period of comparison and the other. Symbolically, is Laspeyres price index and P 01 xP10=1
This test is satisfied by Fishers ideal index, simple geometric mean of price relatives, and weighted geometric mean of
price relatives and Marshall-Edge worth index number.
Fishers formula satisfies Factor Reversal Test
Factor reversal test
The formula should permit the interchange of price and quantity without giving inconsistent results.

This test is satisfied by Fishers ideal index