Business Mathematics and Statistic (523) First Assignment

Q.1 (a) The following table presents the number of new business 
opened   in   Pakistan   during   the   third   quarter   of   1990. 
Construct a pie chart to represent these data.

Ans. To construct the pie chart, we will have to calculate the 
percentage for each type of new business opened to the 
total   number   of   businesses   opened   during   the   third 
quarter of 1990 and then angle of each representation will 
determine in the following manner:

The total number of new businesses opened = 31728

Nature of  No. of  Angle

Business Business

33.8/100 x 360 = 
Retailing 10,724 122°
Services 4,886 15.4/100 x 360 =  55°
Construction 4,315 13.6/100 x 360 = 49°
Wholesaling 3,776 11.9/100 x 360 = 43°
Manufacturing 2,760 8.7/100 x 360 = 31°
Other 5,267 16.6/100 x 360 = 60°
Total: 31,728 360°

Now   the   pie   chart   will   be   constructed   by   dividing   a 

circular   pie   into   six   parts   of   proportional   sizes   as 
indicated by the percentages representing them. The pie 
chart would appear as:

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16.6% Retailing

33.8% S ervices
8.7%
Construction

Wholesaling
11.9%
Manufacturing

13.6% 15.4%
Other

(b) Why   does   business   statistics   usually   involve   the  use   of 
sample   data   instead   of   the   entire   population   when 
making a business decision.

Ans. Business   statistics   usually   involves   the   use   of   sample 

data instead of the entire population, due to the following 
reasons.

• In most cases, it is impossible to obtain the data for 
the entire population. For example, if a TV network 
wants   to   obtain   the   views   of   its   viewers   about   a 
certain talk show, it would be practically impossible 
for the network to reach all of its viewers.

• Sampling   saves   time,   cost,   and   effort.   To   gather 

data   about   every   member   of   the   population   is 
usually very time consuming and costly. Usually, it 
is   so   costly   that   the   benefits   expected   to   be 
achieved from analyzing the data are not worth the 
cost involved. Therefore, a random sample, which is 
representative of the population, is chosen.

• In   some   cases,   inspection   or   testing   of   a   good   or 

product   destroys   its   usefulness.   For   example,   if   a 
firm manufactures bullets, it will not be feasible to 

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test each and every bullet by firing it because then 
they   would   become   useless.   Therefore,   in   such 
cases, sampling is unavoidable.

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Q.2 A particular industrial product is shipped in lots of 20. 
Testing to determine whether an item is defective is costly 
hence the manufacturer samples production rather than 
using   a   100%   inspection   plan.     A   sampling   plan 
constructed   to   minimize   the   number   of   defective   units 
shipped   to   customers   calls   for   sampling   5   items   from 
each lot and rejecting the lot if more than one defective 
units is observed.  (If rejected, each item in the lot is then 
tested).   If a lot contains 4 defectives units, what is the 
probability that it will be accepted.

Ans.
n=5
Probability of acceptance ­ p =1/5
Probability of rejection ­ q = 4/5

P(r ≤ 1) =  P(0)+P(1)
P(0)
= C n pr q n-r
r
= C 50 (.2)0 (.8)5
= 0.3277

P(1)
= C n pr q n-r
r
= C15 (.2)1 (.8) 4
= 0. 4096

= 0.3277 + 4096 
= 0.7373

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Q.3(a) A decline in the demand for a specific brand of a product 
may   result   from   either   a   decline   in   demand   for   the 
product, in general, or a reduction in the percentage of 
the   purchasers   selecting   this   specific   brand   over   its 
competitors.   Suppose that to remain competitive in the 
marketplace,   a   company   producing   brand   “A”   must 
maintain at least an equal share of the market with its 
three major competitors.  IF 100 consumers are randomly 
selected   and   interviewed   regarding   their   brand 
preferences, what is the probability of observing sample 
proportion preferring brand “A” as small as 0.15 or less if 
in fact one­fourth or 25 per cent of the consumers prefer 
brand “A”.

Ans.

n = 100
p 0 = 0. 25
q 0 = 0. 75 and q0 = 1 - p 0

P(P ≤ 0.15) = ?

So
)
P - p0
Z =
p 0q 0
n
0.15 - 0.25
Z =
0.25 × 0.75
100
0.15 - 0.25
Z =
0.0433

P(P ≤ 0.15) = P(Z≤ ­2.31)
= 0.5­P(­2.31≤ Z≤ 0)
= 0.5­0.4896

So

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P(P ≤ 0.15) = 0.0104

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(b) A   sample   of   n=100   employees   from   a   company   was 

selected   and   the   annual   salary   for   each   was   recorded. 
The mean and standard deviation of their salaries were 
found to be  X = Rs . 7,750 and s = Rs . 900

Construct   the   95   per   cent   confidence   interval   for   the 

population average salary µ.

Ans.
σ σ
X - Z <µ < X+Z
∝ ∝
2 n 2 n
900 900
7750 - Z.025 < µ < 7750 + Z .025
100 100
900
7750 - Z.025
100

900
7750 - (1.96)
100
7750 - 176. 4
= 7573.6
and

900
7750 + Z .025
100
= 7750 + 176.4
= 7926.4

7573.6 < µ < 7926.4

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Q.4 (a) The   following   data   have   been   obtained   for   a   random 

sample of ten electronics firms, where X represents age of 
the company in years and  Y  represents annual sales in 
millions   of   dollars.     Determine   the   correlation   between 
age of the firm and sales.
X Y X2 Y2 XY

3 2.5 9 6.25 7.5

10 6 100 36.00 60.0
5 2.5 25 6.25 12.5
6 3.5 36 12.25 21.0
12 6 144 36.00 72.0
15 6.5 225 42.25 97.5
9 6 81 36.00 54.0
2 1.5 4 2.25 3.0
9 5.5 81 30.25 49.5
7 5 49 25.00 35.0
78 45 754 232.50 412.0

The coefficient of correlation:

r= ∑ (X − X)(Y − Y)
[∑ ( X − X ) (Y − Y )
2 2
]

∑ (X − X)(Y − Y) = ∑ XY − ( ) (∑ X )(∑ Y )
n
(∑ X )
2

∑(X − X) 2
= ∑ X2 −
n
( )
2
∑Y
∑(Y − Y) 2
= ∑ Y2 −
n

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(∑ X ) (∑ Y ) 78 × 45
∑ XY − = 412 - = 61
n 10

( )
2
2
∑X 782
∑X − = 754 − = 145.6
n 10

(∑ Y)
2
452
∑( Y − Y) = ∑ Y2 2
− = 232.50 − = 30
n 10

61
r =
145.6 × 30

61
r =
66. 09

r = 0.923

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(b) Describe   a   situation   in   your   area   of   interest   in   which 

simple correlation analysis would be useful.   Use real or 
realistic data and do a complete correlation analysis.

Ans. The   data   given   below   corresponds   to   the   months­wise 

sales   and  marketing  expenses  of   the  ABM   Data   System 
(Pvt)   Limited   which   is   renowned   dealer   in   Computer 
business.

In   the   following,   the   correlation   coefficient   analysis   is 

made between the total sales (X) and marketing expenses 
(Y):

Month of  Total sales Mktg.  X2 Y2 XY

Year 1995 (X) Exp.
(Y)
January 820000 77900 672400000000 6068410000 63878000000

February 830000 82000 688900000000 6724000000 68060000000

March 720000 72000 518400000000 5184000000 51840000000

April 705000 69500 497025000000 4830250000 48997500000

May 980000 99275 960400000000 9855525625 97289500000

June 875000 86000 765625000000 7396000000 75250000000

July 1100000 98000 1210000000000 9604000000 107800000000

August 920000 99750 846400000000 9950062500 91770000000

September 700000 89000 490000000000 7921000000 62300000000

October 620000 70000 384400000000 4900000000 43400000000

November 860000 80000 739600000000 6400000000 68800000000

December 870000 76575 756900000000 5863730625 66620250000

10000000 1000000 8530050000000 84696978750 846005250000

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N ∑ XY − ( ∑ x )( ∑ y )
r =
[N ∑ X 2
− ( ∑ X )2 ][N ∑ Y 2
− ( ∑ Y )2 ]
12 × 846005250000 - 10000000 × 1000000
r =
( )
2
12 × 8530050000000 − 10000000 × 12 × 846005250000 - (1000000 )2

r = 0.77

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Q. 5 (a) A penal of potential cereal product consumers was asked 
to rate one of four potential new products.  Each member 
of the panel rated only one of the products on a 100 point 
scale,  as  compared  to  a   standard,  existing  cereal.     The 
data is given below:

I 16, 31, 57, 62, 67, 71, 73, 75
II 30, 35, 52, 60, 64, 65, 65, 67, 70, 71, 75, 82
III 43, 51, 53, 54, 56, 58, 61, 64, 64, 67, 68, 70, 71, 75, 79
IV 29, 39, 46, 50, 59, 61, 62

Test the hypothesis of equal mean product scores by an 
analysis of variance.  First use
∝ = 0.05, then find a ρ - value.

Ans.
H 0 :µ1 = µ 2 = µ 3 = µ 4

H1 : All me ans are not e qual

∝ = 0.05

I II III IV

16 30 43 29
31 35 51 39
57 52 53 46
62 60 54 50
67 64 56 59
71 65 58 61
73 65 61 62
75 67 64
70 64
71 67
75 68
82 70
71
75

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79
C1   =  452 C2   =  736 C3   =  934 C4   =  346

452
X1 = = 56.5
8
736
X2 = = 61.33
12
934
X3 = = 62.27
15
346
X4 = = 49.43
7
2 (∑ X )2
Sum of square = SS total =  ∑ (X ) -
n

2
∑ (X ) = (16)2 + (31)2 + (57)2 + (62)2 ................(50)2 + (59)2 + (61)2 + (62)2
= 154080

∑X = 452 + 736 + 934 + 346
= 2468

∑ (X )2 = (2468 )2 = 6091024

2 (∑ X )2
SS(T) = ∑ (X ) -
n

(2468)2
= 154080−
42

= 154080 ­ 145024.381

= 9055.62

SS (Factors) + SS (Error) = SS (Total)

SS (Products) = 

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(∑ X )
 C2 C2 C2 C2  2
 1 + 2 + 3 + 4−
 K1 K2 K 3 K4  n

 2
( ) (736) + (934) + (346)  − 145024.381
2 2 2
452
= +
 8 12 15 7 
 

=  145938.69 ­ 145024.381

= 914.305

 C2 C2 C2 C2 
SS (Error ) = ∑ X2 -  1 + 2 + 3 + 4
 K 1 K 2 K 3 K 4 

 2
( ) (736) + (934) + (346) 
2 2 2
452
= 154080 −  -
 8 12 15 7 
 

= 154080 - 145938 .69

= 8141.31

SS (Factor) + SS (Error) = SS (Total)

914.305 + 8141.31 = 9055.62

ANOVA TABLE

SOURCE S.S. d.f. M.S.

Product 914.305 C­1=3 914.305

3
= 304.768

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Error 8141.31 n­c=38 8141.31

38
= 214.245

Total 9055.62 n­1 = 41

304.768
F =
214.245
∝ 0.05
F = 1.422
F (3,38, 0.05 = 2.85)
F ∝ = 0.05 is 2.85

Result

The calculated value F = 1422 is less than F 0.05 = 2.85, 
so we do not reject H0 at 0.05 level of significance

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(b) A   production   superintendent   claims   that   there   is   no 

difference in the employee accident rates for the day and 
evening   shifts   in   a   large   manufacturing   plant.     The 
number of accidents per day is recorded for both the day 
and the evening shifts for n=100 days.   It is found that 
the number of accidents  yE  per day for the evening shift 
exceeded the corresponding number of accidents   yD   on 
the  day   shift  on  63  of  the  100 days.   Do  these results 
provide   sufficient   evidence   to   indicate   that   more 
accidents tend to occur on one shift than on the other, or 
1
P(yE > y D) =
equivalently, that  2?
Ans.
1
H0 : p ( Y E > Y D ) =
2

1
H0 : p ( Y E < Y D ) ≠
2
n = 100 X = 63

so that

)
P = 63
100

also

p 0 = 0.50
q 0 = 0.50

)
P - p0
Z =
p 0q 0
n

0.63 - 0.50
Z =
(0.50)(0.50 )
100

Ζ = 2.6

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