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MBA SEMESTER 1 MB0040 STATISTICS FOR MANAGEMENT- 4 Credits (Book ID: B1129) Assignment Set- 1 (60 Marks) Note: Each question carries 10 Marks. Answer all the questions
1. (a) Statistics is the backbone of decision-making. Comment. (b) Give plural meaning of the word Statistics? [ 5 marks] [ 5 marks]
Answer :(a) Statistics is the backbone of decision-making Due to advanced communication network, rapid changes in consumer behaviour, varied expectations of variety of consumers and new market openings, modern managers have a difficult task of making quick and appropriate decisions. Therefore, there is a need for them to depend more upon quantitative techniques like mathematical models, statistics, operations research and econometrics. Decision making is a key part of our day-to-day life. Even when we wish to purchase a television, we like to know the price, quality, durability, and maintainability of various brands and models before buying one. As you can see, in this scenario we are collecting data and making an optimum decision. In other words, we are using Statistics. Again, suppose a company wishes to introduce a new product, it has to collect data on market potential, consumer likings, availability of raw materials, feasibility of producing the product. Hence, data collection is the back-bone of any decision making process. Many organisations find themselves data-rich but poor in drawing information from it. Therefore, it is important to develop the ability to extract meaningful information from raw data to make better decisions. Statistics play an important role in this aspect. Statistics is broadly divided into two main categories. The two categories of Statistics are descriptive statistics and inferential statistics. Descriptive Statistics: Descriptive statistics is used to present the general description of data which is summarised quantitatively. This is mostly useful in clinical research, when communicating the results of experiments. Inferential Statistics: Inferential statistics is used to make valid inferences from the data which are helpful in effective decision making for managers or professionals. Statistical methods such as estimation, prediction and hypothesis testing belong to inferential statistics. The researchers make deductions or conclusions from the collected data samples regarding the characteristics of large population from which the samples are taken. So, we can say Statistics is the backbone of decision-making. (b) Plural meaning of Statistics The term statistics in its PLURAL SENSE refers to the numerical dataor statistical data. In its SINGULAR SENSE the term refers to a science in which we deal with the techniques or methods of collecting, classifying, presenting, analyzing and interpreting the data. In other words, the concept in its singular sense, refers to statistical methods According to Secriest, the plural meaning of statistics refers to statistical methods. Viz. o Aggregate of facts. o Affected to a marked extend by multicity of causes. o Numerically expressed. o Enumerated / estimated according to reasonable standards of accuracy. o Collected in a systematic manner. o For a predetermined purpose / cause. o Placed in relation with each other.
Nitu Rani, MBA-I, FALL11/MB0040
(b) The factors which should be kept in mind for proper planning of a Statistical Survey.: The relevance and accuracy of data obtained in a survey depends upon the care exercised in planning. A properly planned investigation can lead to best results with least cost and time. The planning stage consists of the following sequence of activities. 1. Nature of the problem to be investigated should be clearly defined in an unambiguous manner. 2. Objectives of investigation should be stated at the outset. Objectives could be to obtain certain estimates or to establish a theory or to verify a existing statement to find relationship between characteristics etc. 3. The scope of investigation has to be made clear. It refers to area to be covered, identification of units to be studied, nature of characteristics to be observed, accuracy of measurements, analytical methods, time, cost and other resources required. 4. Whether to use data collected from primary or secondary source should be determined in advance. 5. The organization of investigation is the final step in the process. In encompasses the determination of number of investigators required, their training, supervision work needed, funds required etc. 3. The percentage sugar content of Tobacco in two samples was represented in table 11.11. Test whether their population variances are same. [ 10 marks] Table 1. Percentage sugar content of Tobacco in two samples Sample A Sample B 2.4 2.7 2.7 3.0 2.6 2.8 2.1 3.1 2.5 2.2 3.6
ANS:
= 12.3 \ 5 = 2.46
= 17.4 \ 6 = 2.9
cal
Since Ftcal (4.08) < Ftab (4.95) Ho is accepted. There is no significant difference. 4. a. Explain the characteristics of business forecasting. [ 5 marks] b. Differentiate between prediction, projection and forecasting. [ 5 marks] Ans (a): Characteristics of Business Forecasting i. Based on past and present conditions: The business forecasting is based on past and present economic condition of the business. To forecast the future, various data, information and facts concerning to economic condition of business for past and present are analyzed. ii. Based on mathematical and statistical methods: The process of forecasting includes the use of statistical and mathematical methods. By using these methods the actual trend which may take place in future can forecasted. iii. Period: The forecasting can be made for long term, short term, medium term or any specific term. iv. Estimation of future: The business forecasting is to forecast the future regarding probable economic conditions. v.Scope: The forecasting can be physical as well as financial. (b) Prediction, Projection and Forecasting A great amount of confusion seem to have grown up in the use of words forecast, prediction andprojection. A prediction is an estimate based solely in past data of the series under investigation. It is purely mechanical extrapolation. A projection is a prediction where the extrapolated values are subjects to a certain numerical assumptions. A forecast is an estimate which relates the series in which we are interested to external factors. Forecasts are made by estimating future values of the external factors by means of prediction, projection or forecast and from these values calculating the estimate of the dependent variable. 5. What are the components of time series? Bring out the significance of moving average in analysing a time series and point out its limitations.[ 10 marks] Ans.The behaviour of a time series over periods of time is called the movement of the time series. The time series is classified into the following four components: 1. Long Term Trend or Secular Trend: This refers to the smooth or regular long term growth or decline of the series. This movement can be characterised by a trend curve. If this curve is a straight line, that is called a trend line. If the variable is increasing over a long period of time,then it is called an upward trend. If the variable is decreasing over a long period of time, then it is called downward trend. If the variable moves upward or downwards along a straight line then the trend is called a linear trend, otherwise it is called a nonlinear trend. 2. Seasonal Variations: Variations in a time series that are periodic in nature and occur regularly over short periods of time during an year are called seasonal variations. By definition, these variations are precise and can be forecasted.Examples: i. The prices of vegetables drop down after rainy season or in winter months and they go up during summer, every year. ii. The prices of cooking oils reduce after the harvesting of oil seeds and go up after some time.
Nitu Rani, MBA-I, FALL11/MB0040
Limitations: i. There is no functional relationship between the values and the time. Thus, this method is not helpful in forecasting and predicting the values on the basis of time.
Nitu Rani, MBA-I, FALL11/MB0040
From the third formula in the above equation it is more apparent that the harmonic mean is related to the arithmetic and geometric means. Equivalently, the harmonic mean is the reciprocal of the arithmetic mean of the reciprocals. As a
simple example, the harmonic mean of 1, 2, and 4 is (b) In statistics, a confidence interval (CI) is a particular kind of interval estimate of a population parameter and is used to indicate the reliability of an estimate. It is an observed interval (i.e. it is calculated from the observations), in principle different from sample to sample, that frequently includes the parameter of interest, if the experiment is repeated. How frequently the observed interval contains the parameter is determined by the confidence level or confidence coefficient. interval estimate describes a range of values within which a population parameter is likely to lie. The probability that we associate with an interval estimate is called the confidence level. This probability indicates how confident we are that the interval estimate will include the population parameter. A higher probability means more confidence. In estimation, the most commonly used confidence levels are 90 percent, 95 percent, and 99 percent, but we are free to apply any confidence level.The confidence interval is the range of the estimate we are making. If we report that we are 90 percent confident that the mean of the population of incomes of people in a certain community will lie between Rs. 8,000 and Rs. 24,000, then the range Rs. 8,000 Rs. 24,000 is our confidence interval. Often, however, we will express the confidence interval in standard errors rather than in numerical values. Thus, we will often express confidence intervals like this: X 1.64 X + 1.64 = upper limit of the confidence interval
X 1.64 = lower limit of the confidence interval Thus, confidence limits are the upper and lower limits of the confidence interval. In this case, X + 1.64 is called the upper confidence limit (UCL) and X 1.64 confidence limit (LCL).
Nitu Rani, MBA-I, FALL11/MB0040
= is the lower
MBA SEMESTER 1 MB0040 STATISTICS FOR MANAGEMENT- 4 Credits (Book ID: B1129) (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions
1. (a) What are the characteristics of a good measure of central tendency? [ 5 marks] (b) What are the uses of averages? [ 5 marks] Answer: a). The characteristics of a good measure of central tendency are: Present mass data in a concise form The mass data is condensed to make the data readable and to use it for further analysis. Facilitate comparison It is difficult to compare two different sets of mass data. But we can compare those two after computing the averages of individual data sets. While comparing, the same measure of average should be used. It leads to incorrect conclusions when the mean salary of employees is compared with the median salary of the employees. Establish relationship between data sets The average can be used to draw inferences about the unknown relationships between the data sets. Computing the averages of the data sets is helpful for estimating the average of population. Provide basis for decision-making In many fields, such as business, finance, insurance and other sectors, managers compute the averages and draw useful inferences or conclusions for taking effective decisions. The following are the requisites of a measure of central tendency: It should be simple to calculate and easy to understand It should be based on all values It should not be affected by extreme values It should not be affected by sampling fluctuation It should be rigidly defined It should be capable of further algebraic treatment b) Appropriate Situations for the use of Various Averages 1. Arithmetic mean is used when: a. In depth study of the variable is needed b. The variable is continuous and additive in nature c. The data are in the interval or ratio scale d. When the distribution is symmetrical 2. Median is used when: a. The variable is discrete b. There exists abnormal values c. The distribution is skewed d. The extreme values are missing e. The characteristics studied are qualitative
Nitu Rani, MBA-I, FALL11/MB0040
ii. The number of years is odd: When the number of years is odd, the value of the middle year is omitted to divide the time series into two equal parts. Then the procedure (i) is followed. A trend value of any future year may be predicted by multiplying the periodic increment by the number of years into the future that is desired and adding the result to the best trend value listed in the series. Merits: i. The method is simple ii. The trend line can be extended on either side in order to obtain past or future estimates. iii. This is an objective method, as any one applying this method get the same trend line. Demerits: i. The method of semi average assumes a straight line relationship between the plotted points, regardless of the fact whether such relationship exists or not. ii. This method has an in built limitation of arithmetic mean. This method is not suitable is case of very low or very large extreme values. iii. There is no assurance that the influence of cycle is eliminated.
Seasonal Variation through Moving Averages. This method is also known as Percentage of Moving Average Method. The steps involved in the computation of seasonal indices by this method are as follows: The moving averages of the data are computed. If the data are monthly then 12 monthly moving average, if they are quarterly, then 4 quarterly moving averages will be computed. In both the cases time periods of moving averages are even, hence these moving averages are to be centred. ii. Under additive model, from each original value, the corresponding moving average is deducted to find out short time fluctuations: iii. Y T = S + C + 1 iv. By preparing a separate table, monthly (or quarterly) short time fluctuations are added for each month (or quarter) over all the years and their average is obtained. these averages are known as seasonal variations for each month or quarter. v. If we want to isolate / measure irregular variations, the mean of the respective month or quarter is deducted form the short time fluctuations.
Nitu Rani, MBA-I, FALL11/MB0040
There shall be no Link Relative corresponding to the first. ii. The mean of the Link Relatives for each season is computed over all the years. Median can also be taken instead of mean of the Link Relatives. iii. These average link, relatives are converted into chain relatives. The chain relative of first is taken as 100. The chain relative of current = (Average Link Relative of current * Chain Relative of previous year)/100 iv. The second chain relative of first is computed on the basis of the chain relative for the last: Chain relative of the first quarter = (Average Link Relative of the first x Chain Relative of the last)/100 This chain relative may or may not be 100. It is not equal to 100 due to secular trend. If it is 100 go to step (vi), if it is not 100 go to step (v) and then step (vi). v. Compute the difference d between the new chain relatives of first obtained in step (iv) and chain relative assumed as 100. d is divided by the number of seasons and the resulting figure is multiplied by 1, 2, 3 and the product is deducted respectively from the chain relatives of 2 nd , 3 rd , and 4 th quarters. These are called corrected relatives. vi. The chain relatives obtained is step (iv), if correction is not necessary for the corrected chain relatives obtained in step are expressed as percentages of the average to have adjusted chain relatives. These are the required seasonal indices. Ratio to Trend Method The steps to determine seasonal indices by this method are as follows: i. Determine the trend values by the method of least squares. ii. To find ratio to trend, divide the original data by the corresponding trend values and multiply these ratios by 100,i,e
iii. Calculate the Arithmetic Mean of the Trend Ratios obtained in step (ii). iv. Finally all the trend ratios will be converted into seasonal indices. For this add all averages obtained in (iii) and find their General Average. Seasonal indices are calculated by using the following formula:
4. The probability that a contractor will get an electrical job is 0.8, he will get a plumbing job is 0.6 and he will get both 0.48. What is the probability that he get at least one? Is the probabilities of getting electrical and plumbing job are independent? [ 10 marks]
(i)
Let A be the event of the getting electric job So Probability is P(A) = 0.8 Let B be the event of getting plumbing job Therefore P(B) = 0.6 Probability of getting both jobs P(A B) = P(A)P(B) = 0.48 Probability of getting both jobs
Nitu Rani, MBA-I, FALL11/MB0040
(ii)
5.
(a) Discuss the errors that arise in statistical survey. Ans. (a)
(b) What is quota sampling and when do we use it? [ 5 marks] Ans (b) It is a type of judgment sampling. Under this design Quotas are set up according to some specified characteristic such as age group, income groups etc. From each group a specified number of units are sampled according to the Quota allotted to the group. Within the group the selection of sample units depends on personal judgment. It has a risk of personal prejudice and bias entering the process. This method is often used in public opinion studies.
Nitu Rani, MBA-I, FALL11/MB0040
Ans(b) ANOVA will enable us to test for the significance of the differences of variances among more than two sample means. Using analysis of variance we will be able to make inferences about whether our samples are drawn from populations having the same mean. Analysis of variance is useful in such situations as comparing the mileage achieved by five different brands of gasoline, testing which of four different training methods produce the fastest learning record, or comparing the first year earnings of the graduates of half a dozen different business schools. In each of these cases, we would compare the means of more than two samples.
Objectives of Analysis of Variance (ANOVA) The objectives are: i. To obtain a measure of the total variation between or among the components, ii. To find a measure of variation between or among the components. Then the significance of difference between the variations in two series or more may be measured. In other words, with the help of the technique of analysis of variance we can test the hypothesis that the means of all the components constituting a population are equal to the mean of the population or that the samples have come from the same population.