VICTORIA UNIVERSITY OF BANGALDESH

A SS IG N M E N T O N S TAT I S T I CA L D E CI S I O N M AK IN G
SUBMIT TED TO: TAREQ AHMED (NIPUN) COURSE INSTRUCTOR LECTURER OF MANAGEMENT

SUBMIT TED BY: S AMIA AKHTAR SULTANA ID: 110814411 BATCH: 14 T H PROGRAM: BBA

FALL SEMESTER 2010 Date of submission: 28.11.10

Letter of Transmittal

Dated: 28 November, 2010 Tareq Ahmed (Nipun) Course Instructor Department of Bachelor of Business Administration Victoria University of Bangladesh. Subject: Submission of Assignment on Statistical Decision Making Sir, Here is my Assignment on Statistical Decision Making that you have asked to prepare and submit as a part of my course curriculum. While writing this assignment I have gone through your lectures, books, and also have searched internet for the relevant information for the assignment topic. I hope this assignment will meet the least standard set by you and will carry some merit. Please let me know if you have any question regarding this assignment. Yours sincerely, Samia Akhtar Sultana ID: 110814411 Batch 14th Program BBA Fall 2010 Victoria University of Bangladesh.

CONTENTS

SERIAL

1. 2. 3. 4. 5. 6. 7. 8.

9. 10. 11. 12. 13. 14.

QUESTIONS PAGE NO. CHAPTER 1 BUSINESS STATISTICS What is statistics? 04 What is population and sample? 05 Discuss statistical method. 05 What are the features of statistics? 06 Describe the application of statistics. 07 What are the importances of statistics? 07-08 Describe functions of statistics. 09 What are the limitations of statistics? 09 CHAPTER 2 DATA COLLECTION What are the sources of data? 10 What facts should be determined before 11
collecting data? Discuss the methods of primary data collection along with their advantages and disadvantages. What are the sources of collecting secondary data? What are the importance of collecting data? What are the limitations of secondary data?

11-12 13 15

CHAPTER 1 BUSINESS STATISTICS

1. WHAT IS STATISTICS?

Ans. The original idea of statistics" was the collection of information about and for the state". The word statistics derives directly, not from any classical Greek or Latin roots, but from the Italian word for state. Sir Ronald Aylmer Fisher, FRS (1890 - 1962) was an English statistician, evolutionary biologist, and geneticist. The historian of statistics, Anders Hald said "Fisher was a genius who almost single-handedly created the foundations for modern statistical science" His contributions to experimental design, analysis of variance, and likelihood based methods have led some to call him "The Father of Statistics". Statistics can be defined as numerical statements of facts which serve by collecting, organizing, presenting, analyzing, and interpreting aggregate numerical matter and the predetermined purpose. Statistics is a way to get information from data

Statistics Data
Data: Facts, especially numerical facts, collected together for reference or information. Example: 4, 15, 3, 8, 16, 13, 21, 9, 11, 24, 2, 25, 23, 17. Information: Knowledge communicated concerning some particular fact. Example: ClassTallyFrequency0-5III35-10II21015II215-20III320-25IIII4n= 14

Information

Therefore statistics is a tool for creating new understanding from a set of numbers.

2. WHAT IS POPULATION AND SAMPLE? Ans. Population: A population is the group of all items of interest to a statistics practitioner. It is frequently very large; sometimes infinite. E.g. all 5 million Florida voters who voted in an election. Sample: A sample is a set of data drawn from the population. It is potentially very large, but less than the population. E.g. a sample of 1000 voters exited the poll after voting.
EXAMPLE:

Subset

POPULATION

SAMPLE

3. DISCUSS STATISTICAL METHOD Ans. Statistics is the science of the measurement of social organism, regarded as a whole in all its manifestations. In statistical method there are five stages for statistical investigation:
1. Collection: Collection of data is the first step for statistical method. Data are the raw

material in statistical process. Hence data must be unbiased & collected in a skillful way.
2. Organization: Data collected from published sources are generally in organized

from. However, a large mass of figures that are collected from a survey frequently needs organization. Editing, classifying and tabulation are done so that there is absolute clarity in the data presented.
3. Presentation: After the data have been collected and organized they are ready for

presentation. Data presented in an orderly manner facilities statistical analysis.

4. Analysis: This step is to analyze the presented data which is done mostly in tabular

form.
5. Interpretation: The last step is interpretation which is drawing conclusions from the

collected data and analyzed. If the data that have been analyzed are not properly

interpreted, the whole object of investigation may be defeated and fallacious conclusions drawn.

4. DISCUSS FEATURES OF STATISTICS

Ans. By Statistics we mean, aggregate of facts affected to a marked extent by multiplicity of causes, numerically expressed, enumerated or estimated according to reasonable standards of accuracy, collected in a systematic manner for a pre-determined purpose and placed in relation to each other. Thus, according to Prof. Horace Secrist, the following features of Statistics can be noticed: 1. Statistics means an aggregate of facts: Facts can be analyzed only when there are more than one fact. Single fact cannot be analyzed. Thus, the fact Mr. John is 180 cms. Tall, cannot be statistically analyzed. On the other hand, if we know the heights of 40 students of a class, we can comment upon the average height, variation, etc. Hence, only a collection of many facts can be called statistics. 2. Statistics are affected to a marked extent by multiplicity of causes: The facts are the results of action and interaction of a number of factors. Thus, the statistics of yield of paddy is the result of factors such as fertility of soil, amount of rainfall, quality of seed used, quality and quantity of fertilizer used, etc. These factors, in turn, are the results of many other factors. 3. Statistics are numerically expressed: Only numerical facts can be statistically analyzed. Therefore, facts such as price decreases with increasing production cannot be called statistics. 4. Statistics are enumerated or estimated according to reasonable standards of accuracy: The facts should be enumerated (collected from the field) or estimated (computed) with required degree of accuracy. The degree of accuracy differs from purpose to purpose. In meaning the length of screws, accuracy up to a millimeter may be required, whereas, while measuring the heights of students in a class, accuracy up to a centimeter is enough. 5. Statistics are collected in a systematic manner: The facts should be collected according to planned and scientific methods. Otherwise, they are likely to be wrong and misleading. 6. Statistics are collected for a pre-determined purpose: There must be a definite purpose for collecting facts. Otherwise, the facts become useless and hence, they cannot be called statistics. 7. Statistics are placed in relation to each other: The facts must be placed in such a way that a comparative and analytical study becomes possible. Thus, only related facts which are arranged in logical order can be called statistics.

5. DESCRIBE THE APPLICATION OF STATISTICS Ans. Statistics is applied in Economics, Commerce, Business and social life etc. Statistical analysis of variations of price, demand and production are helpful to businessmen and economists. Cost of living index numbers help in economic planning and fixation of wages. They are used to estimate the value of money. Analysis of demand, price, production costs, inventoy costs, etc., help in decision making in business activities. Management of limited resources and labor in obtaining maximum profit is done by statistical analysis of data. Planned recruitments and distribution of staff, proper quality control methods, careful study of demand for goods in the market, capture of market by advertisement, balance investment, etc. help the producer to extract maximum profit out of minimum capital. In industries, statistical quality control techniques help in increasing and controlling the quality of products at minimum cost. A governments administrative system is fully dependent on production statistics, income statistics, labour statistics, economic indices of cost, price, etc. Economic planning of any nature is entirely based on statistical facts. It is applied in the study of birth rate, death rate, population growth etc. It is well known that insurance premiums are based on the age composition of the population and the mortality rates. Actuarial science deals with the calculation of insurance premiums and dividends. Therefore it is normal to say that statistics can be used in every phase of life.

6. WHAT ARE THE IMPORTANCES OF STATISTICS? Ans. Statistics plays a vital role in every fields of human activity. Statistics has important role in determining the existing position of per capita income, unemployment, population growth rate, housing, schooling medical facilities etcin a country. Here are some importances of statistics in different fields of business: (1) In Marketing: Statistical analysis are frequently used in providing importance for marketing decisions. A skilful analysis of data on population, purchasing power, habits of people, competition, transportation cost, etc. is prepared through statistical process. In building up and maintaining an extensive market, it is important to keep accurate records of its present and potential geographic distribution and therefore statistics is needed. (2) In Production: Statistical tools help in decision about what to produce, how much to produce, when to produce, for whom to produce and also in quality control, optimum inventory level and in dealing with labor problems etc. Production manager looks at quality control data to decide when to make adjustments in a manufacturing process.

(3) In Banking: The banks work on the principle that all the people who deposit their money with the banks do not withdraw it at the same time. The bank earns profits out of these deposits by lending to others on interest. The bankers use statistical approaches based on probability to estimate the numbers of depositors and their claims for a certain day. (4) In Finance: The financial managers in discharging their finance function efficiently depend heavily on statistical analysis of facts and figures. Financial forecasts, break-even analysis and investment decisions under uncertainty are but part of their activities. (5) In Investment: Statistics greatly assists investor in making clear and valued judgment in his investment decision in selecting securities which are safe and which have the best prospects of yielding a good income. Such investigations assist in determining whether to buy, to sell or to do neither. (6) In Accounting and Auditing: Accounting is impossible without exactness. But for decision making purpose, so much precision is not essential the decision may be taken on the basis of approximation, known as statistics. The correction of the values of current assets is made on the basis of the purchasing power of money or the current value of it. In auditing sampling techniques are commonly used. An auditor determines the sample size of the book to be audited on the basis of error. (7) In purchase: The purchase department in discharging its functions makes use of statistical data to frame suitable purchase policies such as from where to buy, how much to buy, at what time to buy and at what price to buy. (8) In Control: The management control process combines statistical and accounting methods in budget making including- sales, material, labor and other costs and net profits and capital requirements. (9) In Credit: The credit department performs statistical analysis to determine how much credit to extend to various customers. (10) Personnel: The personnel department makes statistical studies of wage rates, incentive plans, cost of leaving, labor turnover rates, employment trends, accident rates, performance appraisal, training programs etc. Such studies help the personnel department in the process of manpower planning. (11) Research and Development: Research and development departments of companies are concerned with how existing products can be improved, what new product lines can be added and how the optimal use of resources made. In the absence of factual data it is almost impossible to carry out fruitful research and development programs.

7. DESCRIBE FUNCTIONS OF STATISTICS Ans. Statistics is the science of estimates & probabilities. Its Important functions are:

1. It simplifies complexity of the data: Complex numerical data are simplified by the application of statistical methods. For instance, complex data regarding varying costs and prices of commodities of daily use can be reduced to the form of cost of living index number. This can be understood easily. 2. It reduces the bulk of the data: Voluminous data could be reduced to a few figures making them easily understandable. 3. It adds precision to thinking: Statistics sharpens ones thinking. 4. It helps in comparing different sets of figures: The imports and exports of a country may be compared among themselves or they may be compared with those of another country. 5. It guides in the formulation of policies and helps in planning: Planning and policy making by the government is based on statistics of production, demand, etc. 6. It indicates trends & tendencies: Knowledge of trend & tendencies helps future planning. 7. It helps in studying relationship between different factors: Statistical methods may be used for studying the relation between production and price of commodities.

8. WHAT ARE THE LIMITATIONS OF STATISTIC S? Ans. Despite usefulness of statistics its major limitations are:

1. Statistics does not deal with qualitative data, only with quantitative data: Statistical methods can be applied only to numerically expressed data. Qualitative characteristics can be studied only if an alternative method of numerical measurement is introduced. 2. Statistics does not deal with individual fact: Statistical methods can be applied only to aggregate of facts. Single fact cannot be statistically studied. 3. Statistical inferences (conclusions) are not exact: Statistical inferences are true only on an average. They are probabilistic statements. 4. Statistics can be misused: Increasing misuse of Statistics has led to increasing distrust in statistics.

5. Common men cannot handle Statistics properly: Only statisticians can handle statistics properly. An illogical analysis of statistical data leads to statistical fallacies.

CHAPTER 2 DATA COLLECTION

9. WHAT ARE THE SOURCES OF DATA? Ans. Data constitute the foundation of statistical analysis and interpretation. Hence the first step in statistical work is to obtain data. Data can be obtained from four important sources, these are: (1) Secondary Data (2) Internal Data (3) External Data (4) Primary Data These sources are discussed below: (1) Secondary Data: When an investigator uses the data which has already been collected by others, such data are called secondary data. Before using the secondary data the investigator should examine the following aspects: - whether the data are suitable and adequate for the purpose of investigation. - whether the data are adequate for the purpose of investigation. - whether the data are reliable. - was the collecting agency unbiased? - if the enumeration was based on a sample. - was there a proper check on the accuracy of the field work? (2) Internal Data: Internal data refer to the measurements that are by-product of routine business record keeping like accounting, finance, production, personnel, quality control, sales, R & D etc. Since internal data originate within the business, collecting the desired information does not offer much difficulty. (3) External Data: Data that are not found internally but can be collected from other companies are called external data. (4) Primary Data: Primary data are measurements observed and recorded as part of an original study. When the data required for particular study can be found in neither in the internal records of the enterprise, nor in published sources, it may become necessary to collect original data which means first hand investigation. There are two methods of obtaining primary dataa. Questioning: Questioning is distinguished by the fact that data are collected by asking questions from people who are thought to have the desired information.

b. Observation: In observation the investigator asks no questions. Instead, observes the objects or actions or actions in which he is interested. Observation method does not automatically produce accurate data. It depends on the observers skills for the accurateness of data. 10. WHAT FACTS SHOULD BE DETERMINED BEFORE COLLECTING THE DATA?

Ans. There are several issues to consider before data collection even begins. There may be regulatory constraints regarding the privacy and confidentiality or collection and use of certain types of data. An investigator must also consider what data will best answer the research questions posed, how data will be collected, and what methods will be used for analysis. Some of the facts that should be determined before collecting the data are: 1. Purpose of data: Why the data is being collected must be explained before starting the collection. 2. Nature and scope of investigation: The nature of the investigation and what are the scopes of the data must determined. 3. Allocated time and money: How much time is needed and how much money will be used needs to be determined. 4. Availability of data: The population of the data must be determined for the data to be available in that population.

11. DISCUSS THE METHODS OF PRIMARY DATA COLLECTION ALONG WITH THEIR ADVANTAGES AND DISADVANTAGES.

Ans. When data are collected for the first time it is called primary data collection. There are six methods of primary data collection1. Direct Data Collection: In this method the data collector directly collects the data from the source. The advantages and disadvantages of this method are: Advantages: 1. It is more accurate 2. It is reliable 3. It is used in small investigation.

Disadvantages: 1. It is more time consuming

2. It is not investigation.

applicable

for

vast

2. Indirect Data collection: When data cant be collected directly it is collected indirectly through oral investigation. Mostly in this method data are collected from the third party. The advantages and disadvantages of this method are: Advantages: 1. Less time consuming 2. It is applicable for vast investigation. Disadvantage: 1. It may be partial 2. Possibility to supply wrong information 3. It is less reliable.

3. Enquiry through local correspondents: Collecting data from the correspondent living near the source of the data is called enquiry through local correspondent. The advantages and disadvantages of this method are: Advantages: 1. It demands less money 2. It requires low manpower 3. It is less time consuming. Disadvantages: 1. It may be partial 2. Depends on assumptions.

4. Questionnaire through post or courier: This method does not require an investigator. A questionnaire is prepared and couriered to the person or organization that needs to answer the question. The advantages and disadvantages of this method are: Advantages: 1. It is less time consuming 2. It demands less money than other sources. Disadvantages: 1. Ignorance to answer 2. Wrong answer due to misunderstanding.

5. Telephone Interview: Investor asks the question through telephone for instant answer. The advantages and disadvantages of this method are: Advantages: 1. Quick data collection 2. It demands low manpower and money. Disadvantages: 1. Source can be absent. 2. Source might not have any telephone access.

6. Observation: In this method no questions are asked. Investigator quietly observes the source and collects data. The advantages and disadvantages of this method are: Advantages:

1. It requires low effort 2. It is less time consuming. Disadvantages:

1. Lack of observer training 2. Different philosophy of the investigator 3. Lack of experience in investigating.

12. WHAT ARE THE SOURCES OF COLLECTING SECONDARY DATA?

Ans. When existing data are collected from someone or some place it is called secondary data. Secondary data has two sources: 1. Published Sources 2. Unpublished sources These sources are discussed below: 1. Published sources: Published sources stands for sources that collects data and publishes the data as a regular function. The data of published sources may be financial report, directorial report, special report etc. These institutions are: (i) Government Institutiona. Pay Commission b. PSC c . Election Commission (ii) Private Institutiona. Bank b. Insurance companies c. Stock Exchange (iii) Research Institutionsa. Institute of Statistical Research and Training (ISRT) b. Bangladesh Agricultural Research Institution (BARI) 2. Unpublished Sources: Some data are collected for the investigators own purpose and these data are not published hence, called unpublished data. Records are kept but are not published for general use. These sources are mostly internal, for example: a. b. c. d. e. Daily income and expenditure Personal research Quality control Pay roll structure Number of accident

f. Production etc.

13. WHAT ARE THE IMPORTANCES OF COLLECTING DATA? Ans. The raw material that are collected for statistical investigation are called data and without collecting data statistical purpose can not be solved. Therefore data collection is very important. Some more importance are: 1. 2. 3. 4. 5. 6. 7. Implementation of planning. Accuracy and reliability of data. Contemporary data. It is the basement of statistics. Statistical decisions depend on data collection. It helps in comparison. It helps in prediction, etc.

14. WHAT ARE THE LIMITATIONS OF SECONDARY DATA?

Ans. Collecting secondary data requires less time and less money but it can have limitations too. Such as: 1. Experience and reliability of data collecting institutions. 2. Time constraints, which is if the data when collected is still useable at present. 3. Method of data collection: a. Census Survey: When data is collected from each of people or totality of the observation is called census survey. b. Sample Survey: When data is collected from a part of whole observation instead of collecting each is called sample survey. 4. Secondary data can be partial.