UNIVERSITY OF NAIROBI

SCHOOL OF BUSINESS
DEPARTMENT OF MANAGEMENT SCIENCE MAY-AUGUST 2013 SEMESTER DMS 501: BUSINESS QUANTITATIVE ANALYSIS ASSIGNMENT: STATISTICS & PROBABILITY DATE DUE: 27TH JULY 2013 Question One We Care Manufacturing (WCM) Co. Ltd wishes to analyze the age distribution of its employees with a view to implement a new policy on probation, training, promotion and retirement of employees. The following data indicates the age distribution of the companys employees: 56 45 55 57 36 35 54 52 62 42 55 29 54 54 56 58 57 34 54 55 46 58 76 25 55 54 55 50 75 37 53 55 51 32 36 32 55 55 77 50 65 36 54 55 40 53 52 26 55 56 47 58 44 38 54 55 61 63 54 27 65 54 53 44 38 26 44 54 32 25 72 33 42 55 67 56 25 27 40 47 29 63 28 36 53 40 49 50 34 28 34 53 55 57 29 54 54 45 67 32

a) Suppose according to the new policy, employees in the 1st, 2nd, 3rd and 4th quarter in the age distribution will be considered for probation, training, promotion and retirement respectively.

i) Determine the quartile age limits. ii) Keeping an employee under probation costs the company Ksh15,000; training an employee costs Ksh 25,000; promoting an employee costs 35,000; while retirement of an employee costs Ksh 1.5 million. What would be the cost of implementing the new policy?

b) For most such companies, employees ages are normally distributed. Is it the case for WCM Co. Ltd?

Question Two a) Attract Money Casino (AMC) has a game that entails tossing three coins and a die. The playing fee for the game is Ksh 1000. The player gains Ksh 500 for every head that appears and Ksh 400 for every tail. The player loses Ksh 100 times the number that appears on the die. Advise a player whether it is prudent to play the game based on its expected value. b) Quality Consumption (QC) Ltd has decided to interview a random sample of 10 customers in order to determine whether or not to change a consumer product. QCs main competitor has already done a similar but much larger study and has concluded that exactly 75% of the consumers approve of the change. Unfortunately QC does not have access to this information but may use 75% in the analysis.

i. What is the expected number of people out of the 10 interviewed who will approve of the change? ii. What is the probability that exactly 8 of the interviewed customers will approve of the change? iii. What is the probability that 8 or more of the interviewed customers will approve of the change?

c) Value For Money (VFM) Ltd, a consultancy firm, has observed that in order to earn enough to pay its debts this year, it will need to be awarded at least 3 contracts. This is not a problem since the yearly average is 5 contracts. Find the probability that VFM Ltd will not earn enough to pay its debts this year. Question Three Widespread Supermarket Chain (WSC) Ltd wishes to compare its performance in two regions, Western and Eastern. The following table shows a summary of findings in one of the studies undertaken for this purpose. The data consisted of weekly profits in Ksh. million Region Western Mean 125
2

Std dev. 15

Sample Size 42

Eastern

115

12

38

a) Find interval estimates of: i) Individual regions mean weekly profit. ii) Difference between the two regions mean weekly profits.

b) The WSCs accountant had expressed a concern that Eastern region was out performed by Western region. Do the study findings support this concern? Question Four a) The following data represents the ages of a certain make of car and annual maintenance costs in Ksh. 000 per year. Age Cost 2 6 5 13 9 23 3 5 8 22

Perform correlation and regression analysis on the data. b) Look Ahead (LA) Ltd is considering expansion to a new location. A survey of employees were asked to respond to the question, Will business conditions in the new location get better, stay the same, or get worse? The survey produced the following data: Response Better Same Worse Not sure 23 37 11 15 Employees Classification Manager Others 185 336 161 87

Test whether there is any relationship between employees classification and the nature of the response or the two factors are independent.