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QT in
Management
Module I
Introduction
AGBS, Bangalore
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Lets warm up [10 minutes]
1. The average monthly salary of 12 workers and 3 managers in a factory was Rs. 600. When
one of the managers whose salary was Rs. 720, was replaced with a new manager, the
average salary of the team went down to Rs. 580. What is the salary of the new manager?
2. The average temperature on Wednesday, Thursday and Friday was 250. The average
temperature on Thursday, Friday and Saturday was 240. If the temperature on Saturday
was 270, what was the temperature on Wednesday?
3. The average age of a group of 12 students is 20 years. If 4 more students join the group,
the average age increases by 1 year. The average age of the new students is ..
4. The average age of a family of 5 members is 20 years. If the age of the youngest member is
10 years, what was the average age of the family just before the birth of the youngest
member?
5. A student finds the average of 10 positive integers. Each integer contains two digits. By
mistake, the student interchanges the digits of one number say ba for ab. Due to this, the
average becomes 1.8 less than the previous one. What is the difference between the two
digits a and b?

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Syllabus
Module I: Introduction
Module II: Probability and Probability Distributions
Module III: Sampling and Sampling Distribution
Module IV: Tests of Hypothesis
Module V: Forecasting Techniques
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Analyze this
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Now analyze this!
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In the slides that follow
Why a manager needs to know about statistics
The growth and development of modern statistics
Key definitions
Descriptive versus inferential statistics
Why data are needed
Types of data and their sources
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Why a Manager Needs to Know about Statistics?
To know how to properly present information
To know how to draw conclusions about populations based on
sample information
To know how to improve processes
To know how to obtain reliable forecasts
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Interpret this!
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Exit polls right or wrong?
All of them were right in declaring abki baar Modi Sarkaar!
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The Growth and Development of Modern Statistics
Needs of government to collect data on its
citizens
The development of the mathematics of
probability theory
The advent of the computer
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Key Definitions
A population (universe) is the collection of
things under consideration
A sample is a portion of the population
selected for analysis
A parameter is a summary measure
computed to describe a characteristic of the
population
A statistic is a summary measure computed
to describe a characteristic of the sample
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Population and Sample
Population Sample
Use parameters to
summarize features
Use statistics to
summarize features
Inference on the population from the sample
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Statistical Methods
Collecting and
describing data
Descriptive
statistics
Drawing conclusions
and/or making
decisions concerning
a population based
only on sample data
Inferential
statistics
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Descriptive Statistics
Collect data
e.g. Survey

Present data
e.g. Tables and graphs

Characterize data
e.g. Sample mean =
i
X
n

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Inferential Statistics
Estimation
e.g.: Estimate the population mean weight
using the sample mean weight

Hypothesis testing
e.g.: Test the claim that the population
mean weight is 120 pounds
Drawing conclusions and/or making decisions
concerning a population based on sample results.
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Measures of
Central Tendency
AGBS Bangalore | 2014
Central Tendency
In general terms, central tendency is a
statistical measure that determines a
single value that accurately describes the
center of the distribution and represents
the entire distribution of scores.
The goal of central tendency is to identify
the single value that is the best
representative for the entire set of data.
18
Central Tendency (cont.)
By identifying the "average score," central
tendency allows researchers to summarize or
condense a large set of data into a single
value.
Thus, central tendency serves as a descriptive
statistic because it allows researchers to
describe or present a set of data in a very
simplified, concise form.
In addition, it is possible to compare two (or
more) sets of data by simply comparing the
average score (central tendency) for one set
versus the average score for another set.
20
The Mean, the Median,
& the Mode
It is essential that central tendency be
determined by an objective and well-defined
procedure so that others will understand exactly
how the "average" value was obtained and can
duplicate the process.
No single procedure always produces a
good, representative value. Therefore,
researchers have developed three commonly
used techniques for measuring central tendency:
the mean, the median, and the mode.
21
The Mean
The mean is the most commonly used
measure of central tendency.
Computation of the mean requires scores
that are numerical values measured on
an interval scale.
The mean is obtained by computing the
sum, or total, for the entire set of scores,
then dividing this sum by the number of
scores.
22
The Mean (cont.)
Conceptually, the mean can also be defined as:
1. The mean is the amount that each individual
receives when the total (X) is divided equally
among all N individuals.
2. The mean is the balance point of the
distribution because the sum of the distances
below the mean is exactly equal to the sum of
the distances above the mean.
Calculate the Mean number of credit hours
Calculate the Mean Salary
Calculate the Median Salary
28
Changing the Mean
Because the calculation of the mean involves
every score in the distribution, changing the
value of any score will change the value of
the mean.
Modifying a distribution by discarding scores or
by adding new scores will usually change the
value of the mean.
To determine how the mean will be affected for
any specific situation you must consider: 1) how
the number of scores is affected, and 2) how the
sum of the scores is affected.
29
Changing the Mean (cont.)
If a constant value is added to every score
in a distribution, then the same constant
value is added to the mean.
Also, if every score is multiplied by a
constant value, then the mean is also
multiplied by the same constant value.
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When the Mean Wont Work
Although the mean is the most commonly used
measure of central tendency, there are
situations where the mean does not provide a
good, representative value, and there are
situations where you cannot compute a mean at
all.
When a distribution contains a few extreme
scores (or is very skewed), the mean will be
pulled toward the extremes (displaced toward
the tail). In this case, the mean will not provide a
"central" value.
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When the Mean Wont Work (cont.)
With data from a nominal scale it is
impossible to compute a mean, and when
data are measured on an ordinal scale
(ranks), it is usually inappropriate to
compute a mean.
Thus, the mean does not always work as a
measure of central tendency and it is
necessary to have alternative procedures
available.

32
The Median
If the scores in a distribution are listed in order
from smallest to largest, the median is
defined as the midpoint of the list.
The median divides the scores so that 50% of
the scores in the distribution have values
that are equal to or less than the median.
Computation of the median requires scores that
can be placed in rank order (smallest to
largest).
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The Median (cont.)
Usually, the median can be found by a
simple counting procedure:
1. With an odd number of scores, list the
values in order, and the median is the
middle score in the list.
2. With an even number of scores, list the
values in order, and the median is half-
way between the middle two scores.
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The Median (cont.)
One advantage of the median is that it is
relatively unaffected by extreme
scores.
Thus, the median tends to stay in the
"center" of the distribution even when
there are a few extreme scores or when
the distribution is very skewed. In these
situations, the median serves as a good
alternative to the mean.

Median for Grouped Frequency Distribution
36
Median for Grouped Frequency Distribution
37
Median for Grouped Frequency Distribution
38
The Mode
The most common observation in a group of scores.
Distributions can be unimodal, bimodal, or multimodal.
If the data is categorical (measured on the nominal scale)
then only the mode can be calculated.
The most frequently occurring score (mode) below is
Vanilla.
0
5
10
15
20
25
30
V
a
n
i
l
l
a
C
h
o
c
o
l
a
t
e
S
t
r
a
w
b
e
r
r
y
N
e
a
p
o
l
i
t
a
n
B
u
t
t
e
r

P
e
c
a
n
R
o
c
k
y

R
o
a
d
F
u
d
g
e

R
i
p
p
l
e
f
Flavor f
Vanilla 28
Chocolate 22
Strawberry 15
Neapolitan 8
Butter Pecan 12
Rocky Road 9
Fudge Ripple 6
Chap 3-40
The Characteristics of the Mode
Value that occurs most often
Not affected by extreme values
Used for either numerical or categorical
(nominal) data
There may be no mode
There may be several modes

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Mode = 9
0 1 2 3 4 5 6
No Mode
The Mode
The mode can also be calculated with
ordinal and higher data, but it often is not
appropriate.
If other measures can be calculated, the
mode would never be the first choice!
7, 7, 7, 20, 23, 23, 24, 25, 26 has a mode
of 7, but obviously it doesnt make much
sense.
Mode for Grouped Frequency Distribution
42
Calculate the Mode
43
What is the mean rate of return here?
An investment of $100,000 declined to $50,000 at the end of
year one and rebounded to $100,000 at end of year two:
The overall two-year return is zero, since it started and ended
at the same level.
000 , 100 $ X 000 , 50 $ X 000 , 100 $ X
3 2 1

50% decrease 100% increase
The Geometric Mean & The Geometric Rate of Return
Geometric mean
Used to measure the rate of change of a variable over time


Geometric mean rate of return
Measures the status of an investment over time



Where R
i
is the rate of return in time period i
n / 1
n 2 1
G ) X X X ( X
1 )] R 1 ( ) R 1 ( ) R 1 [( R
n / 1
n 2 1
G

The Geometric Mean Rate
of Return: Example
Use the 1-year returns to compute the arithmetic mean
and the geometric mean:
% 25 25 .
2
) 1 ( ) 5 . (


X
Arithmetic
mean rate
of return:
Geometric
mean rate of
return:
% 0 1
2 / 1
1 1
2 / 1
)] 2 ( ) 50 [(.
1
2 / 1
))] 1 ( 1 ( )) 5 . ( 1 [(
1
/ 1
)] 1 ( )
2
1 ( )
1
1 [(



n
n
R R R
G
R
Misleading result
More
representative
result
(continued)
Measures of Central Tendency:
Summary
Central Tendency
Arithmetic
Mean
Median Mode Geometric Mean
n
X
X
n
i
i

1
n / 1
n 2 1
G ) X X X ( X
Middle value
in the ordered
array
Most
frequently
observed
value
Rate of
change of
a variable
over time
Which measure to use?
Mean is generally considered the best measure of central tendency and
the most frequently used one. However, there are some situations where
the other measures of central tendency are preferred.
Median is preferred to mean when
There are few extreme scores in the distribution.
Some scores have undetermined values.
There is an open ended distribution.
Data are measured in an ordinal scale.
Mode is the preferred measure when data are measured in a nominal
scale.
A geometric mean is often used when comparing different items finding
a single "figure of merit" for these items when each item has multiple
properties that have different numeric ranges

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Quiz Time
1) A teacher gives a 10 point quiz to a class of 9 students. All
the scores are whole numbers and nobody got a 0 or a
perfect core of 10. If the median is 7, what is the lowest
possible mean? What is the highest possible mean?
2) A poll reports that out of 100 families surveyed, the mean
number of children per family was 2.038, the median was 1.9,
and the mode was 1.82. Which of these values must be
wrong (independently)?
3) What is the mode here?


49
Solve this!
Wages 0-10 10-20 20-30 30-40 40-50 50-60 60-70 Total
Frequency 4 16 ? ? ? 6 4 230
50
Median = 33.5; Mode = 34. Calculate the missing frequencies.
Now solve this!
Variable 10-20 20-30 30-40 40-50 50-60 60-70 70-80 Total
Frequency 12 30 ? 65 ? 25 18 229
51
Median = 46. Calculate the missing frequencies.
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Thank You