ASSIGNMENT

MBA

1st SEMESTER

STATISTICS FOR MANAGEMENT (MB0040)

QUESTION 1

Distinguish between Classification and Tabulation. Explain the structure and components of a Table
with an example.

ANSWER

Classification is a process of arranging things or data in groups or classes according to their

resemblances and affinities. Tabulation follows classification. It is a logical or systematic listing of
related data in rows and columns. The row of a table represents the horizontal arrangement of data
and column represents the vertical arrangement of data. The presentation of data in tables should
be simple, systematic and unambiguous.

Differences Between classification and tabulation

Classification Tabulation
It is the basis for tabulation It is the basis for further analysis
It is the basis for simplification It is the basis for presentation
Data is divided into groups and subgroups on the Data is listed according to a logical sequence of
basis of similarities and dissimilarities. related characteristics

The structure and different components of a table are:

1) (Tab 1) Table number: Table number is to identify the table for reference. When there are
many tables in an analysis, then table numbers are helpful in identifying the tables.

2) (Tab 2) Title: Title indicates the scope and the nature of contents in a concise form. In other
words, title of a table gives information about the data contained in the body of the table.
Title should not be lengthy.

3) (Tab 3 & 4) Captions: Captions are the headings and subheadings describing the data
present in the columns.

4) (Tab 5 & 6) Stubs: Stubs are the headings and subheadings of rows.

5) (Tab 7) Body of the table: Body of the table contains numerical information.

6) (Tab 8) Totals: The sub-totals for each separate classification and a general total for all
combined classes should be given at the bottom or right side of the figures whose totals are
taken. Ruling and spacing separate columns and rows. However, totals are separated from
main body by thick lines.

7) (Tab 9) Head note: Head note is given below the title of the table to indicate the units of
measurement of the data and is enclosed in brackets.
 8) (Tab 10) Source note: Source note indicates the source from which data is taken. The source
note related to table is placed at the bottom on the left hand corner.

QUESTION 2

a) Describe the characteristics of Normal probability distribution.

b) In a sample of 120 workers in a factory, the mean and standard deviation of wages were Rs.
11.35 and Rs.3.03 respectively. Find the percentage of workers getting wages between Rs.9
and Rs.17 in the whole factory assuming that the wages are normally distributed.

ANSWER

Characteristics of Normal Distribution:

1) Normal distribution is a Continuous probability distribution

2) Its probability density function is given by:

3) Its mean is and standard deviation is , where and are the parameters of the
distribution
4) It is a bell-shaped curve and is symmetric about its mean,

a) It is symmetrical (Non-skew). That is β1 = 0

b) The mean, median and mode are equal
5) The Mean divides the curve into two equal portions
6) Its quartile deviation, Q.D. = 2/3
7) Its mean deviation, M.D. 4/5
8) The X – axis is an asymptote to the curve [Asymptote is a straight line that touches the curve
at infinity]
9) 9. The point of inflexion occurs at
10) 10. It is a uni-modal distribution
11) Mean, Median and Mode coincide
12) The area under normal curve within certain limits is depicted in table below. The graphical
representation of the table below is depicted in figure below.
 Area under the Normal Curve for Various Values of ‘ ’ and ‘ ’

Limits Area %
68.2
95
95.4
99.7

Areas under the Normal Distribution Curve

Answer b:

b) n = 120

μ = 11.35

= 3.03

Z=X-μ

p (x>9)

= (9 – 11.35)/3.03

= -0.78

= 0.2823

p (x<17)

= (17 – 11.35)/3.03

= 1.86

= 0.4686

P (9<x<17) = 0.2823 + 0.4686

= 0.7509
QUESTION 3

a) The procedure of testing hypothesis requires a researcher to adopt several steps. Describe in
brief all such steps.
b) Distinguish between:
i. Stratified random sampling and Systematic sampling
ii. Judgment sampling and Convenience sampling

ANSWER

a) Hypothesis testing procedure

1) State null hypothesis (H0) and alternate hypothesis (H1)
2) State the level of significance. This gives you the tabulated normal/’t’-value.
3) Select the appropriate test.
4) Calculate the required values for the test
5) Conduct the test.
6) Draw conclusion. If calculated value is < tabulated value, accept H0. If calculated
value is > tabulated value, reject H0.
b) Stratified random sampling and Systematic sampling

Stratified random sampling Systematic sampling

This sampling design is most appropriate if the
population is heterogeneous with respect to
characteristic under study or the population
distribution is highly skewed. We subdivide the
population into several groups or strata such that:
i) Units within each stratum is more homogeneous
ii) Units between strata are heterogeneous
iii) Strata do not overlap, in other words, every unit
of the population belongs to one and only one
stratum
The criteria used for stratification are geographical,
sociological, age, sex, income etc. The population of
size ‘N’ is divided into ‘k’ strata relatively
homogenous of size N1, N2…….Nk such that ‘N1 +
N2 +……… + Nk = N’.
Then, we draw a simple random sample from each
stratum either proportional to size of stratum or
equal units from each stratum.
Judgment sampling and Convenience sampling
This design is recommended if we have a
complete list of sampling units arranged in
some systematic order such as
geographical, chronological or alphabetical
order.
Suppose the population size is ‘N’. The
population units are serially numbered ‘1’
to ‘N’ in some systematic order and we
wish to draw a sample of ‘n’ units. Then
we divide units from ‘1’ to ‘N’ into ‘K’
groups such that each group has ‘n’ units.
This implies ‘nK = N’ or ‘K = N/n’. From the
first group, we select a unit at random.
Suppose the unit selected is 6th unit,
thereafter we select every 6 + Kth units. If
‘K’ is 20, ‘n’ is 5 and ‘N’ is 100 then units
selected are 6, 26, 46, 66, 86.

Judgement sampling Convenience sampling

The choice of sample items depends
exclusively on the judgment of the
investigator. The investigator’s
experience and knowledge about the
population will help to select the
sample units. It is the most suitable
method if the population size is less.
The sample units are selected according to the
convenience of the investigator. It is also called “chunk”
which refers to the fraction of the population being
investigated, which is selected neither by probability nor
by judgment.
Moreover, a list or framework should be available for the
selection of the sample. It is used to make pilot studies.
However, there is a high chance of bias being introduced.
QUESTION 4

a) What is regression analysis? How does it differ from correlation analysis?

b) Calculate Karl Pearson’s coefficient of correlation between X series and Y series.

X 110 120 130 120 140 135 155 160 165 155
Y 12 18 20 15 25 30 35 20 25 10

ANSWER

Regression analysis

Regression analysis is used to estimate the values of the dependent variables from the values of the
independent variables. Regression analysis is used to get a measure of the error involved while using
the regression line as a basis for estimation. The regression coefficient Y on X is the coefficient of the
variable ‘X’ in the line of regression Y on X. Regression coefficients are used to calculate the
correlation coefficient. The square of correlation is the product of regression coefficients.

Correlation analysis

When two or more variables move in sympathy with the other, then they are said to be correlated. If
both variables move in the same direction, then they are said to be positively correlated. When the
relationship is of a quantitative nature, the appropriate statistical tool for discovering and measuring
the relationship and expressing it in a brief formula is known as correlation”.

Differences between Correlation and Regression Coefficient

Correlation Coefficient Regression Coefficient

The correlation coefficients, rxy = ryx
‘r’ lies between -1 and 1.
It has no units attached to it.
There exists nonsense correlation.
It is not based on cause & effect relationship.
It indirectly helps in estimation.
The regression coefficients, byx bxy
‘byx’ can be greater than one in which case ‘bxy’
must be less than one such that byx.bxy 1
It has units attached to it.
There is no such nonsense regression
It is based on cause and effect relationship.
It is meant for estimation

b)

X dx = x - 139 dx^2 y dy=y-21 dy^2 dx*dy

110 -29 841 12 -9 81 261

120 -19 361 18 -3 9 57

130 -9 81 20 -1 1 9

120 -19 361 15 -6 36 114

 140 1 1 25 4 16 4

135 -4 16 30 9 81 -36

155 16 256 35 14 196 224

160 21 441 20 -1 1 -21

165 26 676 25 4 16 104

155 16 256 10 -11 121 -176

1390 0 3290 210 0 558 540

r= 10 * 540 – 0*0 .

√[10*3290 – 0^2] [10*558 – 0^2]

r= 5400 .

√32900 * 5580

r = 5400 / 13550

r = 0.40

Therefore, Karl Pearson’s correlation coefficient is r = 0.40

QUESTION 5

Briefly explain the methods and theories of Business forecasting.

ANSWER

Business forecasting refers to the analysis of past and present economic conditions with the object
of drawing inferences about probable future business conditions. The process of making definite
estimates of future course of events is referred to as forecasting and the figure or statements
obtained from the process is known as ‘forecast’; future course of events is rarely known. In order to
be assured of the coming course of events, an organised system of forecasting helps.

Methods of Business Forecasting

 Business Barometers: Business indices are constructed to study and analyze the business
activities on the basis of which future conditions are predetermined. As business indices are
the indicators of future conditions, they are also known as ’business barometers’ or
‘economic barometers’. With the help of these business barometers the trend of
 fluctuations in business conditions are understood and a decision can be taken relating to
the problem by forecasting. The construction of business barometer consists of gross
national product, wholesale prices, consumer prices, industrial production, stock prices,
bank deposits etc.

 Time series analysis: Time series analysis is also used for the purpose of making business
forecasting. The forecasting through time series analysis is possible only when the business
data of various years are available which reflects a definite trend and seasonal variation. By
time series analysis the long term trend, secular trend, seasonal and cyclical variations are
ascertained, analyzed and separated from the data of various years.

 Extrapolation: Extrapolation is the simplest method of business forecasting. By

extrapolation, a businessman finds out the possible trend of demand of his goods and also
about the future price trends. The accuracy of extrapolation depends on two factors:
1) Knowledge about the fluctuations of the figures
2) Knowledge about the course of events relating to the problem under
consideration
 Regression analysis: The regression approach offers many valuable contributions to the
solution of the forecasting problem. It is the means by which we select from among the
many possible relationships between variables in a complex economy, which will be useful
for forecasting.
 Exponential smoothing method: This method is regarded as the best method of business
forecasting as compared to other methods. Exponential smoothing is a special kind of
increasing exponential weighted average assigned to recent observation data and is found
extremely useful in short-term forecasting of inventories and sales.

Theories of Business Forecasting

 Sequence or time-lag theory: This is the most important theory of business forecasting. It is
based on the assumption that most of the business data have the lag and lead relationships,
that is, changes in business are successive and not simultaneous. There is time-lag between
different movements.

 Action and reaction theory: This theory is based on the following two assumptions.
1) Every action has a reaction
2) Magnitude of the original action influences the reaction

 Economic Rhythm Theory: The basic assumption of this theory is that history repeats itself
and hence assumes that all economic and business events behave in a rhythmic order.
According to this theory, the speed and time of all business cycles are more or less the same
and by using statistical and mathematical methods, a trend is obtained which will represent
a long term tendency of growth or decline. It is done on the basis of the assumption that the
trend line denotes the normal growth or decline of business events.

 Specific historical analogy: History repeats itself is the main foundation of this theory. If
conditions are the same, whatever happened in the past under a set of circumstances is
 likely to happen in future also. A time series relating to the data in question is thoroughly
scrutinized such a period is selected in which conditions were similar to those prevailing at
the time of making the forecast. However, this theory depends largely on past data.

 Cross-cut analysis theory: This theory proceeds on the analysis of interplay of current
economic forces. In this method, the combined effects of various factors are not studied.
The effect of each factor is studied independently. Under this theory, forecasting is made on
the basis of analysis and interpretation of present conditions because the past events have
no relevance with present conditions.

QUESTION 6

Construct Fisher’s Ideal Index for the given information and check whether Fisher’s formula satisfies
Time Reversal and Factor Reversal Tests.

Items P0 Q0 P1 Q1
A 16 5 20 6
B 12 10 18 12
C 14 8 16 10
D 20 6 22 10
E 80 3 90 5
F 40 2 50 5

ANSWER

Items P0 Q0 P1 Q1 P1Q0 P0Q0 P1Q1 P0Q1

A 16 5 20 6 100 80 120 96

B 12 10 18 12 180 120 216 144

C 14 8 16 10 128 112 160 140

D 20 6 22 10 132 120 220 200

E 80 3 90 5 270 240 450 400

F 40 2 50 5 100 80 250 200

910 752 1416 1180

= √[910/752] * [1416/1180] *100

= √1.21*1.2 * 100

= √1.4521 * 100

= 1.21 * 100

= 121

Time Reversal Test is satisfied if P01 P10 1(without multiplying by 100)

= √ [910/752] * [1416/1180] * [752/910] * [1180/1416]

= √1

=1

Hence Time Reversal Test is satisfied

Factor Reversal Test is satisfied if,

P01 Q01 = ∑ P1Q1/∑ P0Q0

Q01 =

Q01 = √ [1180/752] * [1416 / 910]

P01 Q01 = ∑ P1Q1/∑ P0Q0

{√ [910/752] * [1416/1180] }* {√ [1180/752] * [1416 / 910]} = ∑ P1Q1/∑ P0Q0

√(1416/752)^2 = ∑ P1Q1/∑ P0Q0

1416/752 = ∑ P1Q1/∑ P0Q0

Hence Factor Reversal Test is satisfied

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