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The Association of Business Executives
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Certificate
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1.4 IQM
IQM0610

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Introduction to Quantitative Methods
15 Morning 10 June 2010
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1 Time allowed: 3 hours.
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2 Answer any FOUR questions.
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3 All questions carry 25 marks. Marks for subdivisions of questions are shown in brackets.
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4 No books, dictionaries, notes or any other written materials are allowed in this
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examination.
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5 C
 alculators, including scientific calculators, are allowed providing they are not
24 programmable and cannot store or recall information. Electronic dictionaries and
personal organisers are NOT allowed.
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Appropriate intermediate steps in the calculations must be shown.
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6 Formulae are printed on pages 7 to 10 for the assistance of candidates. Their use is not
27 compulsory. Graph paper is provided at the front of the answer book. Note: £1 = 100p.
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7 Candidates who break ABE regulations, or commit any misconduct, will be disqualified
29 from the examinations.

30 8 Question papers must not be removed from the Examination Hall.

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IQM0610 © ABE 2010 T/500/3660
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 Answer any FOUR questions

Q1 (a) Without the use of a calculator, find the value of the following, showing all steps in
your calculations:
1 1
(i) 6 +4 (2 marks)
3 2

2
 2 36
(ii)  3  × 9
(3 marks)

(b) Express 598.77468:

(i) Correct to 1 decimal place; (2 marks)

(ii) To the nearest whole number; (2 marks)

(iii) Correct to 2 significant figures; (2 marks)

(iv) In standard form A × 10n, where 1 ≤ A < 10 and n is an integer. (2 marks)

(c) Use a calculator to find the value, correct to 2 decimal places, of:

(i) 2.62 (2 marks)

(ii) 5–1.33 (2 marks)

(iii) e3.4 (2 marks)

(iv) ln4.2 (2 marks)

(d) Express 325%:

(i) As a fraction in its simplest form; (2 marks)

(ii) As a decimal. (2 marks)

(Total 25 marks)

IQM0610 2
Q2 (a) The profits of a company are to be shared between 3 business partners, Freddie, Alfie
and Harvey, in the ratio 4:2:3.

(i) What is Alfie’s share of the profits as a percentage of Freddie’s share of the
profits? (2 marks)

(ii) What is Harvey’s share of the profits as a fraction (in its simplest form) of the
total profits? (2 marks)

(iii) If Freddie is to receive £23,000, calculate the company’s total profits. (2 marks)

(b) An office manager is contracted to work an 8 hour day, from Monday to Friday each
week. She is paid a basic hourly rate of £6.20 per hour worked and receives her wages
weekly. Any additional hours worked from Monday to Friday are paid at a higher rate of
£9.30 per hour. Her basic hourly rate is doubled for every hour worked at weekends.

(i) Calculate the office manager’s basic weekly wage (i.e. assuming that she does
not work any hours in addition to those contracted). (3 marks)

(ii) Assuming that the office manager worked 5 additional hours during the week and
4 hours on Saturday, calculate her total wage (i.e. including her basic wage) for
that week. (3 marks)

(iii) Calculate how many hours she would need to work at a weekend to receive
the same increase in her basic wage as if during the week she were to work 6
additional hours to those contracted. (3 marks)

(c) A furniture company is considering placing an advertisement in a national magazine to

increase its sales. The cost of placing an advertisement in a single issue of a particular
monthly magazine is £30,000. It is estimated that circulation of this particular magazine
over the month will total 500,000 copies, and that the additional furniture sales
generated by the company’s advertisement will be 500. Given this information:

(i) Calculate the cost of the advertisement per copy of the magazine sold.
(4 marks)

(ii) Calculate the advertising cost for each additional furniture sale generated.
(3 marks)

(iii) What is the expected number of sales generated for every £300 spent on
advertising in this particular magazine? (3 marks)
(Total 25 marks)

IQM0610 3  [Turn over

Q3 (a) A sum of £25,000 is to be invested over a 7 year period. The investor has a choice of
investing with 3 different banks, each of which offers different interest rates and terms:

● Bank A pays simple interest at 6.0% per annum;

● Bank B pays compound interest at 5.8% per annum;

● Bank C pays compound interest at 0.5% per month.

(i) Calculate the total interest that would be received from each bank after the 7 year
investment period. (Give your answers to the nearest £.) (15 marks)

(ii) What annual rate of compound interest would be necessary in order for £25,000
to grow to £40,000 by the end of 7 years? (Give your answer correct to 1 decimal
place.) (5 marks)

(b) A company purchases a new car at a price of £24,950. The car loses 25% of its value
immediately and 20% at the end of each year thereafter. How much is the car worth at
the end of 3 years? (Give your answer to the nearest £.) (5 marks)
(Total 25 marks)

Q4 (a) Solve the following equations:

(i) 7x – 3 = 15 + x (4 marks)

(ii) x2 – 8x + 12 = 0, using factorisation; (4 marks)

(iii) 3x2 + 6x – 2 = 0, using the quadratic formula. (Give your answer correct to 2
decimal places.) (4 marks)

(b) Calculate the cost of apples and oranges per kg if: 3 kg of apples and 2 kg of oranges
cost £2.80; and 1 kg of apples and 4 kg of oranges cost £2.60. (8 marks)

(c) Simplify the following logarithm equation to a single log term: log (x – 2) + log (x).
(5 marks)
(Total 25 marks)

IQM0610 4
Q5 The revenue R (£’000) of a food manufacturing process is given by the equation
R = 220x – 3x2, where x is the quantity of food sold in ’00 units. The production cost C
(£’000) of the same food manufacturing process is given by the equation C = 2300 + 30x,
where x is the quantity of food produced in ’00 units.

(a) Using the production cost equation for this manufacturing process, identify the value
of the company’s fixed costs (i.e. those that remain constant whatever the quantity
produced) and the variable costs (i.e. those that vary according to production).
(6 marks)

(b) Construct a table to calculate the value of C and R using the values 0, 5, 10, 15, 20,
25, 30 and 35 for x. Use this data to plot a fully labelled graph for C and R against x.
(11 marks)

(c) Use the graph you have plotted to estimate the quantity of food sold where the
manufacturing process breaks even (i.e. where neither a profit nor loss is made).
(2 marks)

(d) The same company has decided to invest in a new manufacturing process so that
C = 2500 + 28x. Comment on how this investment will alter the firm’s cost structure.
(6 marks)
(Total 25 marks)

Q6 The following data shows the number of daily deliveries made by a delivery firm over a
30 day period:

19 32 21 28 49 44 38 12 33 51
26 10 38 32 12 45 21 33 24 54
41 31 23 28 35 30 34 53 24 17

(a) Tabulate the data above in the form of a grouped frequency distribution table (using
class intervals of: ‘10 to 19’; ‘20 to 29’; ‘30 to 39’; ‘40 to 49’ and ‘50 to 59’) and, giving
your answers correct to 2 decimal places, calculate the:

(i) Mean
(ii) Standard deviation (10 marks)

(b) Using the tabulated grouped frequency distribution data, draw a fully labelled histogram
of the number of daily deliveries. Using the histogram:

(i) Comment on the shape of the distribution;

(ii) Determine the most likely value of the mode. (15 marks)
(Total 25 marks)

IQM0610 5 [Turn over

Q7 (a) For each of the following events, classify whether all the possible outcomes are
‘equally likely’ or ‘not equally likely’:

(i) The tossing of a coin;

(ii) Selecting students on the basis of eye colour;
(iii) The rolling of a six-sided dice. (6 marks)

(b) A business consulting company has 200 employees, 80 of whom are female. Of these
80 female employees, 60 have a business qualification. Only 34 of the company’s total
employees do not have a business qualification.

Given this information, construct a two-way contingency table and use it to calculate
the probability that an employee picked at random:

(i) Is male;
(ii) Has a business qualification;
(iii) Has a business qualification and is male;
(iv) Is male or has a business qualification;
(v) Has a business qualification given that the employee is female;
(vi) Is female given that the employee has a business qualification. (19 marks)
(Total 25 marks)

Q8 (a) Explain, using examples, what is meant by the term ‘subjective probability’. (5 marks)

(b) The average life of a battery is normally distributed with a mean of 320 hours and a
standard deviation of 20 hours.

(i) Calculate the probability that a battery selected at random will last:

● Less than 290 hours; (5 marks)

● More than 380 hours; (5 marks)

● Between 310 and 330 hours. (5 marks)

(ii) Calculate the number of hours below which 1 in 500 batteries will run out.
(5 marks)
(Total 25 marks)

End of Question Paper

IQM0610 6
 INTRODUCTION TO QUANTITATIVE METHODS

FORMULAE FOR BUSINESS MATHEMATICS AND STATISTICS

INTEREST
The formula for calculating compound interest:
n
 r 
A = P 1 +
 100 
where: A = Accrued amount
P = Original principal
r = Rate of interest (for a particular time period, usually annual)
n = Number of time periods.

DEPRECIATION
� Straight-line method:
Cost of asset
Annual depreciation = ––––––––––––
Useful life
(Cost of asset) – (Value at end of useful life)
or Annual depreciation = ––––––––––––––––––––––––––––––––––––
Useful life

� Reducing balance method:

D = B (1 – i ) n

where: D = Depreciated value at the end of the n th time period

B = Original value at beginning of time period
i = Depreciation rate (as a proportion)
n = Number of time periods (normally years)

STRAIGHT LINE

A linear function is one for which, when the relationship is plotted on a graph, a straight line is
obtained.

The expression of a linear function, and hence the formula of a straight line, takes the following
form:

y = mx + c

Note that: c = the y intercept (the point where the line crosses the y axis)
m = the gradient (or slope) of the line

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 QUADRATIC EQUATION

A quadratic equation of the form ax 2 + bx + c = 0 can be solved using the following formula:

– b ± b 2 – 4ac
x=
2a

RULES FOR LOGARITHMS

1. log(p × q) = log p + log q

 p
2. log   = log p – log q
q
3. log pn = n log p
4. If y = axn then n = (log y – log a) ÷ log x

PROBABILITY

� Probability rules:
Probability limits: 0 ≤ P(A) ≤ 1
Total probability rule: ΣP = 1 (for all outcomes)
–
For complementary events: P(A) + P(A ) = 1
For two mutually exclusive events: P(A and B) = 0
For independent events: P(A) = P(A |B) and/or P(B) = P(B |A)
� Multiplication rules:
For independent events: P(A and B) = P(A)P(B)
For dependent events: P(A and B) = P(A)P(B |A)
� Additional rules:
For mutually exclusive events: P(A or B) = P(A) + P(B)
For non-mutually exclusive events: P(A or B) = P(A) + P(B) – P(A and B)
� Conditional rules:
P(A and B) P(A and B)
P(A|B) = –––––––––– and P(B |A) = –––––––––
P(B) P(A)

Expected value of variables x with associated probabilities P(x) is E(x) = ΣxP(x)


IQM0610
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STATISTICAL MEASURES
x x
� Mean for ungrouped data: µ = ∑ and x = ∑
N n
–
where N and x are the population and sample means respectively.
–
� Mean for grouped data: µ = Σmf/N and x = Σmf/n

where m is the midpoint and f is the frequency of a class.

� Median for ungrouped data:

 n + 1
= Value of the  th observation in a ranked data set, where the number of
 2 
= observations is odd and where n is the number of observations.

� Range = Largest value – Smallest value.

� Standard deviation for ungrouped data:

(∑ x ) (∑ x )
2 2
2 2
∑x – ∑x –
σ= N and s = n
N n –1

where σ and s are the population and sample standard deviations respectively.

� Standard deviation for grouped data:

( ∑ mf ) ( ∑ mf )
2 2
2 2
∑m f – ∑m f –
σ= N and s = n
N n –1

� Pearson’s measure of skewness:

Mean – Mode 3(Mean – Median)

Psk = ––––––––––––––– or ––––––––––––––––
Standard deviation Standard deviation

● Coefficient of variation:

Standard deviation 100

= ×
mean 1

IQM0610
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STANDARD NORMAL DISTRIBUTION

The table of values of the standard normal distribution set out below provides a means of
determining the probability of an observation (x ) lying within specified standard deviations (σ) of
the mean of the distribution (µ ).

µ x

AREAS IN TAIL OF THE STANDARD NORMAL DISTRIBUTION

(x – µ)
–––––- .00 .01 .02 .03 .04 .05 .06 .07 .08 .09
σ

0.0 .5000 .4960 .4920 .4880 .4840 .4801 .4761 .4721 .4681 .4641
0.1 .4602 .4562 .4522 .4483 .4443 .4404 .4364 .4325 .4286 .4247
0.2 .4207 .4168 .4129 .4090 .4052 .4013 .3874 .3936 .3897 .3859
0.3 .3821 .3783 .3745 .3707 .3669 .3632 .3594 .3557 .3520 .3483
0.4 .3446 .3409 .3372 .3336 .3300 .3264 .3228 .3192 .3156 .3121

0.5 .3085 .3050 .3015 .2981 .2946 .2912 .2877 .2843 .2810 .2776
0.6 .2743 .2709 .2676 .2643 .2611 .2578 .2546 .2514 .2483 .2451
0.7 .2420 .2389 .2358 .2327 .2296 .2266 .2236 .2206 .2177 .2148
0.8 .2119 .2090 .2061 .2033 .2005 .1977 .1949 .1922 .1894 .1867
0.9 .1841 .1814 .1788 .1762 .1736 .1711 .1685 .1660 .1635 .1611

1.0 .1587 .1562 .1539 .1515 .1492 .1469 .1446 .1423 .1401 .1379
1.1 .1357 .1335 .1314 .1292 .1271 .1251 .1230 .1210 .1190 .1170
1.2 .1151 .1131 .1112 .1093 .1075 .1056 .1038 .1020 .1003 .0985
1.3 .0968 .0951 .0934 .0918 .0901 .0885 .0869 .0853 .0838 .0823
1.4 .0808 .0793 .0778 .0764 .0749 .0735 .0721 .0708 .0694 .0681

1.5 .0668 .0655 .0643 .0630 .0618 .0606 .0594 .0582 .0571 .0559
1.6 .0548 .0537 .0526 .0516 .0505 .0495 .0485 .0475 .0465 .0455
1.7 .0446 .0436 .0427 .0418 .0409 .0401 .0392 .0384 .0375 .0367
1.8 .0359 .0351 .0344 .0336 .0329 .0322 .0314 .0307 .0301 .0294
1.9 .0287 .0281 .0274 .0268 .0262 .0256 .0250 .0244 .0239 .0233

2.0 .02275 .02222 .02169 .02118 .02068 .02018 .01970 .01923 .01876 .01831
2.1 .01786 .01743 .01700 .01659 .01618 .01578 .01539 .01500 .01463 .01426
2.2 .01390 .01355 .01321 .01287 .01255 .01222 .01191 .01160 .01130 .01101
2.3 .01072 .01044 .01017 .00990 .00964 .00939 .00914 .00889 .00866 .00842
2.4 .00820 .00798 .00776 .00755 .00734 .00714 .00695 .00676 .00657 .00639

2.5 .00621 .00604 .00587 .00570 .00554 .00539 .00523 .00508 .00494 .00480
2.6 .00466 .00453 .00440 .00427 .00415 .00402 .00391 .00379 .00368 .00357
2.7 .00347 .00336 .00326 .00317 .00307 .00298 .00289 .00280 .00272 .00264
2.8 .00256 .00248 .00240 .00233 .00226 .00219 .00212 .00205 .00199 .00193
2.9 .00187 .00181 .00175 .00169 .00164 .00159 .00154 .00149 .00144 .00139

3.0 .00135


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IQM0610 11 
IQM0610 12 2914-104-1
 Certificate

Introduction to Quantitative Methods

Examiner’s Suggested Answers

Q1

(a)

1 1 19 9 38 27 65 5
(i) 6 + 4 = + = + = = 10
3 2 3 2 6 6 6 6

2
2 36 4 6 24 8
(ii)   × = × = =
3 9 9 3 27 9

(b)

(i) 598.8

(ii) 599

(iii) 600

(iv) 5.9877468 × 102

(c)

(i) 1.62

(ii) 0.12

(iii) 29.96

(iv) 1.44

(d)
1
(i) 3
4

(ii) 3.25

IQM0610 13
Q2

(a)
2 100
(i) × = 50%
4 1

3 1
(ii) =
9 3

(iii) (£23,000 ÷ 4) × 9 = £51,750

(b)
(i) 8 hours × 5 days × £6.20 = £248.00

(ii) £248.00 + (5 hours × £9.30) + (4 hours × (2 × £6.20) = £344.10

6 hours × £9.30
(iii) = 4.5 hours
£12.40

(c)
30,000
(i) = £0.06 per copy
500,000

30,000
(ii) = £60 per additional sale
500

300
(iii) = 5 additional sales
60

Q3

(a)
 6 
(i) Bank A: 25,000 ×  7 ×  = £10,500
 100 

7
 5.8 
Bank B: 25,000 × 1 +  - 25,000 = £12,097
 100 

84
 0. 5 
Bank C: 25,000 × 1 +  - 25,000 = £13,009
 100 

IQM0610 14
 (ii)
7 7 7
 i   i  40,000  i 
25,000 × 1 +  = 40,000 ∴ 1 +  = ∴ 1 +  = 1. 6
 100   100  25,000  100 

(1.069 − 1) × 100
1
i i
∴1 + = 1.6 7 ∴1 + = 1.069 ∴i =
100 100

∴ i = 6.9%

(b) 24,950 × 0.75 × 0.83 = £9,850.80 = £9,851

Q4

(a)
(i) 7x – 3 = 15 + x

∴ 7x = 15 + x + 3

7x – x = 15 + 3

6x = 18

x=3

(ii) Using factorisation:

factorise: (x – 6)(x – 2) = 0

either: x–6=0 or x–2=0

two solutions are: x=6 or x=2

(iii) Using the quadratic formula:

− 6 ± 6 2 − ( 4 × 3 × − 2)
x=
2×3
so:
− 6 ± 60
x=
6

−6 ± 7.745967
x=
6

two solutions are: x = 0.29 or x = -2.29

IQM0610 15
(b)
Let: x = cost of apples per kg
y = cost of oranges per kg

Using the elimination method:

3x + 2y = 2.80 (i)
1x + 4y = 2.60 (ii)

to eliminate y, multiply by:

×2 6x + 4y = 5.60 (i)
1x + 4y = 2.60 (ii)

subtract (ii) from (i):

5x =3.00
so: x = 0.60

substituting for x in (i) we get:

(3 × 0.60) + 2y = 2.80

1.80 + 2y = 2.80

2.80 − 1.80
y=
2

y = 0.50

Therefore, the cost of apples is £0.60 per kg, and the cost of oranges is £0.50
per kg.

(c)
Using the rule: log (p × q) = log p + log q:

log (x-2) + log (x) = log (x (x - 2))

= log (x2 - 2x)

Q5

(a)
The value of fixed costs is: 2,300 × 1000 = £2,300,000

The value of variable costs is: 30 × 1000 = £30,000 per 100 units
= £300 per unit

(b)
X 0 5 10 15 20 25 30 35
C = 2300 + 2,300 2,450 2,600 2,750 2,900 3,050 3,200 3,350
30x
R = 220x - 3x2 0 1,175 2,500 3,975 5,600 7,375 9,300 11,375

IQM0610 16
 Cost and revenue functions of a food manaufacturing process
4500

4000
R = 220x - 3x2

3500

C = 2300 + 30x
3000

2500
£ '000

2000

1500

1000

500

0
0 5 10 15 20 25 30 35

Quantity ('00 units)

(c) From the graph, the breakeven level of production (i.e. the point where revenue
equals cost) is where x = 16.3 (approximately). Thus, breakeven:

= 16.3 × 100 units = 1,630 units

(d) Those costs that remain constant irrespective of quantity produced (i.e. fixed
costs) have increased.

Those costs that vary with quantity produced (i.e. variable costs) have
decreased.

Q6

(a)
No. of Mid-point Frequency
deliveries X F
10 to 19 14.5 5
20 to 29 24.5 8
30 to 39 34.5 10
40 to 49 44.5 4
50 to 59 54.5 3
30

IQM0610 17
 No. of Mid-point Frequency
deliveries X F fx x2 fx2
10 to 19 14.5 5 73 210 1,051
20 to 29 24.5 8 196 600 4,802
30 to 39 34.5 10 345 1,190 11,903
40 to 49 44.5 4 178 1,980 7,921
50 to 59 54.5 3 164 2,970 8,911
30 955 34,588

∑ fx 955
(i) = = 31.83333 = 31.83 deliveries
∑f 30
(ii)
2 ( fx )2 34,588 (955)2
∑ fx ∑
− = − = 11.813363 = 11.81 deliveries
∑f (∑ f )2 30 (30)2

(b)
Daily deliveries made by a delivery firm over a 30 dayperiod

12

10

8
Frequency

0
10 20 30 32.5 40 50 60

Daily deliveries (number)

(i) The histogram is skewed, positively.

(ii) The mode deliveries per day is approximately 32.5.

Q7

(a)
(i) Equally likely

(ii) Not equally likely

IQM0610 18
 (iii) Equally likely

(b)
Male Female Total
Business qualification 106 60 166
No business 14 20 34
qualification
Total 120 80 200

120
(i) P(male) = 200
= 0.60

166
(ii) P(business qualification) = 200
=0.83

106
(iii) P(business qualification and male) = 200
=0.53

(iv) P(male or business qualification) = 120+

200
60
=0.90

60
(v) P (business qualification given that the employee is female) = 80
=0.75

60
(vi) P (female given that the employee has a business qualification) = 166
=0.36

Q8

(a) Subjective probability describes an individual’s personal judgement on how likely

a particular event is to occur. It is not based on any precise theoretical or
empirical foundation, but is often a reasonable assessment by a knowledgeable
person. Thus, a person’s subjective probability of an event describes his/her
degree of belief in the outcome of that event.

In business, managers will often make strategic decisions based on the

subjective probability of the outcome of an event – i.e. on their instinct given their
knowledge of the business environment in which they operate. For example,
investors on the stock market may base many of their decisions to buy and sell
shares on their instinct.

(b)
(i)
290 − 320
P(X < 290) = P(Z< )
20

= P(Z < -1.5)

IQM0610 19
 100
= 0.0668 ×
1

= 6.68%

380 − 320
P(X > 380) = P(Z> )
20

= P(Z > 3.0)

100
= 0.00135 ×
1

= 0.135%

310 − 320 330 − 320

P(310 < X < 330) = P( <Z< )
20 20

= P(-0.5 < Z < 0.5)

= 1 – (0.3085 + 0.3085)

= 1 – 0.617

100
= 0.383 ×
1

= 38.3%

 1 
(ii) 1 in 500 ≡ P  = P(0.002)
 500 

≡ Z value of 2.88

Therefore, 1 in 500 batteries will last more than 2.88 standard deviations
below the mean.

= 320 – (2.88 × 20)

= 262.4 hours

Therefore 1 in 500 batteries will have a life of less than 262.4 hours.

IQM0610 20