MS-8

1. Calculate the mean, median and mode from the following data relating to production of a steel
mill for 60 days
Production (in tons per day) 21-22 23-24 25-26 27-28 29-30
Number of days 7 13 22 10 8

Ans: Mean:
Let a = 25.5, h = 2
Class interval l(C.I) Frequency (fi) xi ui= (x – 25.5)/2 fiui
21 - 22 7 21.5 -2 -14
23 – 24 13 23.5 -1 -13
25 – 26 22 25.5 = a 0 0
27 – 28 10 27.5 1 10
29 – 30 8 29.5 2 16
Σ fi = 60 Σ fiui = -1

By step-deviation method,
͞ = a + [Σ fiui/ Σ fi] x h = 25.5 + (-1/60)2 = 25.5 – 1/30
Mean (x)
= 25.5 – 0.0333 = 25.4667
Mean production of steal is 25.4667 tons per day

Median: Making class intervals continuous by subtracting 0.5 from each lower limit and adding
0.5 to the upper class limit.
Required cumulative frequency is:

Production C.I Number of days Cumulative

frequency
21 - 22 20.5 – 22.5 7 7
23 – 24 22.5 – 24.5 13 20
25 – 26 24.5 – 26.5 22 42
27 – 28 26.5 – 28.5 10 52
29 – 30 28.5 – 30.5 8 60
N = 60

For median, N/2 = 30 which lies in the class 24.5 – 26.5

Here l = 24.5, f = 22, cf = 20, h = 2

Median = l + [(N/2 – cf)/f]xh

= 24.5 + [(30 – 20)/22] x 2

= 24.5 + 20/22

= 24.5 + 0.90909091 = 25.41

Mode: Since the class 24.5 – 26.5 has the maximum observations, i.e., 22

f1 = 22, f0 = 13, f2 = 10, l = 24.5

Mode = l + [(f1 - f0)/(2f1 - f0 - f2)]h

= 24.5 + [(22 – 13)/(2 x 22 – 13 – 10)] x 2 = 24.5 + (9/21) x 2

= 24.5 + 0.8571 = 25.357

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2. A restaurant is experienced discontentment among its customers. It analyses that there are
three factors responsible viz. food quality, service quality and interior décor. By conducting an
analysis, it assesses the probabilities of discontentment with the three factors as 0.40, 0.35 and
0.25 respectively. By conducting a survey among the customers, it also evaluated the
probabilities of a customer going away discontented on account of these factors as 0.6, 0.8 and
0.5, respectively. With this information, the restaurant wants to know that, if a customer is
discontented, what are the probabilities that it is so due to food, service or interior décor?

Ans: Let P( E1) : Discontentment with the food quality = 0.40

P(E2) : Discontentment with the service quality = 0.35
P(E3) : Discontentment with the interior décor = 0.25
Let A : Customer going away discontented
And P(A/E1) = 0.6, P(A/E2) = 0.8, P(A/E3) = 0.5
P(E1/A) = ?, P(E2/A) = ?, P(E3/C) = ?
Using Baye’s theorem,

P(E1/A) =

= = 0.24/0.645 = 0.372

P(E2/A) =

= = 0.28/0.645 = 0.434

P(E3/A) =

= = 0.125/0.645 = 0.77

Discontentment due to food is 0.372, due to service quality 0.434 and due to interior décor 0.77
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3. The monthly incomes of a group of 10,000 persons were found to be normally distributed with
mean equal to 15,000 and standard deviation equal to 1000. What is the lowest income
among the richest 250 persons?

Ans: Here average monthly income µ = 15,000

Standard deviation σ = 1000
We have to find lowest income among the richest 250 persons
If we take x as a random variable depicting the lowest income, we have to find Pr(x < 250)
We have to find Pr(x > 9750)

i.e. Pr ( < ) = Pr ( < )

= Pr ( < ) = Pr (Z < -5.25) = 0.5 – Pr (Z < -5.25)

= 0.5 – Pr ( -5.25 < Z < 0)
= 0.5 – Pr (0 < Z < 5.25)
= 0.5 – 5.25
= 4.75
= 18080 (From normal table)
lowest income among the richest 250 persons = 18080

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4. Write short notes on the following:
(a) Test of goodness of fit
(b) Critical Region of a test
(c) Exponential smoothing method

Ans: (a) Test of goodness of fit: Population distribution is Normal, Poisson, and Uniform. This will
base on evidence produced by a sample. This procedure is developed to test how close the fit
between the observed data and the distribution assumed is. These tests are based on the chi-
square statistic.

(b) Critical Region of a test: The sample mean would be used to draw conclusions about the
population mean and so the test statistic is R. We shall be in a position to reject Ho only if the
sample evidence is strongly against it i.e. if the observed value of x is much larger than 20. The
critical region will therefore be of the form: x? c, where c is a real number much larger than 20.
The actual value of c would depend on the significance level used.

This has been shown as the shaded region in Figure V above, where the distribution of has
been shown as a normal curve. This is valid under two conditions-(1) if the population
distribution is normal, then the distribution of z is also normal, or (2) if the 'sample size is large,
then again, the central limit theorem assures us that the distribution of x can be approximated

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 by a normal distribution. Therefore, if either of these conditions is valid (and in this case the
second condition is certainly valid as n = 100), then

Now that we have identified the critical region, we can compare the observed value of x and
see if it belongs to critical region. The observed value of x is 20.5-which lies in the critical
region and so we can conclude that the sample evidence is strong enough for us to reject Ho.

(c) Exponential smoothing method: Exponential smoothing is an averaging technique where

the weightage given to the past data declines (an an exponential rate as the data recedes into
the past. This all the values are taken into consideration, unlike in moving averages, where all
data points prior to the period of the Moving average are ignored.

If Ft is the one-period a head forecast made at time t and Dt is the demand for period t, then

Ft = Ft-1 + α(Dt – Ft-1)

= αDt + (1 – α) Ft-1
Where α is a soothing constant that lies between 0 1 but generally chosen values lie between
0.01 and 0.30

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