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Statistics
BMS1024 MANAGERIAL STATISTICS
Key Concepts
The central location is the extent to which all
scattering of values
Numerical Descriptive
Measures for a Sample
SUMMARY MEASURES
Central
Location
Mean
Median
Mode
Variation
Quartiles
Range
Interquartile Range
Variance
Standard deviation
Coefficient of Variance
Measures of Central
Location
SUMMARY
Central Location
Arithmetic
Mean
Median
Mode
X
i 1
Middle value in
the ordered array
Most frequently
observed value
Measures of Central
Location
THE ARITHMETIC MEAN
The arithmetic mean (mean) is the most common
X
Sample size
BMS1024 Managerial Statistics
X
i 1
X1 X 2 X n
n
Observed values
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Measures of Central
Location
THE ARITHMETIC MEAN
The most common measure of central location
Mean = sum of values divided by the number of values
Affected by extreme values (outliers)
EXAMPLE 1
The data given below are the 2008 profits (rounded to
billions of dollars) of 12 companies selected from all over
the world.
8 12 7 17 14 45 10
13 17 13 9 11
Compute the mean profit for these companies.
Solution:
12
8 12 11 176
X
14.67
12
12
12
i 1
Measures of Central
Location
THE MEDIAN
In an ordered array, the median is the middle number
Measures of Central
Location
THE MEDIAN
The median of an ordered set of data is located at the
middle number.
If the number of values is even, the median is the
EXAMPLE 2
Refer to same data as provided in the previous
example.
Compute the median profit for those companies.
Solution:
13,
12 13
12.5
Hence, the median
2
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Measures of Central
Location
THE MODE
Value that occurs most often
Not affected by extreme values
Used for either numerical or categorical data
There may be no mode
There may be several modes
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EXAMPLE 3
Refer to same data in the previous example.
Determine the mode for the data.
Solution:
13,
12
Measures of Central
Location
Review Example
House Prices:
$2,000,000
500,000
300,000
100,000
100,000
Sum 3,000,000
Mean:
($3,000,000/5)
= $600,000
Median: middle value of ranked data
= $300,000
Mode: most frequent value
= $100,000
Learn how to compute mean using the
Mode SD function on your scientific
calculator!
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Measures of Central
Location
WHICH MEASURE TO CHOOSE?
The mean is generally used, unless extreme
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Quartile Measures
Quartiles split the ranked data into 4 segments with an
25%
Q1
25%
Q2
25%
Q3
Q3 = upper
quartile
The first quartile, Q1, is the value for which 25% of the observations
are smaller and 75% are larger
Q2 is the same as the median (50% are smaller, 50% are larger)
Only 25% of the values are greater than the third quartile
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Quartile Measures
LOCATING QUARTILES
Find a quartile by determining the value in the appropriate
position in the ranked data, where
First quartile position:
Second quartile position:
Third quartile position:
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Quartile Measures
GUIDELINES
Rule 1: If the result is a whole number, then the quartile is
equal to that ranked value.
Rule 2: If the result is a fraction half (2.5, 3.5, etc), then the
quartile is equal to the average of the corresponding ranked
values.
Rule 3: If the result is neither a whole number or a fractional
half, you round the result to the nearest integer and select that
ranked value.
BMS1024 Managerial Statistics
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Quartile Measures
LOCATING THE FIRST QUARTILE
Sample Data in Ordered Array: 11 12 13 16 16 17 18 21 22
First, note that n = 9.
Q1 = is in the (9+1)/4 = 2.5 ranked value of the ranked data, so use
the value half way between the 2nd and 3rd ranked values,
so
Q1 = 12.5
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EXAMPLE 4
Refer to same data as in the previous example.
Find all quartiles and interpret their results.
Solution:
Q1
Q2
Q3
Position
(12+1)/4
= 3.15 3
(12+1)/2
= 6.5
3(12+1)/4 =
9.45 9.5
12.5
15.5
Value
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EXAMPLE 4 Continued
Q1 = 9. This result indicate that 25% of the companies
have profits equal to or lesser than $ 9 billion. Also, 75%
of the companies have profits equal to or greater than $
9 billion.
Q2 = 12.5. This result indicate that 50% of the
companies have less than $ 12.5 billion profit. Also, 50%
of the companies have more than $ 12.5 billion profit.
Q3 = 15.5. This result indicate that 75% of the
companies have less than $ 15.5 billion profit. Also, 25%
of the companies have more than $ 15.5 billion profit.
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Measures of Variation/
Dispersion/ Variability
Variation measures the spread, or dispersion, of
values in a data set:
Range
Interquartile Range
Variance
Standard Deviation
Coefficient of Variation
Small
dispersion
Large
dispersion
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Measures of Variation
RANGE
values:
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Measures of Variation
RANGE
Sensitive to outliers
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Measures of Variation
INTERQUARTILE RANGE
= Q3 Q1
BMS1024 Managerial Statistics
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Measures of Variation
INTERQUARTILE RANGE
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EXAMPLE 5
Refer to the following data: (continuation of previous
examples)
8 12 7 17 14 45 10
13 17 13 9 11
Compute the range and interquartile range.
Solution:
Range 45 7 38
IQR Q3 Q1 15.5 9 6.5
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Outlier Detection
For the data 2, 5, 6, 9, 12, we have the following five-number summary:
Xminimum = 2; Q1 = 3.5;
Range = 12-2 = 10
IQR = Q3 Q1 = 10.5 3.5 = 7
To determine if there are outliers we must consider the numbers that
no outliers.
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EXERCISE
Refer to the following data: (continuation of previous
exercises and examples)
8 12 7 17 14 45 10
13 17 13 9 11
Is there any outlier in the data? If yes, remove that outlier
and find the summary measures for the new data.
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Measures of Variation
VARIANCE
x = arithmetic mean
n = sample size
Xi = ith value of the variable X
X 2i = ith squared value of the variable X
BMS1024 Managerial Statistics
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Measures of Variation
STANDARD DEVIATION
i 1
n 1
n(n 1 )
i 1
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Measures of Variation
STANDARD DEVIATION
12
n8
14
15
17
18
18
24
Mean X 16
10
12 2 ... 24 2
10 12 ... 24
8 1
8 8 1
2178 128
7
8 7
4.3095
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EXERCISE
Refer to the following data: (continuation of previous
exercise and examples)
8 12 7 17 14 45 10
13 17 13 9 11
(i)
an outlier is removed?
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Measures of Variation
STANDARD DEVIATION
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Measures of Variation
STANDARD DEVIATION
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Measures of Variation
COEFFICIENT OF VARIATION (CV)
s
CV
X
100%
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Measures of Variation
COEFFICIENT OF VARIATION (CV)
STOCK A
Average price last year =
$50
Standard deviation = $5
CV A
5
100% 10%
50
STOCK B
Average price last year =
$100
CV
B
5
100% 5%
100
Standard deviation = $5
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Exercise
The variation in the annual incomes of executives at
Nash Rambler Products, Inc is to be compared with the
variation in incomes of unskilled employees.
The observation from a sample of executives,
RM500,000 and s = RM50000.
For a sample of unskilled employees,
and s = RM3,200.
X =
= RM32000
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Measures of Variation
SUMMARY CHARACTERISTICS:
The more the data are spread out, the greater the range,
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Shape of a Distribution
Describes how data are distributed
Measures of shape: Symmetric or skewed
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Pearsons Coefficient of
Skewness
It is used to measure the degree of skewness of a
distribution.
3( X Median)
Sk
s
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EXAMPLE 6
Refer to the following data: (continuation of previous
examples)
8 12 7 17 14 45 10
13 17 13 9 11
Compute the Pearsons coefficient of skewness and
describe the shape of the distribution.
Solution:
0.6467
s
10.066
The distribution of the data is slightly skewed to the right.
BMS1024 Managerial Statistics
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General Descriptive
Stats Using Microsoft
Excel
Add-in Data
Analysis into your
Excel.
Go to Developer >>
Add-ins >> Select
Analysis ToolPak >>
Click OK button.
BMS1024 Managerial Statistics
42
General Descriptive
Stats Using Microsoft
Excel
1. Enter data.
2. Select Data.
3. Select Data
Analysis.
4. Select
Descriptive
Statistics and
click OK.
BMS1024 Managerial Statistics
43
General Descriptive
Stats Using Microsoft
Excel
5. Enter the cell
range.
6. Check the
Summary
Statistics box.
7. Click OK.
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General Descriptive
Stats Using Microsoft
Excel
Microsoft Excel
descriptive statistics
output, using the house
price data:
House Prices:
$2,000,000
500,000
300,000
100,000
100,000
BMS1024 Managerial Statistics
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Example: Simple
Interpretation
The average house prices is $ 600,000.
50 percent of the house prices are $300,000 and
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Numerical Descriptive
Measures for a Population
Descriptive statistics discussed previously
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Population Mean
The population mean is the sum of the values in
the population divided by the population size, N.
N
where
X
i 1
X1 X 2 X N
= population mean
N = population size
Xi = ith value of the variable X
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Population Variance
The population variance is the average of
squared deviations of values from the mean.
N
2
where
2
(
X
)
i
i 1
= population mean
Population
variance is seldom
used because we
usually rely on
sample data, not
population data!
N = population size
Xi = ith value of the variable X
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Population Standard
Deviation
The population standard deviation is the most
where
2
(
X
)
i
i 1
= population mean
N = population size
Population
standard deviation
is seldom used
because we
usually rely on
sample data, not
population data!
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Sample Statistics
versus Population
Parameters
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CLASS EXERCISE 1
The following data is the amount that a sample of 10
customers spent for lunch ($) at a fast-food restaurant:
7.42
6.29
5.90
4.89
(i)
5.83
6.50
8.34
9.51
7.10
6.80
and Q3.
(iii) Is the data skewed? If so, how?
(iv) Based on your results of (i) to (iii), what conclusions
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and variation
Describe the shape of a distribution
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