Professional Documents
Culture Documents
Business Statistics
Level 3
Model Answers
Series 4 2009 Singapore (3709)
Model Answers have been developed by EDI to offer additional information and guidance to Centres,
teachers and candidates as they prepare for LCCI International Qualifications. The contents of this
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3709/4/09/MA Page 1 of 19
QUESTION 1
Stein plc produces sub assemblies for the automotive industry. The company is currently assessing
whether investment in a new tooling machine to replace an existing machine will lead to a significant
increase in output.
To compare the efficiency of the new machine with the one presently in use a random sample of
production employees was selected and each employee used the existing machine on one day and
the new machine on another day.
The machine to be used first was chosen at random for each employee.
The number of items produced over each day was then recorded.
(b) Test whether there is evidence of a significant increase in output from the new machine
compared with the existing machine.
(10 marks)
(c) Suggest one other factor that might have accounted for a difference between the machines.
(2 marks)
(d) Set up a 95% confidence interval for the mean daily output for the new machine.
(6 marks)
(Total 20 marks)
3709/4/09/MA Page 2 of 19
MODEL ANSWER TO QUESTION 1
(a) to remove effects of other factors that may influence the outcome
∑d² = 145
___________
st. devn. = √(145-72.9) / 9
= 2.83
∑x² = 4948
_____________
s = √ (4948-4665.6) / 9
______
= √ 31.378 = 5.6
21.6 ± 4.00
17.60 - 25.60
3709/4/09/MA Page 3 of 19
QUESTION 2
The following table shows the annual bank service charges applied to a random sample of 150
customer accounts held at a city centre branch.
∑fx = 37 600
and ∑fx² = 16 490 000
(where x represents the class mid-point)
(a) Estimate the mean and the standard deviation for the sample using the summary measures given
above.
(4 marks)
(b) Using your answers from (a) and given that the median value for this distribution is $168.52,
calculate a measure of skewness for the data.
(3 marks)
(c) Sketch a curve to represent this distribution showing clearly on your sketch approximate positions
of the mean, median and mode.
(3 marks)
The bank wishes to conduct a survey of householders in the city to find out how many would consider
applying for a new type of current account with no service charges, provided the account remains in
credit for a minimum of nine months each year.
For the purpose of the survey the city is split into 30 smaller areas.
Within each area there are 45 streets each having approximately 90 householders.
(d) Explain how a sample of 50 householders could be selected using multi-stage sampling.
(4 marks)
(e) Give two advantages and two disadvantages in using this method to select the sample of
householders.
(4 marks)
(f) Suggest two reasons why this might be considered an inappropriate method for conducting a
survey of this type.
(2 marks)
(Total 20 marks)
3709/4/09/MA Page 4 of 19
MODEL ANSWER TO QUESTION 2
_
(a) x = 37600/150 = $250.67
_____________________
σ = √ 16490000/150– (250.67)²
_______
= √47097.88
= $217.02
3(250.67 – 168.52)
217.02
(d) number areas and random choice of a small number of areas: number streets within chosen
areas and select streets at random: select 50 householders at random from chosen streets
(e) cost/time, fieldwork concentrated, sample frame only at final stage. Error increases at each level,
sample unrepresentative, complex to organize.
3709/4/09/MA Page 5 of 19
QUESTION 3
The weight of a packet of cereal is normally distributed with a mean weight of 450 grams and standard
deviation of 2.5 grams.
(a) Calculate the probability that the actual weight of a cereal packet, selected at random, will be:
Prior to dispatch, the packets of cereal are put into large boxes each containing a total of 64 packets.
(b) Ignoring the weight of the box, what is the probability that a box chosen at random will weigh
more than 28.85 kg?
(6 marks)
The company is liable to prosecution if 5% or more of the packets of cereal are less than 450 grams in
weight.
(c) What should the mean weight setting be changed to if the percentage underweight is to be less
than:
(i) 5%
(ii) 1%?
(4 marks)
(d) Explain, with reasons, whether the company should use the 5% or the 1% setting.
(4 marks)
(Total 20 marks)
3709/4/09/MA Page 6 of 19
MODEL ANSWER TO QUESTION 3
Prob. = 0.008
Z = 28.85 - 28.80
0.02 = + 2.5
1% setting = 455.8(25)
(d) higher risk of prosecution if 5% level used: more waste if 1% setting used
3709/4/09/MA Page 7 of 19
QUESTION 4
(a) In the context of time series analysis, explain the difference between seasonal and cyclical
effects.
(2 marks)
The following data refers to the quarterly number of unemployed (in thousands) in one UK city
between 2006 and 2008.
(b) By calculating a suitable centred moving average, establish the trend for the data.
(6 marks)
(c) Using an additive model, calculate the mean seasonal variations for each quarter.
(4 marks)
(d) Forecast the number unemployed in the city in the first two quarters of 2009.
(4 marks)
Data recently made available showed the actual number unemployed in the city as 28 000 in quarter 1
of 2009 and 20 000 in quarter 2 of 2009.
(e) Give two possible reasons why the forecasts made in (d) proved to be inaccurate.
(4 marks)
(Total 20 marks)
3709/4/09/MA Page 8 of 19
MODEL ANSWER TO QUESTION 4
24
115
25 226 28.25 -3.25
111
30 220 27.5 2.5
109
32 218 27.25 4.75
109
22 214 26.75 -4.75
105
25 206 25.75 -0.75
101
26 200 25 1.0
99
28 196 24.5 3.5
97
20 184 23 -3
87
23
16
Q1 Q2 Q3 Q4
-3.25 2.5
4.75 -4.75 -0.75 1.0
3.5 -3
(e) trend may not have continued as before, seasonal factor not constant, random factor may
influence forecasts.
3709/4/09/MA Page 9 of 19
QUESTION 5
(a) Sketch three different control charts for means to illustrate situations where the plotted points
confirm a manufacturing process is out of control.
(6 marks)
A company in its quality control procedures sets the warning limits at 0.025 probability point and the
action limits at 0.001 probability point. This means, for example, that the upper action line is set so
that the probability of the mean length exceeding the line is 0.001.
When it is under control, a process produces components whose lengths are normally distributed with
mean 75cm and standard deviation 1.2cm.
Random samples of 9 components are selected at regular intervals and the mean length of the
sample calculated.
The first 10 samples of a day’s output gave the following mean lengths:
(ii) Plot these values on your control chart and comment on the stability or otherwise of the
process.
(3 marks)
(c) If the mean length had been set incorrectly at 76cm (the standard deviation remaining at 1.2cm),
and assuming the use of the existing control chart continues, what is the probability of the mean
of a random sample of 9 items exceeding the upper action limit?
(4 marks)
(Total 20 marks)
3709/4/09/MA Page 10 of 19
MODEL ANSWER TO QUESTION 5
75.8 - 74.2
or 75.784 - 74.216
Action limits
__
75 + 3.09(3) (1.2/√9 )
76.2 - 73.8
or 76.236 - 73.764
(ii) plots
early instability but corrected around sample 5
(c) 76.236 - 76
0.4
3709/4/09/MA Page 11 of 19
QUESTION 5(b) Control Chart for Sample Means
77
UAL
76
UWL
75
1 2 3 4 5 6 7 8 9 10
Lengths
LWL
74
LAL
INSTABILITY IN CONTROL
73
3709/4/09/MA Page 12 of 19
QUESTION 6
(a) Explain the difference between a confidence interval estimate and a significance test.
(4 marks)
A company produces a product in four sizes, small, medium, large and extra large.
In the past, the demand for these sizes has been fairly constant at 20% for small, 43% for medium,
25% for large and 12% for extra large.
A random sample of 400 recent sales included 62 small, 176 medium, 109 large and 53 extra large
items.
(b) Test whether there is evidence of a significant change in demand for the different sizes.
(10 marks)
(c) (i) Use the data from the sample to set up a 95% confidence interval for the proportion of all
recent sales that were for small sized items.
(4 marks)
(ii) Compare your answer in (c) (i) with the figure of 20% small item sales based on past
demand patterns.
What does this show?
(2 marks)
(Total 20 marks)
3709/4/09/MA Page 13 of 19
MODEL ANSWER TO QUESTION 6
(a) An interval that specifies the limits within which it is likely that the population value will fall.
contributions
4.05 0.09 0.81 0.52
0.155 + 0.0355
= 0.1905 - 0.1195
or 19.05% - 11.95%
(ii) 20% based on past demand for small sizes outside of 95% interval estimate : hence
proportion of small sizes likely to be below the previous 20% figure despite overall no
change in demand
3709/4/09/MA Page 14 of 19
QUESTION 7
The manager of a retail clothing outlet is concerned at the high level of absenteeism recorded by the
10 staff employed in the sales department.
He suggests that the staff absentee rate may be proportional to their length of service with the
company.
A 1 7
B 3 9
C 7 8
D 6 12
E 4 10
F 15 5
G 19 4
H 11 0
I 20 1
J 24 4
(a) Calculate the Product Moment Correlation Coefficient for this data and interpret the value
obtained.
(10 marks)
(b) Test whether the correlation coefficient found in (a) is significantly different from zero, given that
the calculated value of t in this case is 2.609.
(5 marks)
(c) The regression line for this data passes through the following pairs of coordinates:
(11, 6) and (18, 3.711)
Use these readings to find the regression equation in the form ŷ = a + bx
(5 marks)
(Total 20 marks)
3709/4/09/MA Page 15 of 19
MODEL ANSWER TO QUESTION 7
(a) ∑x = 110 ∑y = 60
∑x² = 1794 ∑y² = 496
∑xy = 469
formula gives
- 1910/2818.2
- 0.678
t = 2.609 (given)
b = -0.327
y – 6 = -0.327 (x - 11)
ŷ = -0.327x + 9.597
3709/4/09/MA Page 16 of 19
QUESTION 8
A survey of travellers using an urban rapid transit system last Monday showed 45% to be male. Of
these males, 15% were over 50 years of age and 35% under 20 years of age.
Independent of their sex and age, 60% of travellers were visiting the shops and the remainder going to
work.
(b) Construct a suitably labelled diagram or table to show all this information.
(6 marks)
(c) Find the probability that a passenger selected at random from those using the rapid transit
system was:
(Total 20 marks)
3709/4/09/MA Page 17 of 19
MODEL ANSWER TO QUESTION 8
(a) (i) list of events covers all possible outcomes e.g. defective and non defective product
(ii) events can occur together e.g. output drops and profit falls
= 0.329(3)
3709/4/09/MA Page 18 of 19
QUESTION 8(b) Tree diagram