MBA SEMESTER 1

MB0040 – STATISTICS FOR MANAGEMENT- 4 Credits

(Book ID: B1129)
Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions

Ques.1 What do you mean by Statistical Survey? Differentiate between

“Questionnaire” and “Schedule”.

Ans: Statistical Survey

A Statistical Survey is a scientific process of collection and analysis of numerical data. A

statistical survey is divided into two broad categories.

1. Planning 2. Execution

Planning of a Statistical Survey

The relevance and accuracy of data obtained in a survey depends upon the care exercised in
planning. A properly planned investigation can lead to best results with least cost and time. The
planning stage consists of the following sequence of activities.
1. Nature of the problem to be investigated should be clearly defined in an un- ambiguous
manner.
2. Objectives of investigation should be stated at the outset. Objectives could be to obtain
certain estimates or to establish a theory or to verify a existing statement to find relationship
between characteristics etc.
3. The scope of investigation has to be made clear. It refers to area to be covered, identification
of units to be studied, nature of characteristics to be observed, accuracy of measurements,
analytical methods, time, cost and other resources required.
4. Whether to use data collected from primary or secondary source should be determined in
advance.
5. The organization of investigation is the final step in the process. It encompasses the
determination of number of investigators required, their training, supervision work needed, funds
required etc.

Execution of Statistical Survey Control methods should be adopted at every stage of carrying
out the investigation to check the accuracy, coverage, methods of measurements, analysis and
interpretation. The collected data should be edited, classified, tabulated, presented in diagrams
and graphs, analyzed and interpreted.
Differentiate between “Questionnaire” and “Schedule”

1. Very often information is collected through Questionnaires. The questionnaires are filled by of
questions pertaining to the investigation. They are sent to the respondents with a covering letter
soliciting cooperation by giving correct information and mailing it back. The objectives of
investigation are explained in the covering letter together with assurance for keeping information
provided by them as confidential.

Information can be collected through schedules filled by investigator through personal contact.
In order to get reliable information, the investigator should be well trained, tactful, unbiased and
hard working.

2. This method is generally adopted by research workers and other official and non-official
agencies. It covers large area of investigation. It is more economical and free from investigator’s
bias. However it results in many “non-response” situations. The respondent may be illiterate.
They can provide wrong information due to wrong interpretation of questions.

The information used for the investigation of the current problem and obtained from the data
collected and used by some other agency or person before for his investigation is known a
secondary data.

3. Success of Questionnaire method of collection of data depends mainly on proper drafting of

the questionnaire. Following general principle are considered.
i. The number of questions should be less.
ii. Lengthy questions should be avoided.
iii. Answers to them should be short.

They are available in published or unpublished form. In published form they are available in
research papers, news papers, magazines, government publication, international publication,
websites etc. They are collected for a different purpose. Therefore care should be exercised
while making use of it. Their accuracy, reliability, objectives and scope should be examined
thoroughly before use.
Ques2. The table shows the data of Expenditure of a family on food, clothing,
education, rent and other items.

Items Expenditure

Food 4300

Clothing 1200

Education 700

Rent 2000

Others 600

Depict the data shown in the table using Pie chart.

Ans: Pie chart of Expenditure of a family on food, clothing, education, rent and other
items.

Expenditure
7%

Food
23% Clothing
Education
49% Rent
Others

8%

14%
Ques3. Average weight of 100 screws in box „A‟ is 10.4 gms. It is mixed with 150
screws of box „B‟. Average weight of mixed screws is 10.9 gms. Find the average
weight of screws of box „B‟.

Ans:
_ _
Given X1 = 10.4, n1 = 100 X = 10.9
_
X =? , n2=150

n1 X1 + n2 X2

We know X1 =

n1 + n2

100 x 10.4 + 150 X2

= 10.9

100 + 150

1040 + 150 X2 = 10.9 x 250 = 2725

150 X2 = 2725 – 1040 = 1685

X2 = 1685 / 150 =11.23 gms.

Ques4. (a) Discuss the rules of “Probability”.
(b) What is meant by “Conditional Probability”?

Ans: (1) Probability

Probability is a numerical measure which indicates the chance of occurrence of an event “A”. It
is denoted by P(A). It is the ratio between the favorable outcomes to an event “A” (m) to the total
outcomes of the experiment (n). In other words

P (A) = m / n

Rules of Probability

a) Addition Rule

i) If A and B are any two events then the probability of the occurrence of either A or B is given
by P (A U B) = P (A) + P (B) – P (A  B)
ii) If A and B are two mutually exclusive events then the probability of occurrence of either A or
B is given by
P (A U B) = P (A) + P (B)
iii) If A, B and C are any three events then the probability of occurrence of either A or B or C is
given by P (A U B U C) = P (A) + P (B) + P(C) – P (A  B) – P (B  C) – P (A  C) + P (A  B 
C)
iv) If A1, A2, A3………An are “n” mutually exclusive and exhaustive events then the probability of
occurrence of at least one of them is given by
P (A1 U A2 U……..U an) = P (A1) + P (A2) +……. + P (An). In terms of Venn diagram i), ii) and iii) can be
represented as follows.
Managers very often come across with situations where they have to take decision about
implementing either course of action A or course of action B or the course of action C.
Sometimes they have to take decisions regarding the implementation of both A and B.
For example a sales manager may like to know the probability that he will exceed the target for
product A or product B. Sometimes he would like to know the probability that sales of product A
and B will exceed the target. The first type of probability is answered by addition rule. The
second type of probability is answered by multiplication rule.

b) Multiplication Rule

i) If A and B are two independent events then the probability of occurrence of A and B is given
by P (A u B) = P (A) P (B)

(2) Conditional Probability

Sometimes we wish to know the probability that the price of a particular petroleum product will
rise, given that the finance minister has risen the petrol price. Such probabilities are known as
conditional probability.
Thus the conditional probability of occurrence of an event “A” given that the event “B” has
already occurred is denoted by P (A / B). Here A and B are dependent events. Therefore we
have the following rules.
If A and B are dependent events then the probability of occurrence of A and B is given by

P (A n B) = P (A) P (B/A)

= P (B) P (A/B)

It follows that)

P (A/B) = P (A n B) / P (B)

P (B/A) = P (A n B) / P (A)
Ques5. (a) What is meant by “Hypothesis Testing”? Give Examples
(b) Differentiate between “Type-I” and “Type-II” Errors

Ans: (A) Testing Hypothesis

Null and Alternate hypothesis In hypothesis testing, we must state the assumed or
hypothesized value of the population parameter before we begin sampling. The assumption we
wish to test is called the null hypothesis and is symbolized by Ho.
Suppose we want to test the hypothesis that the population mean is equal to 500. We would
symbolize it as follows and read it, “The null hypothesis is that the population mean = 500
written as Ho: µ = 500. The term null hypothesis arises from earlier agricultural and medical
applications of statistics. In order to test the effectiveness of a new fertilizer or drug, the tested
hypothesis (the null hypothesis) was that it had no effect, that is, there was no difference
between treated and untreated samples.
If we use a hypothesized value of a population mean in a problem, we would represent it
symbolically as µ H0. this is read.

“The hypothesized value of the population mean.”

If our sample results fail to support the null hypothesis, we must conclude that something else is
true. Whenever we reject the hypothesis, the conclusion we do accept is called the alternative
hypothesis and is symbolized H1 (“H sub-one”). For the null hypothesis H0: µ = 200

We will consider three alternative hypotheses as:

H1: µ ≠ 200 (population mean is not equal to 200)

H1: µ > 200 (population mean greater than 200)
H1: µ < 200 (population mean less than 200)

Example 1: Assume that a manufacturer of light bulbs wants to produce bulbs with a mean life
of = Ho = 1,000 hours. If the lifetime is shorter, he will lose customers to his competitions; if
the lifetime is longer, he will have a very high production cost because the filaments will be
excessively thick. In order to see whether his production process is working properly, he takes a
sample of the output to test the hypothesis Ho; = 1,000. Because he does not want to deviate
significantly from 1,000 hours in either direction, the appropriate alternative hypothesis is H1:
1,000 and he uses a two-tailed test. That is, he rejects the null hypothesis if the mean life of
bulbs in the sample is either too far above 1,000 hours or too far below 1,000 hours.

(B) Differentiate between “Type-I” and “Type-II” Errors

Type I error is preferred

Suppose that making a Type I error (rejecting a null hypothesis when it is true) involves the time
and trouble of reworking a batch of chemicals that should have been accepted. At the same
time, making a Type II error (accepting a null hypothesis when it is false) means taking a
chance that an entire group of users of this chemical compound will be poisoned. Obviously, the
management of this company will prefer a Type I error to a Type II error and, as a result, will set
very high levels of significance in its testing to get low β s.

Type II error is preferred

Suppose, on the other hand, that making a Type I error involves disassembling an entire engine
at the factory, but making a Type II error involves relatively inexpensive warranty repairs by the
dealers. Then the manufacturer is more likely to prefer a Type II error and will set lower
significance levels in its testing.

Ques6. From the following table, calculate Laspyres Index Number, Paasches Index
Number, Fisher‟s Price Index Number and Dorbish & Bowley‟s Index Number taking
2008 as the base year.

2008 2009

Commodity Price (Rs.) Per Price (Rs.) Per Quantity in

Quantity in Kg
Kg Kg Kg

A 6 50 10 56

B 2 100 2 120

C 4 60 6 60

D 10 30 12 24

E 8 40 12 36
Ans:

Commodit 2008 2009        

y P0 Q0 P1 Q1 P1Q0 P1Q1 P0Q0 P0Q1
A 6 50 10 56 500 560 300 336
B 2 100 2 120 200 240 200 240
C 4 60 6 60 360 360 240 240
D 10 30 12 24 360 288 300 240
E 8 40 12 36 480 432 320 288
          1900 1880 1360 1344
∑P1Q0=190 ∑P1Q1=188 ∑P0Q0=136 ∑P0Q1=134
          0 0 0 4

(A) Laspyres Index Number

=∑P1Q0 / ∑P1Q1 x 100

=1900 / 1880 x 100

= 1.0106 x 100

= 101.06 Ans.

(B) Paasches Index Number

=∑P1Q1 / ∑P0Q1 x 100

=1880 /1344 x 100

=1.3988 x 100

=138.88 Ans.

(C) Fisher’s Price Index Number

= ∑P1Q0 x ∑P1Q1 / ∑P0Q0 x ∑P0Q1 X 100

= 1900 x 1880 / 1360 x 1344 X 100

= 1.9542 x 100

= 1.3979 x 100

= 139.79 Ans.

(D) Dorbish & Bowley‟s Index Number

= ∑P1Q0 / ∑P0Q0 + ∑P1Q1 / ∑P0Q1 x 100

= 1900 / 1360 + 1880 / 1344 x 100

= 2.795 x 100

= 1.6718 x 100

= 167.18 Ans.