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Business Statistics Level 3

Model Answers

Series 3 2009 (3009)

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**Business Statistics Level 3
**

Series 3 2009

How to use this booklet 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 booklet are divided into 3 elements: (1) (2) Questions Model Answers – reproduced from the printed examination paper – summary of the main points that the Chief Examiner expected to see in the answers to each question in the examination paper, plus a fully worked example or sample answer (where applicable) – where appropriate, additional guidance relating to individual questions or to examination technique

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© Education Development International plc 2009 All rights reserved; no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission of the Publisher. The book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover, other than that in which it is published, without the prior consent of the Publisher.

Page 1 of 18

when the results of the two factories have been combined. (b) Test whether the opinions of the engineering company’s employees. (12 marks) Nationally. differ from the national figure. (8 marks) (Total 20 marks) 3009/3/09/MA Page 2 of 18 . For the two factories that it operates the results are: Western factory 175 out of 500 staff voted in favour and Northern factory 110 from 300 staff voted in favour. the proportion in favour of flexible working arrangements is 33%. (a) Test whether there is a significant difference between the Western and Northern factories in the proportion of workers voting in favour of the flexible working arrangements.QUESTION 1 An engineering company polls its staff to investigate the proportion of them who wish to move to flexible working arrangements.

026 0.96/2. 3009/3/09/MA Page 3 of 18 .58 z= p −π = 0.356 (1 − 0. Critical z value = ±1.0167 =1.33(1 − 0.56 π (1 − π ) n = 0.356 − 0. (b) Null hypothesis: There is no difference between the company proportion and the national proportion. There is no difference in the proportion of employees in favour of the new flexible working arrangements at the two factories.96/2.356 z= 0.33 0.367 1 1 0.229(0.58 p1 = 175/500 = 0. Polled value of p = p2 = 110/300 = 0. Critical z = ±1. Alternative hypothesis: There is a difference between the company proportion and the national proportion.35. There is no difference between the company proportion and the national proportion.35 − 0.MODEL ANSWER TO QUESTION 1 (a) Null hypothesis: There is no difference in the proportion wanting flexible working hours in the Western and Northern factories.356 ) + 500 300 = 0.367 175 + 110 500 + 300 = 285 800 = 0.00533 ) 0.477 Conclusions: There is insufficient evidence to reject the null hypothesis at the 5% significance level.026 0. Alternative hypothesis: There is a difference in the proportion wanting flexible working hours in the Western and Northern factories.33) 800 z= 0.000276 Conclusion: There is insufficient evidence to reject the null hypothesis.017 = 0.

QUESTION 2 (a) Give two business uses of the normal distribution. (4 marks) (b) A factory that manufactures microwave cooker casings has a three stage production process. At the painting stage. Assume the times for each process are independently normally distributed as follows: Cutting: mean time 16 seconds with standard deviation 2 seconds Forming: mean time 20 seconds with standard deviation 3 seconds Painting: mean time 40 seconds with standard deviation 5 seconds. forming and painting. cutting. (11 marks) (Total 20 marks) 3009/3/09/MA Page 4 of 18 . (5 marks) For a complete casing. calculate the proportion of items that are produced: (iii) in under 60 seconds (iv) between 70 seconds and 80 seconds. calculate the proportion of items that: (i) (ii) take more than 48 seconds to produce take more than 36 seconds to produce.

16 = − 16 6. (b) (i) More than 48 seconds z= x−x sd = 48 − 40 5 = 1.MODEL ANSWER TO QUESTION 2 (a) As the basis for hypothesis testing.341 + 0.6) Table z = 0.242 = 0.995 = 0.65 /0.6: = 0.16 = -6 6.0.841 – 0.16 = −0.726) required probability = 0.005 (iv) Between 70 and 80 seconds z= x−x sd = 70 − 76 6.341 z= x−x sd = 80 − 76 6.0.60 Table probability = 0.16 = 0.242 (0.841 required probability = 0.742 (by interpolation) (0.5 = 0.995 Required probability 1 – 0.0.567) 3009/3/09/MA Page 5 of 18 .8: = 0.8 Table probability for z = 0.16 = −2.788 (iii) Mean time for complete process = x 1+ 2+3 = x 1 + x 2 + x 3 = 16 + 20 + 40 = 76 sd1 + sd 2 + sd 3 = 2 2 2 Joint Standard deviation = Under 60 seconds z= x−x sd = 60 − 76 6.649(0.055 (ii) More than 36 seconds z = x−x sd = 36 − 40 5 = .6 Table probability for z = 1.0) Table z = 0.226) Answer = 0.742 .5 = 0.16 2 +3 +5 2 2 2 = 38 = 6.945 Answer = 1 .583 (0.945 = 0. quality control or estimation of probabilities of a sales or product failure.16 = 4 6.97(1.

Employee Age (years) Speed (seconds) a 18 9 b 24 16 c 17 4 d 17 3 e 19 8 f 21 15 g 26 19 h 17 4 i 18 5 j 26 17 k 31 8 l 29 19 (a) Calculate the product-moment correlation coefficient.QUESTION 3 A random sample of 12 operatives are tested for speed in completing a simple assembly task and a comparison is made with their age. (6 marks) (c) Calculate the coefficient of determination and explain what it means. (10 marks) (b) Test whether the correlation coefficient found in part (a) differs significantly from zero. (4 marks) (Total 20 marks) 3009/3/09/MA Page 6 of 18 .

698 x 100% = 48.698) 2 = 3.MODEL ANSWER TO QUESTION 3 (a) Age x 18 24 17 17 19 21 26 17 18 26 31 29 263 Σx Speed y 9 16 4 3 8 15 19 4 5 17 8 19 127 Σy x 324 576 289 289 361 441 676 289 324 676 961 841 6047 2 Σx 2 y 81 256 16 9 64 225 361 16 25 289 64 361 1767 2 Σy 2 xy 162 384 68 51 152 315 494 68 90 442 248 551 3025 Σxy r= (n∑ x n ∑ xy − (∑ x )(∑ y ) 2 − (∑ x ) 2 )(n∑ y 2 2 − (∑ y ) 2 ) 2 r= (12 × 6047 − 263 )(12 × 1767 − 127 ) 2899 3395 x 5075 = 0.2 = 12 .05/0. Reject the null hypothesis. but not at the 1% level. There is some evidence the correlation coefficient differs from zero.698 (0.7) 12 × 3025 − 263 × 127 r= (b) Null hypothesis: The correlation coefficient does not differ significantly from zero. (c) Coefficient of determination = r x 100% = 0.08 Conclusions: The calculated value of t is greater than the critical t value at the 5% level.698 12 − 2 1 − (0.7% (49%) 48. Degrees of freedom = n .2 = 10 Critical value of t0. 2 2 3009/3/09/MA Page 7 of 18 .01 = 2.17 t= r n−2 1− r 2 t= 0.7% (49%) of the change in speed is associated with the change in age (and/or vice versa).23/3. Alternative hypothesis: The correlation coefficient does differ significantly from zero.

(12 marks) (c) Distinguish between a type 1 and a type 2 error and identify which might have occurred in your answer to (b). A and C. Member of staff Process A errors Process C errors 1 17 15 2 15 16 3 13 14 4 16 13 5 18 14 6 19 12 7 13 15 8 18 14 (b) Test whether there is a difference in the error rate between the two processes. (4 marks) (Total 20 marks) 3009/3/09/MA Page 8 of 18 . are being evaluated.QUESTION 4 (a) When would a paired t test be used instead of an independent two sample mean test? (4 marks) Two processes. Eight randomly selected members of staff are asked to produce 80 items by each process and the number of errors is recorded.

1 = 7 critical t0.50) Process A 17 15 13 16 18 19 13 18 Process B 15 16 14 13 14 12 15 14 d 2 -1 -1 3 4 7 -2 4 16 d 2 (d − d ) 0 9 9 1 4 25 16 4 68 2 4 1 1 9 16 49 4 16 100 d= ∑d n = 16 8 2 =2 sd = ∑d ∑d − n n = 2 = 100 8 − (2 ) 2 = 2.37 (t0.1 = 8 .05 value = 2. Degrees of freedom = n .01 = 3. eg identical twins or the same people are being measured as in before and after tests. Type 2 error is the probability of accepting a false null hypothesis. 3009/3/09/MA Page 9 of 18 . there is no difference in the error rate. (c) Type 1 error is the probability of rejecting the null hypothesis when it is true.92 t= d−0 sd n −1 2−0 2.1 = 1.MODEL ANSWER TO QUESTION 4 (a) The paired t test would be used when there is some indication that the same items are being compared.81 Conclusion: Accept the null hypothesis.92 8 −1 = t= 2 1. (b) Null Hypothesis: There is no difference in the error rate. Alternative hypothesis: There is a difference in the error rate. A Type 2 error may have occurred.

QUESTION 5 (a) When would each of the following models be used to analyse a time series? (i) (ii) Additive model Multiplicative model (4 marks) The sales in £m of a shoe manufacturer in recent years have been: Quarter 1 Quarter 2 Quarter 3 Quarter4 2006 2007 2008 2009 147 152 155 162 139 139 143 147 163 174 182 152 156 160 (b) Calculate the centred trend by the method of moving averages and hence the quarterly seasonal factors. (12 marks) (c) Estimate sales for the first quarter of 2010. (4 marks) (Total 20 marks) 3009/3/09/MA Page 10 of 18 .

375 -0.5 21. The multiplicative model is used when the seasonal variations are proportional to the trend.9375 = 166.5 160.125 -15.125 -2.25 – 150.25 + 1.5 -2.75 18. (b) Sales Moving total 1 Moving total 2 Trend Differences 147 139 163 152 152 139 174 156 155 143 182 160 162 147 Seasonal differences ASV 601 606 606 617 621 624 628 636 640 647 651 1207 1212 1223 1238 1245 1252 1264 1276 1287 1298 150.26 n-1 10 -1 9 Trend Estimate = 162.9375 12.125 -16.6125 3009/3/09/MA Page 11 of 18 .55 – 1.125 0.875 -15.5 -3 -16.875 = 11.5 152.25 -0.3 = 168.55 Quarterly Sales = 168.5 158 159.61 or 168.125 17.75 18.875 154.625 156.375 = 1.875 -3 -1.20833 0.26 x 5 = 162.25 -0.5 -0.375 -16.25 + 6.94 = 166.MODEL ANSWER TO QUESTION 5 (a) The additive model is used when the seasonal variations are independent of the trend and relatively stable.5 21.875 162.55 – 1.75 155.25 12.875 151.75 (c) Quarterly growth T10-T1 = 162.5 -0.

000 is earned in January 2008 what was its value in 1985? (9 marks) (c) When a man retired at 60 years of age he drew a pension of £8. the value of the price index is 152. (i) Explain what is meant by ‘the index was rebased’. Now at the age of 65 his pension will be increased to take into account general price increases. What will be the value of the increased pension? (5 marks) (Total 20 marks) 3009/3/09/MA Page 12 of 18 .QUESTION 6 (a) Explain the purposes of calculating a general price index such as the Retail Price Index. (6 marks) (b) A general price index number (1985 = 100) stood at 194. The general price index now stands at 202.460 per annum and a general price index stood at 162. In January 2008.8 (1996 = 100).6 (1990 = 100).1 (1990 = 100). (ii) What is the value of the index in January 2008 based on 1985 = 100? (iii) If a wage of £40.7 in 1996 when it was rebased (1996 = 100).

243 £10.6 1.1 162.1 202.243 old pension = new pension = £8.515.8 100 = 297.5 (iii) wage in Jan 2008 = old wage (1985) = 40.5 £13.38 162.7 x 152.7 100 Jan 2008 152.515. to find a rate of inflation and to find ‘real’ income.460 162.MODEL ANSWER TO QUESTION 6 (a) The purposes of calculating a general price index such as the Retail Price Index are to calculate cost of living pay rises. to increase pension payments.6 £10.460 x 1.1 x 8.17 Alternative answer: age 60 65 162.6 202.445. (b) (i) (ii) 1985 100 1996 194.1 8. This may involve recalculating past values of the index which have an earlier base year.460 £8.000 40.6 202.460 £x Rebasing the index means to create a new starting year for an index.17 3009/3/09/MA Page 13 of 18 . (c) old index value = current index value = Increase in index = x = 202.000 x 100 297.8 Rebased value 194.

(12 marks) A previous survey had shown the customers to be derived from the four advertising sources as shown in the table below: Radio Television Newspaper Internet 28% 48 % 16% 8% (b) Has the percentage of customers derived from the different advertising sources changed significantly? (8 marks) (Total 20 marks) 3009/3/09/MA Page 14 of 18 .QUESTION 7 A direct sales company records the ages of a random sample of customers against the source of the advertisement which led to the sale. Source of Advertisement Age Radio Television Newspaper Internet Total Under 30 30 and under 50 50 & Over Total 50 80 70 200 120 135 145 400 30 35 35 100 50 20 30 100 250 270 280 800 (a) Carry out a suitable statistical test to see if an association exist between age of customers and the source of the advertisement.

1) = (4 .61 384 400 0.1)(3 .200 0. Degree of freedom (R . there is a strong relationship between age and source medium.25 33. (b) Null hypothesis: There has been no change in the advertising source over time. Alternative hypothesis: There is a relationship between customer age and source medium.714 280 800 expected freq contribution to chi squared under 30 30< 50 50 & over Chi squared Conclusion: Reject the null hypothesis.34 Conclusion: Reject the null hypothesis.81/11. Alternative hypothesis: There has been a change in the advertising source over time.25 33. Radio 28% Television 48 % Newspaper 16% Internet 8% expected observed contribution Chi squared 224 200 2.179 35 100 31. there has been a change in the advertising source.667 128 100 6.000 0.1) = 6 2 Critical χ = 12.046 0.856 145 400 125 135 140 0.5 70 2.MODEL ANSWER TO QUESTION 7 (a) Null hypothesis: There is no relationship between the age of customer and the source medium.25 Degree of freedom (n .000 30 100 31. 3009/3/09/MA Page 15 of 18 .315 0.1)(C .75 35 11.125 64 100 20.75 35 0.250 5.81 Medium Under 30 30 and under 50 50 & over Radio 50 80 Television Newspaper Internet 120 30 50 135 35 20 Total 250 270 Age 70 200 62.050 0.602 0.59/16.5 67.1) = (4 .571 29.1) = 3 2 Critical χ = 7.500 2.000 22.

or via the internet. Give one advantage and one disadvantage of this sampling technique. face to face interviews. (4 marks) Explain what is meant by stratified random sampling. (4 marks) (ii) A research team have been discussing the relative merits of collecting information from the public by postal enquiry. Give one advantage and one disadvantage of this sampling technique.QUESTION 8 (a) (i) Explain what is meant by simple random sampling. (b) Explain what is meant by these three terms and give two advantages and two disadvantages for each collection method. (12 marks) (Total 20 marks) 3009/3/09/MA Page 16 of 18 .

easy to remail. Internet surveys Advantages: Cheap. Replies can be thought about. gender. Questionnaire can be complex. No interviewer bias. self-selecting sample. Possible to calculate the standard error. All the population needs to be numbered. Questions must be kept simple. Interviewer bias. Provides information on the individual strata. Difficult to ask sequential questions. Interviewer can probe. The sample is more representative of the population. internet access can be limited. No possibility of probing. Stratified random sampling Divides the population into groups by a common characteristic eg age. As multistage design is often used. 1 advantage: An equal chance of selection.MODEL ANSWER TO QUESTION 8 (a) Simple random sampling Each item has an equal chance of being chosen. 2 disadvantages from eg Low response rate. A sample is taken from each stratum. 1 advantage: More representative of the population. The strata chosen must be relevant to the outcome of the survey. More cost involved because of the need for more information on the strata. quick. The interviewer can add observations to the answers. 2 advantages. Face to face interviews Use an interviewer to ask the questions on the questionnaire. access to specialist population. Failure to complete all the interviews. 2 disadvantages: Cost. Can use a random sample. The sample may be geographically dispersed and therefore costly to investigate. 3009/3/09/MA Page 17 of 18 . 2 advantages from eg Cheapness. Can take a large sample. usually a reply paid envelope is included. 1 disadvantage: Needs a complete sampling frame. A selection then has to be made using random numbers. (b) Postal enquiry The questionnaires are sent by post to all the sample. there is a larger standard error. Disadvantages: Difficult to identify the sampling frame. advertising medium. 1 disadvantage: May be difficult to obtain a sampling frame for the strata. Standard error is less than for a random sample. High response rate.

LEVEL 3 3009/3/09/MA Page 18 of 18 .

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