STATISTICS IN PRACTICE CASE 1 Data for Statistical Analysis BUSINESS WEEK * New York With a global circulation of more

re than 1 million, Business Week is the most widely read business magazine in the world. More than 200 dedicated reporters and editors in 26 bureaus worldwide deliver a variety of articles of interest to the business and economic community. Along with feature articles on current topics, the magazine contains regular sections on International Business, Economic Analysis, Information Processing, and Science & Technology. Information in the feature articles and the regular sections help readers stay abreast of current developments and assess the impact of those developments on business and economic conditions. More issues of Business Week provide an in-depth report on a topic of current interest. Often, the in-depth reports contain statistical facts and summaries that help the reader understand the business and/or economic information. For instance, the January 17, 2000, issue contained a report on who gets hurt most by higher interest rates; the January 24, 2000, issue contained a report on what is wrong with mutual funds; the February 28, 2000, issue contained a report on stock options; the December 30, 2002, issue reported earnings forecasts and other statistical information for 900 companies; the January 13, 2003, issue contained a report on the best and worst managers in 2002; and the February 3, 2003, issue reported statistics on global outsourcing of white-collar jobs. In addition, the weekly Business Week Investor contains statistics about the state of the economy including production indexes, stock prices, mutual funds, and interest rates. Business Week also uses statistics and statistical information to help manage its own business. For example, an annual survey of subscribers helps the company learn about subscriber demographics, reading habits, likely purchases, lifestyles, and so on. Business Week managers use the statistical summaries from the survey to provide better services to subscribers and advertisers. For instance, a recent North American subscriber survey indicated that 90% of Business Week subscribers have a personal computer at home and that 64% of Business Week subscribers are involved with computer purchases at work. Such statistics alert Business Week managers to subscriber interest in articles about new developments in computers. The results of the survey are also made available to potential advertisers. The high percentage of subscribers using personal computers at home and the high percentage of subscribers involved with computer purchases at work would be an incentive for computer manufacturer to consider advertising in Business Week. In this training programme, we will discuss the types of data that are available for statistical analysis and describe how the data are obtained. We introduce descriptive statistics as a way of converting data into meaningful and easily interpreted statistical information.
___________________ * The authors are indebted to Charlene Tretham, Research Manager at Business Week, for providing this Statistics in Practice.

STATISTICS IN PRACTICE CASE 2 Tabular & Graphical Methods Page 1 of 3

COLGATE-PALMOLIVE COMPANY* New York The Colgate-Palmolive Company started as a small soap and candle shop in New York in 1806. Today, Colgate-Palmolive is a $9 billion company whose products can be found in more than 200 countries and territories around the world. While best known for its brand names of Colgate, Palmolive, Ajax, and Fab, the company also markets Mennen, Hills Science Diet, and Hills Prescription Diet products. The Colgate-Palmolive Company uses statistics in its quality assurance program for home laundry detergent products. One concern is customer satisfaction with the quantity of detergent in a carton. Every carton in each size category is filled with the same amount of detergent by weight, but the volume of detergent is affected by the density of the detergent powder. For instance, if the powder density is on the heavy side, a smaller volume of detergent is needed to reach the cartons specified weight. As a result, the carton may appear to be underfilled when opened by the consumer. To control the problem of heavy detergent powder, limits are placed on the acceptable range of powder density. Statistical samples are taken periodically, and the density of each powder sample is measured. Data summaries are then provided for operating personnel so that corrective action can be taken if necessary to keep the density within the desired quality specifications. A frequency distribution for the densities of 150 samples taken over a one-week period is shown in the accompanying table. Density levels above .40 are unacceptably high. The frequency distribution show that the operation is meeting its quality guidelines with all of the densities less than or equal to .40. Managers viewing these statistical summaries would be pleased with the quality of the detergent production process. Frequency Distribution of Density Data Density .29-.30 .31-.32 .33-.34 .35-.36 .37-.38 .39-.40 Total Frequency 30 75 32 9 3 1 150

In this training programme, you will also learn about tabular and graphical methods of descriptive statistics such as frequency distributions, bar graphs, pie charts, histograms, cross-tabulations, scatter diagram and others. The goal of these methods is to summarize data so that they can be easily understood and interpreted. __________________
* The authors are indebted to William R. Fowle, Manager of Quality Assurance, ColgatePalmolive Company, for providing this Statistics in Practice.

STATISTICS IN PRACTICE CASE 3 Numerical Statistics Page 2 of 3

SMALL FRY DESIGN* Santa Ana, California Founded in 1997, Small Fry Design is a toy and accessory company that designs and imports products for infants. The companys product line includes teddy bears, mobiles, musical toys, rattles, and security blankets, and features high-quality soft toy designs with an emphasis on color, texture, and sound. The products are designed in the United States and manufactured in China. Small Fry Design uses independent representatives to sell the products to infant furnishing retailers, childrens accessory and apparel stores, gift shops, upscale department stores, and major catalog companies. Currently, Small Fry Design products are distributed in more than 1000 retail outlets throughout the United States. Cash flow management is one of the most critical activities in the day-to-day operation of this young company. Ensuring sufficient incoming cash to meet both current and ongoing debt obligations can mean the difference between business success and failure. A critical factor in cash flow management is the analysis and control of accounts receivable. By measuring the average age and dollar value of outstanding invoices, management can predict cash availability and monitor changes in the status of accounts receivable. The company has set the following goals: the average age for outstanding invoices should not exceed 45 days and the dollar value of invoices more than 60 days old should not exceed 5% of the dollar value of all accounts receivable. In a recent summary of accounts receivable status, the following descriptive statistics were provided for the age of outstanding invoices: Mean 40 days Median35 days Mode 31 days Interpretation of these statistics shows that the mean or average age of an invoice is 40 days. The median shows that half of the invoices have been outstanding 35 days or more. The mode of 31 days is the most frequent invoice age indicating that the most common length of time an invoice has been outstanding is 31 days. The statistical summary also showed that only 3% of the dollar value of all accounts receivable was over 60 days old. Based on the statistical information, management was satisfied that accounts receivable and incoming cash flow were under control. In this training programme, you will learn how to compute and interpret some of the statistical measures used by Small Fry Design. In addition to the mean, median, and mode, you will learn about other descriptive statistics such as the range, variance, standard deviation, percentiles, and correlation. These numerical measures will assist in the understanding and interpretation of data. __________________ * The authors are indebted to John A. McCarthy, president of Small Fry Design, for providing
this Statistics in Practice.

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