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Definitions

“Statistics is a numerical statement of facts in any department of

enquiry placed in relation to each other’. -Bowley

• “Statistics are the classified facts representing the conditions of the

people in a State specially those facts which can be stated in

numbers or any tabular or classified arrangement”. -Webster

• “Statistics can be defined as the aggregate of facts affected to a

marked extent by multiplicity of causes, numerically expressed,

enumerated or estimated according to a reasonable standard of

accuracy, collected in in a systematic manner, for a pre-determined

purpose and placed in relation to each other”. -Secrist

• Statistics is the science of collecting, organizing , analyzing,

interpreting and presenting data.

SCOPE OF STATISTICS

1.Social Sciences

-Man Power Planning

-Crime Rates

-Income & Wealth Analysis of Society

-In studying Pricing, Production, Consumption, Investments &

Profits etc.

2.Planning

-Agriculture

-Industry

-Textiles

-Education etc.

For ex. Five Year Plans in India.

SCOPE OF STATISTICS

contd…

3. Mathematics

-Extensive use of Differentiation, Algebra, Trigonometry, Matrices

etc in modern business analysis.

-Statistics now treated as Applied Mathematics.

4. Economics

- Family Budgeting

-Applied in solving economic problems related to production,

consumption, distribution of products as per income & wealth

related patterns, wages, prices, profits & individual savings,

investments, unemployment & poverty etc.

SCOPE OF STATISTICS

contd…

5. Business Management

- Trend Analysis

- Market Research & Analysis

- Product Life Cycle

i) Marketing

Marketing Policy Decisions depend on forecasting, demand

analysis, time & motion studies, inventory control, investments &

analysis of consumer data for production & sales.

SCOPE OF STATISTICS

contd…

ii) Production

- Designs

- Methods of Production

- Technology Selection

- Quality Control Mechanisms

- Product Mix

- Quantities

- Time Schedules for Manufacturing & Distribution

SCOPE OF STATISTICS

contd…

iii) Finance

-Correlation Analysis of profits & dividends, assets & liabilities

-Analysis of income & expenditure

- Financial forecasts, break-even analysis, investment & risk

analysis

iv) Sales

-Demand Analysis

-Sales Forecasts

v) Personnel

- Wage plans, Incentive plans, Cost of living, Labor turnover ratio,

Employment trends, Accidental Rates, Performance Appraisals

etc.

SCOPE OF STATISTICS

contd…

vi) Accounting & Auditing

-Analysis of Income, Expenditure, Investment, Profits and

Optimization of Production etc

- Forecasting costs of production & price

vii) Other Areas

-Insurance, Astronomy, Social Sciences, Medical Sciences,

Psychology, Education etc.

LIMITATIONS OF STATISTICS

Does not study individual items, deals with

aggregates.

Statistical laws are not exact.

Not suitable for the study of qualitative

phenomenon.

Statistical methods are only means and not

end for solving problems.

ROLE OF STATISTICS IN

MANAGEMENT DECISIONS

A. Marketing & Sales

- Product selection & competence strategies

- Utilization of resources including territory control

- Advertising decisions for cost & time effectiveness

- Forecasting & trend analysis

- Pricing & market research

ROLE OF STATISTICS IN

MANAGEMENT DECISIONS contd…

B. Production Management

- Product mix & product positioning

- Facility & production planning

- Distribution management

- Material handling & facility planning

- Maintenance policies

- Activity planning & resources allocation

- Quality control decisions

ROLE OF STATISTICS IN

MANAGEMENT DECISIONS contd…

C. Materials Management

- Buying policy- Sourcing & Procurement

- Material Planning & Lead Times

D. Finance, Investments & Budgeting

- Profit planning

- Cash Flow Analysis

- Investment decisions

- Dividend policy decisions

- Risk Analysis

- Portfolio Analysis

ROLE OF STATISTICS IN

MANAGEMENT DECISIONS contd…

E. Personnel Management

- Optimum organization level

- Job evaluation & assignment analysis

- Social / habit analysis

- Salary / wage policies

- Recruitment & Training

ROLE OF STATISTICS IN

MANAGEMENT DECISIONS contd…

- Area of thrust – Analysis & Planning

- Project Selection Criteria\

- Alternatives analysis

- Trade – off analysis - cost & revenue

ROLE OF STATISTICS IN

MANAGEMENT DECISIONS contd…

G. Defense

- Optimization of weapon system

- Force deployment

- Transportation Cost Analysis

- Assignment Suitabilities

Definitions Continued

Observations: Numerical quantities that

measure specific characteristics.

Examples include height, weight, gross

sales, net profit, etc.

Some More Definitions

Raw Data: Data collected in original form.

set of collected data. Ex.10-20,20-30 etc

value or class of values occurs.

raw data into table form using classes and

frequencies.

More Definitions

the frequency of that class and the frequencies

of all the preceding or succeeding classes which

are listed in some sensible order (numerical

order, alphabetical order, etc.)

Illustration – Individual Series

Marks of ten students of a class in Statistics

15, 35, 55, 67, 78, 84, 79, 90, 89, 94

Illustration – Discrete

Frequency Distribution

Height No. of

(in Students

inches)

60 12

62 18

64 10

66 6

68 4

Illustration – Grouped or Continuous

Frequency Distribution

Exclusive Type Class – Class- Frequency

Intervals Intervals

20-25 8

25-30 2

30-35 40

35-40 23

40-45 9

Illustration – Grouped or Continuous

Frequency Distribution contd…

Inclusive Type Class - Class- Frequency

Intervals Intervals

1-10 2

11-20 6

21-30 10

31-40 15

41-50 12

CONVERSION OF INCLUSIVE TYPE

CLASS-INTERVALS TO EXCLUSIVE

TYPE CLASS INTERVALS

Calculate ADJUSTMENT FACTOR as follows:

A.F= Lower Limit of Next C.I – Upper Limit of Previous C.I

2

using the given inclusive type class intervals.

2. Obtain new class intervals as follows:

New Lower Limit = Old Lower limit – A.F

New Upper Limit = Old Upper Limit + A.F

CONVERSION OF INCLUSIVE TYPE

CLASS-INTERVALS TO EXCLUSIVE TYPE

CLASS INTERVALS contd…

Intervals = 0.5

1-10 2 For 1st C.I i.e 1-10

11-20 6 New L.L = 1(old L.L) – 0.5

= 0.5

21-30 10 New U.L=10(old U.L) +0.5

31-40 15 = 10.5

And so on.

41-50 12

CONVERSION OF INCLUSIVE TYPE CLASS-

INTERVALS TO EXCLUSIVE TYPE CLASS

INTERVALS contd…

Class- Frequency

Intervals

0.5-10.5 2

can be made.

20.5-30.5 10

30.5-40.5 15

40.5-50.5 12

Obtaining Cumulative

Frequency Distribution

Class Frequency Less than type More than type

-Intervals

Cum.frequency

20-25 15 15 60cum.frequency

+ 15 = 75

25-30 34 15 +34 =49 26 + 34 = 60

30-35 6 49 + 6 =55 20 + 6 = 26

35-40 10 55 + 10 = 65 10 + 10 = 20

40-45 8 65 + 8 = 73 2 + 8 = 10

45-50 2 73 + 2 = 75 2

Introduction to Measures of

Central Tendency

Also known as averages.

Values show a distinct tendency to cluster or

group around a value.

This behavior is central tendency of data.

The value around which the data clusters is

the measure of central tendency which

represents the whole set of data.

Objectives of Averages

To find out one value that represents the

whole mass of data.

To enable comparison.

To establish relationship.

To derive inferences about universe to which

sample belongs.

To aid decision – making.

Requisites of a Good Average

Should be rigidly defined.

Should be mathematically expressed.

Should be readily comprehensible & easy to

calculate.

Should be calculated on the basis of all the

observations.

Should be least affected by extreme values and

sampling fluctuations.

Should be suitable for further mathematical

treatment.

Common Measures of Central

Tendency

Arithmetic Mean

Geometric Mean

Harmonic Mean

Median

Mode

Partition Values like Deciles ,Quartiles &

Percentiles.

Averages

Arithmetic Mean

Individual Series

μ = x1 + x2 +…… + xn

n

For ex. A.M of 3, 6, 24 and 48

μ = 3 + 6 + 24 + 48

4

= 81/4 = 20.25 Ans.

Arithmetic Mean contd…

Discrete Frequency X Freq. fx

Distribution x1 f1 f1x1

x2 f2 f2x2

μ = f1x1 + f2x2 + …..fnxn = fx x3 f3 f3x3

Σ

x4 f4 f4x4

N

Σf

Where N = f1 +f2 +…+fn

n = no. of observations

Illustration

Height No. of Students

(in inches) f fX

X

60 12 60 x 12 = 720

62 18 1116

64 10 640

66 6 396

68 4 272

50 = N 3144 = Σ fx

Arithmetic Mean contd…

Continuous Frequency Distribution

- Direct Method

- Assumed Mean Method

- Step Deviation Method

Arithmetic Mean Formulae

Direct Method

N Σf

Where N = f1 +f2 +…+fn

x = mid value of a C.I

= (U.L + L.L)

2

Arithmetic Mean Formulae

contd…

Assumed Mean Method

μ = A + Σ fd

N

Where A = assumed mean

N=Σf

d=x–A

x = mid - value

Arithmetic Mean Formulae

contd…

Step Deviation Method

μ = A + Σ fd x i

N

where A = assumed mean

N=Σf

d=x–A

i

x = mid – value

i = width of C.I = U.L – L.L

Illustration – Direct Method

C.I Freq Mid- fX

f Value

μ = Σ fx

X

Σf

4-6 6 5 30

6-8 12 7 84

8-10 17 9 153

= 442/50

10-12 10 11 110

= 8.84 Ans.

12-14 5 13 65

Total 50 = 442 =

Σf Σfx

Illustration – Assumed Mean Method

C.I Freq. Mid Values d =(x-A) fd

f (x) μ = A + Σ fd

10-15 2 12.5 -10 -20 Σf

36

20-25 9 22.5 = A 0 0

= 22.5 + 2.916

25-30 8 27.5 5 40 = 25.416 Ans.

30-35 6 32.5 10 60

35-40 4 37.5 15 60

36

Illustration- Step Deviation Method

C.I Freq.(f) MidValues d= (x-A) fd

(x) I

μ = A + Σ fd x i

(i= 5) Σf

10-15 200 12.5 -2 -400

= 22.5 + 2100 x 5

20-25 900 22.5 = A 0 0 3600

25-30 800 27.5 1 800 = 22.5 + 2.916

30-35 600 32.5 2 1200 = 25.416 Ans.

35-40 400 37.5 3 1200

Σf= Σfd =

3600 2100

Illustration

Marks X or Cum. C.I Freq.

more Freq.

10 140 10-20 140-133= 7

20 133 20-30 133-118=15

30 118 30-40 118-100=18

40 100 40-50 100-75=25

50 75 50-60 75-45=30 Proceed

60 45 60-70 45-25=20 as usual

70 25 70-80 25-9=16

80 9 80-90 9-2=7

90 2 90-100 2-0=2

100 0

What if…

C.I Frequency

50-59 1

40-49 3

30-39 8

20-29 10 ?

10-19 15

0-9 3

Total N=40

A.F = (L.L of 1st C.I – U.L of 2nd C.I)/2

= (50-49)/2

= 0.5

New C.I

L.L of new C.I = L.L of original C.I – A.F

U.L of new C.I= U.L of original C.I + A.F

For ex. For 1st C.I,new L.L = 50-0.5

= 49.5

new U.L = 59 +0.5

= 59.5 and so on.

Now Continue as usual.

Determining missing frequency when A.M is known –

Illustration Mean = 16.82

(x –A)/i

0-5 10 2.5 -3 -30

5-10 12 7.5 -2 -24

10-15 16 12.5 -1 -16

15-20 ? = f4 17.5 = A 0 0

20-25 14 22.5 1 14

25-30 10 27.5 2 20

30-35 8 32.5 3 24

N = 70 + f4 Σfd = -12

Determining missing frequency when A.M is known -

Illustration

Soln. μ = A + Σ fd x I

Σf

μ = 16.82 (given) , I = 5

Hence 16.82 = 17.5 + ( -12 )x 5

70 + f4

- 0.68 = - 60

70 + f4

f4 = 12.4/0.68 = 18 approx. Ans.

Some More Applications of A.M

Q1.The avg. marks secured by 50 students was 44.Later on it was

discovered that a score 36 was misread as 56. Find the correct

average marks secured by the students.

Soln. Given N = 50 and mean μ = 44

μ = ΣX

N

ΣX = 44N

i.e ΣX = 44x55

ΣX = 2200

Since 36 was misread as 56

Hence correct ΣX = 2200 – 56 + 36 = 2180

Correct mean = 2180/50 = 43.6 Ans.

Combined A.M

Suppose for k different series with n1,n2……nk

observations each, the respective A.M s are

μ1,μ2,….μk. Then the A.M of the new series

obtained on combining all the n1,n2,…nk

observations is obtained using the formula:

μ = n1μ1+n2μ2+….+nkμk

n1+n2+….+nk

Illustration- Combined A.M

There are two branches of a Co. employing 100 and

80employees respectively .If A.Ms of the monthly

salaries paid by the two branches are Rs.4570 and

Rs.6750 respectively, find the A.M of the salaries of the

employees of the Co. as a whole.

Soln. Given No. of employees in 1st factory, n1 = 100

Avg. Salary of employees in 1st factory, μ1 = Rs.

4750

No. of employees in 2nd factory, n2 = 80

Avg. Salary of employees in 2nd factory, μ2 = Rs.6750

Avg salary of the employees of the Co. as a whole

= 100 x 4750 + 80 x 6750 = 997000 = Rs. 5538.89

100 + 80 180

Practice Questions- Arithmetic Mean

(in Rs.)

Q1.

No.of workers 200 700 900 800 600 400

Weight (in kgs) 30-34 35-39 40-44 45-49 50-54 55-59 60-64

Q2

No.of Students 3 5 12 18 14 6 2

Rs.)

Q3 No.of 8 10 25 35 12 10 4

workers

Practice Questions- Arithmetic Mean contd…

Lifetime (in hrs.) No. of tubes

Q4 Less than 300 0

Less than 400 20

Less than 500 60

Less than 600 116

Less than 700 194

Less than 800 265

Less than 900 324

Less than 1000 374

Merits of A.M

Is rigidly defined and has a definite value.

Is based on all the observations.

Is capable of algebraic treatments for further

data analysis & interpretation.

Easy to calculate & simple to understand.

For a large no. of observations, A.M provides

a good basis of comparison.

Drawbacks of A.M

Being based on all the observations, is considerably

affected by abnormal observations. For ex. A.M of

1000, 25, 35 & 40 will be (1000+25+35+40)/4 = 275

which is not at all a representative figure.

Cannot be calculated even if a single observation is

missing.

Cannot be obtained just by inspection as in case of

median & mode.

May give absurd results. For ex. If avg. no. of

children per family is to be calculated and the result

is 3.4 children per family, how would you interpret it?

Weighted Arithmetic Mean

Formula Used

μw = x1w1+ x2w2 +…….+xnwn

w1+ w2 +…….+wn

Illustration – Weighted A.M

Designation Monthly No. of

Salary employees wX

(in Rs.) (X) (w)

Class I 1500 10 15000

Officers

Class II 800 20 16000

officers

Subordinate 500 70 35000

Staff

Clerical Staff 250 100 25000

350 = Σw 106000 =

ΣwX

Illustration – Weighted A.M

Weighted A.M = Σ wX

Σw

= 106000

350

= Rs 302.857 Ans.

Median – Positional Average

The value of the middle term of a series

arranged in ascending or descending

order of magnitude.

Its value is the value of the middle item

irrespective of all other values.

Calculation of Median

Individual Series

N = no. of observations or items in the series

- Arrange all the items in ascending or

descending order of magnitude.

Case I N = Odd

Median = Value at (N+1) th position in

2

the arranged series.

Case II N = Even

Median = A.M of values at (N, N+1)th

2 2

position.

Calculation of Median – Illustration

(Individual Series)

Ex.1 Find the median 5, 7, 9, 12, 10, 8, 7, 15,21

Solution: Arranging in ascending order we get

5, 7, 7, 8, 9, 10, 12, 15, 21

Here N = 9 i.e odd

Hence Md = (N+1) th item in the arranged order

2

= (9 +1) th item

2

= 5 th item

= 9 Ans.

Calculation of Median – Illustration

(Individual Series)

Solution Arranging in ascending order we get

9, 10, 11, 15, 17, 18, 24, 30

Here N = 8 i.e even

Hence Md = A.M of the ( N , N+1)th items in the

2 2

arranged order.

= A.M of (4th, 5th) items

= (15 + 17)

2

= 16 Ans.

Calculation of Median

Discrete Frequency Distribution

(i) Find less than type cum.frequency.

(ii) Find N/2.( N = Σf)

(iii) Find the cum.freq. just greater than N/2.

Suppose it is C.

(iv) Find the corresponding value of X. (the

item) This is median.

Calculation of Median-Illustration

(Discrete Freq. Distribution)

Here N = 50

(in students Freq. (i) N/2 = 25

inches) (ii) Cum. Frequency just greater

than N/2 = 30

60 12 12 (iii)Corresponding value of item

is 62.

62 18 30 Median = 60 Ans.

64 10 40

66 6 46

68 4 50

N = 50

Calculation of Median

Grouped Frequency Distribution

(i) Find less than type cum.frequency.

(ii) Find N/2.( N = Σf)

(iii) Find the cum.freq. just greater than N/2. Suppose it is

X.

(iv) Look for the cum.freq. preceding X. Find the

corresponding class interval.This is median class

Formula Used Md = L1 + N/2 - C (L2 – L1)

f

L2 = U.L of median class

C =cum.freq. of class preceding the median class.

f = frequency of median class.

Calculation of Median-Illustration

(Grouped Freq. Distribution)

Hence median class is 25-30.

10-15 200 200 Hence L1 = 25

L2 = 30

15-20 700 900 C = 1800

f = 800

20-25 900 1800

25-30 800 2600 Md = 25 + 1800 - 1800 (30 – 25 )

800

30-35 600 3200 = 25 Ans.

35-40 400 3600

Σf=

3600

Calculation of Missing Frequencies when median is known :

Illustration : Median = 50

0-20 14 14

20-40 ? = f1 14 + f1

40-60 27 41 + f1

80-100 15 56 + f1 + f2

N = 100

Calculation of Missing Frequencies when median

is known : Illustration

Here median = 50 L1 = 40

N = 100 L2 = 60

N/2 = 50 f = 27

Hence median class 40-60 C = 14 + f1

Md = L1 + N/2 - C (L2 – L1)

f

50 = 40 + 50 – (14 + f1)(60 – 40)

27

10 = 720 – 20 f1

27

f1 = 450/20 = 22.5 = 23 families approx.

N = 56 + f1 + f2

100 = 56 + 23 + f2

f2 = 21 Ans. f1 = 23 and f2 = 21

Practice Numericals - Median

20-25 14 Less than 10 4

25-30 28 Less than 20 16

Less than 30 40

30-35 33

Less than 40 76

35-40 30

Less than 50 96

40-45 20

Less than 60 112

45-50 15

Less than 70 120

50-55 13 Less than 80 125

55-60 7

Practice Problems- Median

frequencies. The median is

46.Also determine the A.M. 10-20 12

20-30 30

30-40 ?

40-50 65

50-60 ?

60-70 25

70-80 18

229 = N

Merits - Median

Is rigidly defined.

Can be easily calculated.

Not affected by extreme values.

Can be located merely by inspection.

Demerits - Median

May not represent the entire series in many

cases.

Not suitable for further algebraic treatment.

More likely to be affected by sampling

fluctuations.

Mode

The value occurring the largest no. of times in

a series. That is the value having the

maximum frequency.

Is calculated for discrete and continuous

frequency distributions only.

For ex. How to obtain the mode for 1,2,3,4,5 ?

as the maximum frequency is 1 and each

observation has frequency 1.

Mode – Discrete Frequency

Distribution

corresponding to pounds students

maximum frequency is 120 1

the mode.

130 3

For ex. The weight 132

pounds has the 132 2

maximum frequency 3. 135 2

Hence 130 pounds is

the mode for this 140 1

frequency distribution. 141 1

Total 10

Mode – Continuous Frequency Distribution

1.Look for the class-interval with maximum

frequency. This is the modal class.

2. Note down the following:

L1 = lower limit of the modal class.

i = width of class-interval

f0 = frequency of class preceding the modal

class.

f1 = frequency of modal class.

f2 = frequency of class succeeding the

modal class.

Mode: Formula for Continuous

Frequency Distribution

2f1-f0-f2

Empirical Relationship

between Mean, Median & Mode

Geometric Mean

Individual Series

G = (x1.x2.x3……xn)1/n

n

G = antilog ( 1 Σ log x)

n

Geometric Mean

Discrete Frequency Distribution

G = (x1f1.x2f2…….xnfn)1/N

N

G = antilog ( 1 Σfilogxi)

N

Geometric Mean

Continuous Frequency Distribution

- Formula same as in case of discrete

frequency distribution with x (as

observations) replaced by x (as mid-values)

Harmonic Mean

Reciprocal of A.M of reciprocals

- Individual Series

H= 1

1( 1 + 1 +…..+ 1 )

n x1 x2 xn

H= n

Σ(1 )

x

Harmonic Mean

H= 1

1( f1 + f2+…..+ fn )

N x1 x2 xn

H= N

Σ(fi )

xi

Harmonic Mean

Continuous Frequency Distribution

- Formula same as that of Discrete Frequency

Distribution with x (as observations) replaced

by x (as mid values).

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