Statistical Methods for Decision Making - Assignments Project -1 (Cold Storage

Case Study)

- Sanan S Olachery.

Submission Date: Nov 1st 2019.

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 Contents:

 Problem 1: - Pg3
 Objective - Pg3
 Problem Solution Working - Pg4 to Pg9

 Problem 2: - Pg 10
 Objective - Pg 10
 Problem Solution Working - Pg11 to Pg12

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  Problem 1:

Cold Storage started its operations in Jan 2016. They are in the business of storing
Pasteurized Fresh Whole or Skimmed Milk, Sweet Cream, Flavored Milk Drinks. To
ensure that there is no change of texture, body appearance, separation of fats the
optimal temperature to be maintained is between 2 - 4 C.
In the first year of business they outsourced the plant maintenance work to a
professional company with stiff penalty clauses. It was agreed that if the it was
statistically proven that probability of temperature going outside the 2 - 4 C
during the one-year contract was above 2.5% and less than 5% then the penalty
would be 10% of AMC (annual maintenance case). In case it exceeded 5% then
the penalty would be 25% of the AMC fee.

 Objective

With the Data Set provided, objective of the Assessment is to find out solutions
for the following:
 Mean Cold Storage Temperature in different season.
 Overall Mean for the Full Year.
 Standard Deviation for the Full Year.
 Assuming Normal distribution, what is the probability of temperature
having fallen below 2 C?
 Assuming Normal distribution, what is the probability of temperature
having gone above 4 C?
 Penalty for the AMC Company

NOTE: in order to derive at the solutions I have used both MS Excel and R Studio.

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 Problem Solution Working.

Q1. Mean Cold Storage Temperature in different season.

Solution: Dataset has information of 3 seasons namely summer, rainy and winter.
Accordingly Mean Cold Storage Temperature is derived in MS Excel. & R Studio as
given below:
MS Excel
Seasons Average of Temperature
Rainy 3.039344
Summer 3.153333
Winter 2.700813

R Studio

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Q2.Overall Mean for the Full Year.

Solution: The overall mean for the full year is 2.96274 and it is calculated in Ms.
Excel & R Studio, as mention below.
MS. Excel
Seasons Average of Temperature
Rainy 3.03934
Summer 3.15333
Winter 2.70081
Grand Total 2.96274

R Studio

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Q3. Standard Deviation for the Full Year.

Solution: Standard Deviation for the full year is 0.5085890 and it is calculated in
Ms. Excel & R Studio, as mention below.

MS. Excel
Seasons StdDev of Temperature
Rainy 0.5916160
Summer 0.3963984
Winter 0.4007157
Grand Total 0.5085890
R Studio

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Q4. Assuming Normal distribution, what is the probability of temperature having
fallen below 2 C?

Solution: Probability of temperature having fallen below 2C is 0.02918141 or

2.91% is calculated as under:

Ms Excel
Formula =NORMDIST(2,2.96274,0.508589,TRUE)

Result 0.02918141

R Studio

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Q5. Assuming Normal distribution, what is the probability of temperature having
gone above 4 C?

Solution: The probability of temperature having gone above 4 C is 0.02069686 or

2.07%

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Q6.Penalty for the AMC Company

Solution: Since cumulative probability of temperature is 0.04987827 (0.02918141

+ 0.02069686) or 4.99 % which is within the range of above 2.5% and less than 5%
then as per the penalty clauses penalty would be charged at 10% of AMC.

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  Problem 2:

In Mar 2018, Cold Storage started getting complaints from their Clients that they
have been getting complaints from end consumers of the dairy products going
sour and often smelling. On getting these complaints, the supervisor pulls out
data of last 35 days’ temperatures. As a safety measure, the Supervisor decides to
be vigilant to maintain the temperature 3.9 C or below.
Assume 3.9 C as upper acceptable value for mean temperature and at alpha = 0.1
do you feel that there is need for some corrective action in the Cold Storage Plant
or is it that the problem is from procurement side from where Cold Storage is
getting the Dairy Products.

 Objective

With the Data Set provided, objective of the Assessment is to find out solutions
for the following:
 Which Hypothesis test shall be performed to check the if corrective action
is needed at the cold storage plant? Justify your answer.
 State the Hypothesis, perform hypothesis test and determine p-value.
 Give your inference.

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 Problem Solution Working.

Q1. Which Hypothesis test shall be performed to check the if corrective action is
needed at the cold storage plant? Justify your answer.
Solution:
Pre requisites:
 Mean value = 3.9742
 Mu= 3.9c
 N= 35
 35 = 5.916
 Standard Deviation = 0.1596
 Null Hypothesis =Ho:mu<=3.9
 Alternative Hypothesis = H1: mu>3.9
 Degree of Freedom = N-1 ie. 35-1 = 34

Calculating Hypothesis using T test

3.9742 - 3.9/0.1596/35
= 2.5931
The Alpha Value is less than the T Value we can reject Null Hypothesis.

Calculating Hypothesis using Z test

3.9742 – 3.9 / 0.1596 /5.9161

=0.07858
The Alpha Value is more than the Z value we can accept the Null Hypothesis.

Therefore we can conclude that there is no Corrective action needed.

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Q2. Determining P Value by performing Hypothesis Test.

Solution:
Calculating Hypothesis using T test
3.9742 - 3.9/0.1596/35
= 2.5931

Calculating Hypothesis using Z test

3.9742 – 3.9 / 0.1596 /5.9161

=0.07858

P Value using Standard Deviation of 0.1596 is derived at 0.19790

Q3. Inference
Solution:
Basis the Hypothesis Test results we can conclude that there is no corrective
actions required and that the problem is from procurement side from where Cold
Storage is getting the Dairy Products.

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