STATISTICS FOR MANAGEMENT

Q1. Distinguish between Classification and tabulation. Explain the structure and components of a
table with an example,

Ans1. Meaning of Classification:

According to Stockton and Clark, “The process of grouping large numbers of individual facts and
observations, on the basis of similarity among the items is called Classifications.”

In other words, Classification is the process of arranging things or data in groups or classes according
to their resemblances and affinities.

Meaning of Tabulation

Tabulation follows classification. Tabulation is a logical or systematic listing of related data in rows
and columns. The row of a table represents the horizontal arrangement of data whereas the column
of table represents the vertical arrangement of data.

Difference between Classification and Tabulation:

CLASSIFICATION TABULATION
It is the basis for tabulation. It is basis for further analysis.

It is the basis for simplification. It is the basis for presentation.

Data is divided into groups and sub-groups on Data is listed according to a logical sequence of
the basis of similarities and dissimilarities. related characteristics.

Structure and Components of a table with an example:

1 2
Below table 1.1 and figure 1.2 is an example of percentage of KEPL employees based on their
ages and departments.

5 3 9
DEPARTMENTS AGE (Age in years)
20-40 40 and above 4
ACCOUNTS 24 21.429
6 FINANCE 20 23.571
HR 20 20.714 7
PRODUCTION 20 18.571
MARKETING 16 15.714
TOTAL 100 100
8

Source:............ 10
 TAB 1: Table Number

Table number is to identify table for reference. When there are many tables in an analysis, then table
numbers are quite useful in identification of a particular table.

TAB 2: Title

Title indicates the scope and the nature of contents in a concise form, i.e. title gives information
about the data contained in the body of table. Title should not be lengthy.

TAB 3 and TAB 4: Captions

Captions are headings and sub-headings describing the data present in the columns.

TAB 5 and TAB 6: Stubs

Stubs are the headings and sub-headings of the rows.

TAB 7: Body of the Table

Body of table contains numerical information.

TAB 8: Totals

The sub-totals for each separate classifications and a general total for all combined classes should be
given at the bottom or right side of the figures whose totals are taken. Ruling and spacing separate
rows and columns.

TAB 9: Head Note

Head note is given below the title of the table to indicate the units of measurement of the data and is
enclosed in brackets.

TAB 10: Source Note

Source Note indicates the source from which data is taken. It is placed at the bottom on the left hand
corner.

Q2. A) Describe the characteristics of Normal Probability distribution

Ans. A) The following are some characteristics of Normal Distribution

1. Normal Distribution is an important continuous probability distribution.

2. The probability density function of the normal distribution is defined as:

, -∞<x<∞,σ>0, -∞<µ<∞

Here is the constant e = 2.7183…, and is the constant π = 3.1415. A probability distribution which has
above Probability density function ( P.D.F) is called Normal Distribution.

3. Its mean is µ and standard deviation is σ, where µ and σ are the parameters of the distribution.
4. It is bell-shaped curve and is symmetric about its mean, as depicted in figure 2

Fig 2

a. It is symmetrical (Non-skew). That is β1=0

b. The mean, median and mode are equal.

5. The mean divides the curve into two equal parts.

6. Its quartile deviation, Q.D. =2/3 σ

7. Its mean deviation, M.D. =˜ 4/5 σ

8. The X-axis is an asymptote to the curve.

9. The point of inflection occurs at µ ≠ σ.

10. It is unimodal distribution.

11. Mean, Mode and Median coincide.

12. The area under normal curve within certain limits is depicted in table 3. The graphical representation is
depicted in figure 3.1

Area Under the Normal Curve for Various Values of ‘µ’ and ‘σ’
Limits Area %
µ±σ 68.2
µ ± 1.96σ 95
µ ± 2σ 95.4
µ ± 3σ 99.7

FIG 3.1 Area Under the Normal Distribution Curve

 Q2.B): In a sample of 120 workers in a factory, the mean and standard deviation of wages were
Rs11.35 and Rs.3.03 respectively. Find the percentage of workers getting wages between Rs.9 and
Rs.17 in the whole factory assuming that the wages are normally distributed

Answer:

n = 120

μ = 11.35

σ = 3.03

percentage of workers getting wages between Rs.9 and Rs.17 in the whole factory assuming that the
wages are normally distributed is :

= P( 9 ≤ X ≤ 17)

= P( [ 9 - μ ] / σ ≤ [X - μ] / σ ≤ [ 17 - μ ] / σ )

= P( [ 9-11.35 ] / 3.03 ≤ z ≤ [ 17-11.35 ] / 3.03 ) ; z = [X - μ ] / σ is the standard normal variable

= P(-0.776 ≤ z ≤ 1.865 )

= P(z ≤ 1.865 ) - P( z ≤ -0.776 )

= 0.96891 - 0.21887

= 0.75

Ans: 75% Of workers are getting wages between Rs. 9 and Rs. 17.

Q3.a) The procedure of testing hypothesis requires a researcher to adopt several steps. Describe in brief all
such steps.

Ans.3a) A hypothesis is an assumption about relations between variables. It is a tentative explanation of the
research problem or a guess about the research outcome.

To test a hypothesis means to tell (on the basis of the data researcher has collected) whether or not
the hypothesis seems to be valid. Having calculated appropriate z-statistic or t-statistic, to reject or
accept the null hypothesis, it is necessary to identify the rejection region with reference to the given
level of significance. If the calculated statistic is in the rejection region, we accept the alternative
hypothesis against the null hypothesis at that level of significance. Otherwise we accept null
hypothesis at the given level of significance. Table 3.1 depicts the rejection region , normally denoted
by ‘R.’

Table 3.1: Kinds of Tests

Kind of test z-statistic t-statistic
Two tail test R: │z│ > │z table│ R: │t│ > │t table│
Lower tail test R: z < z table R: t < t table
Upper two tail test R: z > z table R: t > t table
 The various steps involved in hypothesis testing procedure are stated below: -

Step 1: state the null hypothesis (Ho) and the alternate hypothesis (H1)

Step 2: State the level of significance. This gives you the tabulated normal/”t”-value.

Step 3: Select the appropriate test from the list given in table 3.2.

Step4: Calculate the required values for the test.

Step 5: Conduct the test.

Step 6: Draw conclusion. If calculated value is < tabulated value, accept Ho. If calculated value is >
tabulated value, reject Ho.

Table 3.2: Condition for using the Normal and ‘t’ Distribution in Testing Hypothesis about Means
When the Population Standard When the Population Standard
Deviation is Known Deviation is not known
Sample size “n” is larger than Normal Distribution, Normal Distribution,
30. z-table z-table
Sample size “n” is 30 or less Normal distribution, ‘t’ distribution, ‘t’ table
and we assume the population z-table
is normal or approximately so.

Q3 b) Distinguish between:

Stratified random sampling Systematic sampling

This sampling design is most appropriate if the
population is heterogeneous with respect to
characteristic under study or the population
distribution is highly skewed.
Provides more efficient estimate
Can be applied in situation where different
degrees of accuracy is desired for different
segments of population.
This design is recommended if we have a
complete list of sampling units arranged in some
systematic order such as geographical,
chronological or alphabetical order.
It gives biased results if periodic feature exist in
the data
More efficient than simple random sampling if
we have up-to-date frame.

Q3.b)

Judgement Sampling Convenience Sampling

The choice of sample items depends exclusively
on the judgement of the investigator.
The investigator’s experience and knowledge
about the population will help to select the
sample units.
It is the most suitable method if the population
size is less.
The sample units are selected according to the
convenience of the investigator.
It is also called “chunk” which refers to the
fractions of the population being investigated,
which is selected neither by probability nor by
judgement.
It is used to make pilot studies.

Q4.a) Meaning of Regression and correlation.

Correlation Analysis: When two or more variables move in sympathy with the other, then they are
said to be correlated. According to A.M. Tuttle, “Correlation is an analysis of the co variation between
two or more variables.”
Regression Analysis: Regression analysis is used to estimate the values of the deponents variables
from the values of the independent variables. Regression analysis is used to get a measure of the
error involved while using the regression line as a basis for estimation.

B) How does correlation analysis differs from regression analysis?

Correlation analysis attempts to study the relationship between the two variables ‘X’ and ‘Y’. In
regression analysis, it is attempted to quantify the dependence of one variable on the other.
Correlation and regression analysis are related in the sense that both deal with relationships among
variables.

C) Calculate Karl Pearson ‘s coefficient of correlation between X series and Y series.

X Y X2 Y2 XY
110 12 12100 144 1320
120 18 14400 324 2160
130 20 16900 400 2600
120 15 14400 225 1800
140 25 19600 625 3500
135 30 18225 900 4050
155 35 24025 1225 5425
160 20 25600 400 3200
165 25 27225 625 4125
155 10 24025 100 1550
∑X =1390 ∑Y =210 ∑X2 =196500 ∑Y2 =4968 ∑XY =29730

ANS:
∑X =1390
∑Y =210
∑X2 =196500
∑Y2 =4968
∑XY =29730
Solution on next page;
Q5. BRIEFLY EXPLAIN:
A) Meaning of business forecasting:

Business forecasting refers to the analysis of past and present economic conditions with the
object of drawing inferences about probable future business conditions. The process of
making definite estimates of future course of events is referred to as forecasting and the
figure or statements obtained from the process is known as ‘forecast’; future course of events
is rarely known. In order to be assured of the coming course of events, an organised system
of forecasting helps.

There are two aspects of Scientific Business Forecasting

1. Analysis of past economic conditions.
2. Analysis of present economic conditions.

B) Methods Of Business Forecasting:

Almost all businessmen forecast about the conditions related to their business. In recent
years scientific methods of forecasting have been developed. The base of scientific
forecasting is statistics. To handle the increasing variety of managerial forecasting problems,
several forecasting techniques have been developed in recent years.

The following are the main methods of business forecasting.

 1. Business Barometers: Business indices are constructed to study and analyse the
business activities on the basis of which future conditions are predetermined. As
business indices are the indicators of future conditions, they are also known as
’business barometers’ or ‘economic barometers’. With the help of these business
barometers the trend of fluctuations in business conditions are understood and a
decision can be taken relating to the problem by forecasting.

2. Time series analysis: Time series analysis is also used for the purpose of making
business forecasting. The forecasting through time series analysis is possible only
when the business data of various years are available which reflects a definite trend
and seasonal variation. By time series analysis the long term trend, secular trend,
seasonal and cyclical variations are ascertained, analysed and separated from the
data of various years.

3. Extrapolation: Extrapolation is the simplest method of business forecasting. By

extrapolation, a businessman finds out the possible trend of demand of his goods and
also about the future price trends. The accuracy of extrapolation depends on two
factors:
• Knowledge about the fluctuations of the figures
• Knowledge about the course of events relating to the problem under
consideration

4. Regression analysis: The regression approach offers many valuable contributions

to the solution of the forecasting problem. It is the means by which we select from
among the many possible relationships between variables in a complex economy,
which will be useful for forecasting.

5. Modern econometric methods: Econometric techniques, which originated in the

eighteenth century, have recently gained popularity for forecasting. Econometrics
refers to the application of mathematical economic theories and statistical procedures
to economic data to verify economic theorems. Models take the form of a set of
simultaneous equations. The values of the constants in such equations are supplied
by a study of statistical time series, and a large number of equations may be
necessary to produce an adequate model.

6. Exponential smoothing method: This method is regarded as the best method of

business forecasting as compared to other methods. Exponential smoothing is a
special kind of increasing exponential weighted average assigned to recent
observation data and is found extremely useful in short-term forecasting of
inventories and sales.

Q5. C) Theories of Business Forecasting:

There are a few theories that are followed while making business forecasts.
Some of them are:

1. Sequence or time-lag theory:

This is the most important theory of business forecasting. It is based on the

assumption that most of the business data have the lag and lead relationships, that
is, changes in business are successive and not simultaneous. There is time-lag
between different movements.

2. Action and reaction theory:

This theory is based on the following two assumptions.

 • Every action has a reaction
• Magnitude of the original action influences the reaction

When the price of rice goes above a certain level in a certain period, there is a
likelihood that after some time it will go down below the normal level. Thus, according
to this theory a certain level of business activity is normal or abnormal; conditions
cannot remain so for ever.

3. Economic Rhythm Theory:

The basic assumption of this theory is that history repeats itself and hence assumes
that all economic and business events behave in a rhythmic order. According to this
theory, the speed and time of all business cycles are more or less the same and by
using statistical and mathematical methods, a trend is obtained which will represent a
long term tendency of growth or decline. It is done on the basis of the assumption that
the trend line denotes the normal growth or decline of business events.

4. Specific historical analogy:

History repeats itself is the main foundation of this theory. If conditions are the same,
whatever happened in the past under a set of circumstances is likely to happen in
future also. A time series relating to the data in question is thoroughly scrutinised
such a period is selected in which conditions were similar to those prevailing at the
time of making the forecast. However, this theory depends largely on past data.

5. Cross-cut analysis theory:

This theory proceeds on the analysis of interplay of current economic forces. In this
method, the combined effects of various factors are not studied. The effect of each
factor is studied independently. Under this theory, forecasting is made on the basis of
analysis and interpretation of present conditions because the past events have no
relevance with present conditions.

Q6. Formula of Fishers Ideal Index

Computation of Fisher’s Ideal Index

Fisher’s formula satisfies Time Reversal Test

Fisher’s formula satisfies Factor Reversal Test

Ans

This method is a combination of Laspeyre’s and Paasche’s method. If we find out the
geometric average of Laspeyre’s index and Paasche’s index, we get the index suggested by
Fisher. Fisher’s index number is given by:

Ans:

ITEMS P0 Q0 P1 Q1
A 16 5 20 6
B 12 10 18 12
C 14 8 16 10
D 20 6 22 10
E 80 3 90 5
F 40 2 50 5