BE Term-II Assignment Solution-QMM Student Name-

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QUANTITATIVE METHODS FOR MANAGERS

MAXIMUM MARKS: 40
1. Using the Excel file Sales transaction find the following 15 Marks
a. Identify the levels of measurement for each variables
b. Construct a cross tabulation to find the number of transactions by product and
region, total amount of revenue by region, and total revenue by region and product.
c. Calculate the descriptive statistics and infer.
d. Find the average sales by source (web or e-mail). Do you think this information,
could be useful in advertising? Explain how and why or why not.
e. Find the proportion of customers who used PayPal and the proportion of customers
who used credit cards. Also find the proportion that purchased a book and the
proportion that purchased a DVD.
f. Summarize your findings a present a brief report
Note: All the answers to the Question 1 is calculated in excel also which is attached.

Sales
Transactions.xlsx

Answer 1a.
Levels of
Variable Measurements
Cust ID Nominal
1 Region Nominal
Payment Nominal
Transaction Code Nominal
Source Nominal
Amount Ratio Scale
Product Nominal
Time Of Day Interval
Answer 1b.

Below is a cross tabulation to find the number of transactions by product and region
Count of Time Of Day Column Labels
Row Labels East North South West Grand Total
Book 56.00 43.00 62.00 100.00 261.00
DVD 42.00 42.00 37.00 90.00 211.00
Grand Total 98.00 85.00 99.00 190.00 472.00

Below is a cross tabulation to find total amount of revenue by region

Column Labels
East North South West Grand Total
Sum of Amount2 4,170.44 2,849.24 4,422.11 7,412.63 18,854.42

Below is a cross tabulation to calculate total revenue by region and product.

Sum of Amount Column Labels

Row Labels East North South West Grand Total
Book 3,364.34 2,009.27 3,683.26 5,615.40 14,672.27
DVD 806.10 839.97 738.85 1,797.23 4,182.15
Grand Total 4,170.44 2,849.24 4,422.11 7,412.63 18,854.42
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Answer 1c.

Amount
Mean 39.945805
standard Error 2.638371
Median $20.61
Mode 15.33
Standard Deviation 57.32009
Sample Variance 3,285.59306
Kurtosis 5.18228
Skewness 2.61264
Range 232.06
Minimum 15.08
Maximum 247.14
Sum 18,854.42
Count 472.00

Inference- From the data, we can say that the average sales per transaction is $39.95. On
the other hand, the middle most value for the sales is $20.61. Furthermore, the most frequent
amount sold per transaction is $15.33. We can see the mean has the highest value compared
to the median and mode. If this the distribution will be graphed, the median and mode is at
the left side of the mean. With this, we can say the data is positively skewed.
2
Answer 1d.

Average sales by source

  Sales Amount $ Count Average

Web 13235.26 343 38.59
Email 5619.16 129 43.56

Yes, the information on the average sales by source can be useful in advertising. The
average sales amount per transaction can be a basis for the average advertising expense that
can be allotted per transaction. In the data, we can say that email sales has a higher average
than web sales. With this data, one can roughly decide where to focus on adverting,
advertising through e-mail or through web.
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Answer 1e.

Answer: 1 e The results are shown below

=COUNTIF (C4:C475,"Paypal")
=COUNT(A4:A475)
Paypal 173
Total 472

Proportion=Customers who used Paypal / Total customers

Proportion=173/472​=36.65% or 0.3665

Proportion of customers who used Credit Cards (since there were only two modes of Payments which is Paypal &
Credit Cards therefore balance would be of Credit cards) = 100%- proportion of customers who used Paypal = 100
% - 36.65% = 63.35%

Again using COUNTIF and COUNT functions in excel to count the number of customers who purchased a book.

=COUNTIF (G4:G475,"Book")
=COUNT(G4:G475)
Book 261
Total 472

Proportion=Customers who purchased Book / Total customers

Proportion=261/472​=55.30% or 0.55296

Proportion of customers who purchased Book (since there were only Books or DVD to buy therefore balance would
purchase DVD) = 1- proportion of customers who used Paypal = 100 % - 55.30% = 44.70%

Answer 1f.
3 Below is the finding;

Based on the total sales per region, the one place that got the highest is from the West with
190 customers had a total sales of $7,412.63. This is followed by the South with 99
customers, the East with 98 customers and the North with 85 customers having total sales
of $4,422.11, $4,170.44 and $2,849.24 respectively. Based on the products sold, most
customers (261 customers) preferred to buy books rather than DVDs (211 customers).
Total sales from books reached $14,672.27 while sales from DVDs are only $4,182.15.
Based on the sales by the source, 343 customer were engaged in availing the products
through website while only 129 where engaged in availing the products through email.
Total sales through the website reached $13,235.26 while total sales through email reached
$5,619.16. Based on the mode of payment, 173 customers used PayPal while 299
customers used credit cards.
These data are just descriptive information from the given data. It would be good to have
hypothesis tests to determine and prove relationships between variables.

2. An employee of a vending concession firm at the Subiaco Oval needs to choose between
two options. He can work behind a hamburger counter and receive a fixed sum of $100 per
game. Alternatively, he can walk around the stands selling beer and snacks on a
commission basis. On this second option, the employee can expect to earn $180 on a good
day, $100 on an average day and $70 on a poor day. The probabilities of a good, average
and poor day are 0.30, 0.40 and 0.30 respectively.
(a) What would be the expected earnings and the standard deviation in earnings for the
employee under the commission option?
(b) Which job should he take and why? 5 marks
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Answer 2a.

Expected earning = 0.3*$180 + 0.4*$100 + 0.3*$70 = $115.

Answer 2b.
It is eminent that in the second job alternative (walking through the stalls selling beer and
snacks on commission) there is a 0.70 (70%) probability of earning in between 100 and 180
dollars, which is of the most tempting and viable offer.
Explanation:
Let's consider
Xi aims to win (in dollars) on a given day.
P (X): The probability of profit on a given day.
X: 180 100 70
P(X): 0.3, 0.4, 0.3
Expected earnings in the commission option.
VE=∑Xi. P(X) ⟹VE=180*0.3+100*0*4+70*0.3=54+40+21=115
Standard deviation in earnings for the employee beneath the commission option.
σ=∑Xi^2.P(X) –VE^2 ⟹σ=180^2*0.3+100^2*0.4+70^2*0.3−1152
⟹σ=9720+4000+1470−13225
⟹σ=1965

3. Suppose it is known that the distribution of purchase amounts by customers entering a

4 popular retail store is approximately normal with mean $75 and standard deviation $20.

a. What is the probability that a randomly selected customer spends less than $85 at
this store?
Answer-
The required probability can be obtained as:
P (x<85) = P (x- µ < 85-75)
= P (((x-µ)/ σ) < ((85-75)/20))
= P (Z<0.5)
From the Standard normal table P (Z<0.5) = 0.691
P (X< 85) = 0.691
Thus, probability is 0.691

b. What is the probability that a randomly selected customer spends between $65 and
$85 at this store?
Answer-

P (65 < x < 85) = P (65- 75 < x- µ <85-75)

= P ((65-75)/20 < (x- µ)/ σ < (85-75)/20)
= P (-0.5 <Z <0.5)
= P (Z < 0.5) - P (-0.5)

Referring standard normal table, P (Z < 0.5) = 0.691 and P (Z < -0.5) = 0.308
Therefore the equation would be P (65 < x < 85) =0.691-0.308
=0.383
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Therefore, the required probability would be 0.383.

c. What is the probability that a randomly selected customer spends more than $45 at
this store?

Answer-

P (x>45) = P (x- µ > 45)

= P (((x-µ)/ σ) < ((75 - 45)/20))
= P (Z > 1.5)

From the Standard normal table P (Z>1.5) = 0.93319

P (X>45) = 0.93319

d. Find the dollar amount such that 80% of all customers spend at least this amount.

Answer-

P (X ≤ a) = 0.8
Cumulative distribution function (φ)
Φ ((a-75)/20) = 0.8
(a-75) /20 = Φ-1 (0.8) (From Standard Normal Table)
5
(a-75) /20 = 0.8416

a = 75 + (0.8416 X 20)
a = $ 91.83

e. Find two dollar amounts, equidistant from the mean, such that 90% of all customer
purchases are between these values.

Answer,
It is provided that mean, μ = 75 and standard deviation, σ = 20
We use z-tables to find z-scores with probability of 0.90, we get
P (-1.645 < X < 1.645) = 0.90
Now, we take z = -1.645
Z= (x−μ) / σ

-1.645 = (x - 75)/20
x = -1.645 x 20 + 75
x = 42.1
For z = 1.645
Z = (x−μ)/σ
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1.645 = (x - 75)/20
x = 1.645 x 20 + 75
x = 107.9
Hence, 90% of all customer purchases between 42.1 and 107.9
4. Using the Excel Home Market Value
a. Identify if there is any outlier in square feet and Market Value
b. Draw a scatter plot and infer about correlation
c. Identify the dependent and independent variable(s)
d. Fit a simple linear regression ( Market value on Square feet)
e. Predict the market value for 1450 square feet
f. Calculate coefficient of determination and comment 10 marks

Home Market
Value.xlsx
Note: All the answers to the Question 2 is calculated in excel also which is attached.

Answer-a.

There are two outliers in square feet, 2372 and 2372 (Both have same values)
There are four outliers in the Market value, $113200, $114000, $116100. $120700

6 Answer-b.

Home Market Value

$124,000.00
$117,000.00
$110,000.00
$103,000.00
$96,000.00
Market Value

$89,000.00
$82,000.00
$75,000.00
$68,000.00
$61,000.00
$54,000.00
$47,000.00
$40,000.00
1,200 1,350 1,500 1,650 1,800 1,950 2,100 2,250 2,400 2,550
Square Feet

The scatter plot indicates that there is a strong and positive correlation between the square feet and
market values as the points are close to each other and are in the upward direction.
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Answer-c.
The market value is the dependent variable and square feet is the independent variable.

Answer-d.

Home Market Value

$124,000.00

$110,000.00 f(x) = 35.04 x + 32673.22

R² = 0.53
$96,000.00
Market Value

$82,000.00

$68,000.00

$54,000.00

$40,000.00
1,200 1,350 1,500 1,650 1,800 1,950 2,100 2,250 2,400 2,550
Square Feet

The regression equation formed is

Y= a +bx
Market Value = 32673.2199 + 35.0363 * (Square feet)
7 This is the regression equation.

Answer-e.

The market value at 1450 square feet will be

Market Value = 32673.2199 + 35.0363 (Square feet)
Market Value = 32673.2199 + 35.0363 (1450)
Market Value = 32673.2199 + 50802.635
Market Value = $ 83475.8549
Thus, the market value at 1450 square feet is $ 83475.8549

Answer-f.
Correlation (R) = 0.731255223

Coefficient of Determination (R^2) = 0.534734202

R^2= 0.53 indicates that 53.47 % variability is explained by its linear relationship with Y (market
value) while remaining 46.53% (i.e. 100%-53.47%) variations are due to other factors.