BUSINESS STATISTICS

PROJECT REPORT

SUBMITTED BY:

GROUP 01:
NISHANT SHARMA (MBA19124)
RA ANIMESH (MBA19129)
ALOK TRIPATHY (MBA19087)
RAHUL CHOUDHURY (MBA19130)
MOHIT SAMANT (MBA19114)
 Problem Statement
You need to collect data from business families and service class people. Make a suitable
assumption that business families spend more on going to restaurants than service class
families. Make suitable conditions for verifying the assumption.

Introduction
Business statistics is a specialty area of statistics which are applied in the business setting. It
can be used for quality assurance, financial analysis, production and operations, and many
other business areas. Plenty of companies naturally collect lots of data in the course of
business. This is especially true in the Internet age, when it's often possible to gather
detailed information about when customers do everything from open emails to access
particular items on a company website. The role of statistics in business is in evaluating all
of this information to determine what it says about the company's operations and strategy.

Business statistics are used in making good and sound decisions for a company or business.
These decisions are made even if there is uncertainty in what may happen financially.
Anything that has to do with auditing, financial analysis or marketing research will be
included in the statistics. The statistics contain data that is published for business members
to look at and analyze.

Overview
In this report, we have solved the problem statement using Z- Hypothesis Testing. To start
with, the team has collected data from the students of IIM Kashipur through a google form.
The raw data is then segregated to form a meaningful sample. The sample has been used to
test whether our assumption that business class people spend more at restaurants than
service class people is true or not. We apply Z-Hypothesis testing method to accept/reject
our null or alternate hypothesis at different significance levels. Finally, a conclusion has
been provided based on the solution.

Sample Collection Methodology

We floated a google form among the students of MBA-1 and PGP-2 of IIM Kashipur. There
were four questions that were asked from the students in the google form:

1. What is your family background? (Service Class / Business Class)

2. What is your family’s average income range? (<7 Lakh / 7 Lakh to 15 Lakh / >15 Lakh)
3. What is your family’s average monthly expenditure at restaurants? (Number only)
4. How many members are there in your family? (Number only)
We got a total of 102 responses from the students among which 32 students belonged to
business class and 70 students from service class background.

For simplification of use, Income range was divided into groups as:

• <7 Lakh : Low Income Group (LIG)

• 7 Lakh to 15 Lakh : Middle Income Group (MIG)
• >15 Lakh : High income Group (HIG)

Sample Selection Methodology

The aforementioned raw data was then simplified to form a uniform sample for both
business class and service class. To make sure that the sample we use for solving the
problem statement is uniform, two major strategies have been implemented:

1. Uniform Data Segregation based on Income: The data has been segregated into
Sample Size of 30 for both business class and service class using following
parameters:

Income Group No. of units per sample

Low Income Group (LIG) 11
Middle Income Group (MIG) 13
High income Group (HIG 6

Total Sample Size(each): 30

2. Average restaurant expense of a family per member: Average monthly

expenditures of each family has been divided by number of members in that family.
So, instead of using average monthly expenditure per family, we use average
monthly expenditure per family member. This resulted in the collected raw data to
be more meaningful and appropriate for hypothesis testing by reducing outliers and
creating uniformity in both samples.
 Sample Data
1. Sample for Business Class:

FAMILY
INCOME GROUP TYPE CLASS EXPENSE MEMBERS EXPENSE/PERSON
High Income Group Business Class 8000 6 1333.33
Medium Income Group Business Class 1000 1 1000
Low Income Group Business Class 2000 2 1000
High Income Group Business Class 4000 3 1333.33
Low Income Group Business Class 500 1 500
Low Income Group Business Class 3000 3 1000
High Income Group Business Class 10000 5 2000
Medium Income Group Business Class 1000 1 1000
Medium Income Group Business Class 4000 4 1000
Medium Income Group Business Class 1000 1 1000
Medium Income Group Business Class 7000 5 1400
Medium Income Group Business Class 1000 1 1000
Medium Income Group Business Class 4000 4 1000
High Income Group Business Class 10000 6 1666.67
Medium Income Group Business Class 3000 3 1000
Medium Income Group Business Class 5000 5 1000
High Income Group Business Class 10000 6 1666.67
Low Income Group Business Class 1200 1 1200
Medium Income Group Business Class 5000 5 1000
Low Income Group Business Class 700 1 700
Low Income Group Business Class 800 1 800
Low Income Group Business Class 1600 2 800
Low Income Group Business Class 2500 3 833.33
Medium Income Group Business Class 2000 2 1000
Low Income Group Business Class 5000 6 833.33
High Income Group Business Class 10000 6 1666.67
Medium Income Group Business Class 5000 5 1000
Low Income Group Business Class 4000 5 800
Low Income Group Business Class 3000 4 750
Low Income Group Business Class 7000 5 1400
MEAN 4076.666667 1089.444
STANDARD DEVIATION 3096.45886 334.952
 2. Sample for Service Class:

FAMILY
INCOME GROUP TYPE CLASS EXPENSE MEMBERS EXPENSE/PERSON
Low Income Group Service Class 1500 2 750
Medium Income Group Service Class 2000 2 1000
Medium Income Group Service Class 4000 4 1000
Medium Income Group Service Class 1000 1 1000
Medium Income Group Service Class 2000 2 1000
Medium Income Group Service Class 5000 5 1000
Medium Income Group Service Class 4000 4 1000
Medium Income Group Service Class 3000 3 1000
Low Income Group Service Class 900 1 900
Medium Income Group Service Class 2000 2 1000
Medium Income Group Service Class 4000 4 1000
High Income Group Service Class 5000 4 1250
Low Income Group Service Class 3000 5 600
High Income Group Service Class 5500 5 1100
Medium Income Group Service Class 1000 1 1000
High Income Group Service Class 3500 3 1166.67
High Income Group Service Class 6000 5 1200
Medium Income Group Service Class 2000 2 1000
High Income Group Service Class 10000 5 2000
High Income Group Service Class 11000 6 1833.33
Medium Income Group Service Class 4500 4 1125
Low Income Group Service Class 800 1 800
Low Income Group Service Class 1700 2 850
Low Income Group Service Class 1500 2 750
Low Income Group Service Class 4000 5 800
Low Income Group Service Class 3000 4 750
Medium Income Group Service Class 2000 2 1000
Low Income Group Service Class 1500 2 750
Low Income Group Service Class 4000 5 800
Low Income Group Service Class 5000 6 833.33
MEAN 1008.611
STANDARD DEVIATION 289.970
 Problem Solution

Step 1: Stating the null and alternate hypothesis

• Null hypothesis:

There is no significant difference between the monthly expenses incurred by

business class people and service class people at restaurants.
Ho: u1-u2=0

• Alternative hypothesis:

The business class spend more on restaurants than service class people.
H1: u1-u2>0

Because we are interested in finding out the whether mean 1 is greater than mean two, we
need to perform right tailed tests at different significant levels.

Step 2: Choosing the appropriate distribution and finding the critical value.

Both the sample sizes are sufficiently large i.e. equal to/greater than 30. Hence z-
distribution has been used for carrying out hypothesis testing.

The mean and standard deviation of the samples have been calculated from the data
collected as follows:
x̄1 =1089.44
s1 = 334.95
x̄2 = 1008.61
s2 = 289.97

where,
x̄1 = mean of sample 1
s1 = standard deviation of sample 1
x2 = mean of sample 2
s1 = standard deviation of sample 2

The standard deviations of the two populations are unknown. The first step is to estimate
them as follows:
σ1 = s1 = 334.95
σ2 = s2 = 289.97
Step 3: Computing the standard error and standardizing the sample statistics.

The standard error of the difference between the two means can be determined by using
the following formula.

Standard error = 80.88

Now, the difference of sample means, x̄1 - x̄2 is standardized. First, 𝜇1 -𝜇2 , the hypothesised
difference of the population means is found. The, the estimated standard error of the
difference between sample means is calculated.

The observed value of z is found out to be 0.99

Step 4: Interpreting the result

The critical values of z are found at three significance levels (1%, 5% and 10%) to compare
with the calculated values of z. The critical values at different significance levels can be
found out from z-distribution table.

1. Significance level 1%

• The critical value at 1% significance level is 2.33.

• 1% significance level signifies an acceptation area of 0.99 and a rejection area of 0.01
in the normal distribution curve.

The calculated value of z falls within the accepted area. So, the null hypothesis is
accepted which means there is no significant difference between the monthly expenses
incurred by business class people and service class people at restaurants.

2. Significance level 5%

• The critical value at 5% significance level is 1.645

• 5% significance level signifies an acceptation area of 0.95 and a rejection area of 0.05
in the normal distribution curve.
The calculated value of z falls within the accepted area. So, the null hypothesis is
accepted which means there is no significant difference between the monthly expenses
incurred by business class people and service class people at restaurants.

3. Significance level 10%

• The critical value at 10% significance level is 1.28

• 10% significance level signifies an acceptation area of 0.90 and a rejection area of
0.010 in the normal distribution curve.

The calculated value of z falls within the accepted area. So, the null hypothesis is
accepted which means there is no significant difference between the monthly expenses
incurred by business class people and service class people at restaurants.

Conclusion
As per our hypothesis testing, the null hypothesis is accepted at every value of
significance levels. Hence, it is safe to conclude that business class people and service
class people having similar levels of income spend equally at restaurants.