Final-Term Exam (Take-Home) Fall – 2020

Department of Business Administration

Subject: Business Statistics Submission Day: Saturday

Instructor: Dr. Rizwan Tirmizi/Dr. Fahad Submission Date: January 30, 2021

Program: BBA Max. Marks: 20

Name: Registration ID:

 Question Number 01 [04 Marks]

a) A firm report that 25 percent of its accounts receivable from other business firms are overdue
due to economic conditions. If an accountant takes a random sample of seven such accounts,
determine the probability of each of the following events by use of the formula for binomial
probabilities:
(i) none of the accounts is overdue, and, (ii) exactly two accounts are overdue,

Solution

We are given

p = 25% = 0.25

q = 1-p = 1-0.25 = 0.75

n=7

(i) none of the accounts is overdue

Let x be a random variable which represent the number of accounts which are receivable aver
due and p is the probability of success for accounts receivable aver due. Then

X ~ B(n=7, p=0.25), x=0,1,2,3,….,7

So,

P( x=0)¿ C70∗( 0.25 )0∗(0.75)7−0

P ( x=0 )=1∗1∗( 0.75 )7

P( x=0)=0.1335

(ii) exactly two accounts are overdue

P( x=2)¿C 72∗( 0.25 )2∗(0.75)7 −2

5
P ( x=2 )=21∗0.0625∗( 0.75 )

P ( x=2 )=21∗0.0625∗0.237 3

P ( x=2 )=0.311 4
b) On average, six people per hour conduct transactions at a special services desk in a
commercial bank. Assuming that the arrival of such people is independently distributed and
equally likely throughout the period of concern, what is the probability that more than 12
people will wish to conduct transactions at the special services desk during a particular hour?

Solution

We are given
μ=6
t=1 hour

Let x be a random variable which represent the number of people which conduct transaction.

Then,

x ~ poi(μ=6)

So,
∞
e−μt ∗μ t x
P( x >12)= ∑
x=13 x!

P ( x>12 ) =¿1 – P(x ≤ 12)

12
e−6 (1)∗6 (1) x
P ( x>12 ) =¿1 – ∑
x=0 x!

P ( x>12 ) =¿1 – (0.0025 +0.0149 +0.0446+ 0.0892

+0.1339+0.1606+0.1606+0.1377+0.1032 +0.0688+0.0413+0.0225+0.0112)

P ( x>12 ) =1−0.991 2

P ( x>12 ) =0.008 8
 Question Number 02 [04 Marks]
a) The packaging process in a breakfast cereal company has been adjusted so that an average of
μ=12.0 oz of cereal is placed in each package. Of course, not all packages have precisely
12.0 oz because of random sources of variability. The standard deviation of the actual net
weight is σ =0.2 oz, and the distribution of weights is known to follow the normal probability
distribution. Determine the probability that a randomly chosen package will contain between
13.0 and 13.2 oz of cereal and illustrate the proportion of area under the normal curve which
is associated with this probability value.

Solution

We are given

μ=12.0

σ =0. 2

P(13 < x < 13.2) = ?

Let x follow normal distribution with μ=12.0 and σ =0.2

Then P(13 < x < 13.2) = Area in between 13 and 13.2

x−μ
Using standard normal z=
σ

13−13
z= =0.00
0.1

13 .2−13
z= =2 .00
0.1

Using the z score table

P(0.00 < z < 2.00) = Area in between 0.00 and 2.00

 P(13 < x < 13.2) = P(0.00 < z < 2.00)

P(13 < x < 13.2) = P( z < 2.00) - P( z < 0.00)

P(13 < x < 13.2) = 0.9772 – 0.5000

P(13 < x < 13.2) = 0.4772

P(13 < x < 13.2) = 47.72%

b) Given a normal distribution with μ=30 and σ =6, find the two values of x that contain the
middle 75% of the normal curve area.

Solution

We are given

μ=30

σ =6

two values of x that contain the middle 75% of the normal curve area = ?

1−0.75
=0.12 5
2

P ¿) = 0.125

P ¿) = 0.125

x−30
= -1.15 (using z score table)
6
x= 30 – (1.15)*6

x= 30 -6.9

x= 23.1

P(X>x)=0.125

P ¿) = 1 - 0.125 = 0.875

P ¿) = 0.875

x−30
= 1.15 (using z score table)
6

x= 30 + (1.15)*6

x= 30 + 6.9

x= 36.9

So, two values of x that contain the middle 75% of the normal curve area are 23.1 and 36.9

Question Number 03 [04 Marks]

a) Traveling between EDC campus and Gulshan campus of Iqra university via shuttle bus takes,
on average, 28 minutes with a standard deviation of 5 minutes. In a given week, a bus
transported passengers 40 times. What is the probability that the average transport time was
more than 30 minutes? Assume the mean time is measured to the nearest minute

Solution

We are given

μ=28

σ=5

 n=40

P(X ≥ 30) =?

The corresponding z-value needed to be computed is:

x−μ
z=
σ /√n

30−28
z=
5
√ 40
z=2.52 98

Therefore, we get that

30−28
P ( X ≥30 )=P(Z ≥ )=P (z ≥ 2.5298)
5
√ 40

P ( X ≥30 )= 1−0.9943

P ( X ≥30 )= 0.0057

b) Suppose that the standard deviation of the tube life for a particular brand of TV picture tube
is known to be σ =400, but that the mean operating life is not known. Overall, the operating
life of the tubes is assumed to be approximately normally distributed. For a sample of n=15,
the mean operating life is X́ =8900 hr. Determine (i) the 95 percent and (ii) the 90 percent
confidence intervals for estimating the population mean.

(i) the 95 percent confidence intervals for estimating the population mean.

Solution

We are given

X́ =8900

 σ=400

n = 15

and the required confidence level is 95%.

Based on the provided information, the critical z-value for α=0.05 is z_c = 1.96.

The 95% confidence for the population means μ is computed using the following
eexpression

CI =¿´¿)

Therefore, based on the information provided, the 95 % confidence for the population
mean μ is

CI =¿)

CI = (8900−202.424, 8900+202.424)

CI = (8697.576, 9102.424)

(ii) the 90 percent confidence intervals for estimating the population mean.

The required confidence level is 90%.

Based on the provided information, the critical z-value for α=0.1 is z_c = 1.645.
The 90% confidence for the population means μ is computed using the following expression

CI =¿´¿)
Therefore, based on the information provided, the 90 % confidence for the population
mean μ is

CI =¿)
 CI = (8900−169.88, 8900+169.88)

CI = (8730.12, 9069.88)

Question Number 04 [04 Marks]

a) A marketing research analyst collects data for a random sample of 100 customers out of the
4,000 who purchased a particular “coupon special.” The 100 people spent a sample average
of X́ =$ 24.57 in the store with a standard deviation of σ =$ 6.60. Before seeing these sample
results, the marketing manager had claimed that the average purchase by those responding to
the coupon offer would be at least (not less than) $25.00. Can this claim be rejected, using the
5 percent level of significance?

Solution

We are given
X́ =24.57

s = 6.6

n = 100

Testing

Step 1: Null and Alternative Hypotheses

Ho: μ = 25

Ha: μ > 25

This corresponds to a right-tailed test, for which a t-test for one mean, with unknown
population standard deviation will be used.

Step 2: Level of Significance

Alpha = ɑ = 5%

Step 3:  Critical Region

Based on the information provided, the significance level is α=0.05, and the critical value for
a right-tailed test is t_c = 1.66.

The rejection region for this right-tailed test is R =t:t>1.66

Step 4: Test Statistics

 The t-statistic is computed as follows:

X́=−μ
t=
s/ √ n

24.57−25
t=
6.6 / √ 100

t = -0.652

Step 5: Conclusion

Since it is observed that t =−0.652 ≤ t_c =1.66, it is then concluded that the null hypothesis is
not rejected.

Using the P-value approach:

The p-value is p = 0.7419, and since p =0.7419 ≥ 0.05,

it is concluded that the null hypothesis is not rejected.

Therefore, there is not enough evidence to claim that the population means μ is greater than
25, at the 0.05 significance level.

b) A survey conducted by a research institute lists median salaries for associate professors of
statistics at public sector institutions and at private sector institutions in Pakistan. Assume
that a sample of 100 associate professors from public sector institutions has an average salary
of PKR 72,000 per month with a standard deviation of PKR 6000. Assume also that a sample
of 150 associate professors from private sector institutions has an average salary of PKR
78,000 with a standard deviation of PKR 5000. Test the hypothesis that the mean salary for
associate professors in private institutions is PKR 1500 higher than for those in other
institutions. Use a 0.01 level of significance.
Solution

We are given

X́ 1= 78000

X́ 2=72000

Also, the provided sample standard deviations are:

s1 = 5000

s2=6000

and the sample sizes are

n1 = 150 and n2 = 100.

Testing

Step 1:  Null and Alternative Hypotheses

Ho: μ1 = μ2

Ha: μ1 > μ2

This corresponds to a right-tailed test, for which a t-test for two population means, with two
independent samples, with unknown population standard deviations will be used.

Step 2: level of Significance

Alpha = ɑ = 0.01

Step 3: Critical Region

Based on the information provided, the significance level is α=0.01, and the degrees of
freedom are df = 248.

In fact, the degrees of freedom are computed as follows, assuming that the population
variances are equal:

Hence, it is found that the critical value for this right-tailed test is t_c = 2.341, for α=0.01 and
df = 248.
The rejection region for this right-tailed test is

R ={t:t>2.341}.

Step 4: Test Statistics

Since it is assumed that the population variances are equal, the t-statistic is computed as
follows:
 X́ 1− X́ 2
t=
( n 1−1 ) s + ( n 2−1 ) s 22 1 1
2

√ 1
n 1+n 2−2
( + )
n1 n2

78000−72000
t=
( 150−1 ) 500 02❑+ ( 100−1 ) 60002❑ 1
√ 150+100−2
( +
1
150 100
)

t=8.573

Step 5:  Conclusion

Since it is observed that t =8.573 > t_c=2.341, it is then concluded that the null hypothesis is
rejected.

Using the P-value approach: The p-value is p = 0,

and since p =0<0.01, it is concluded that the null hypothesis is rejected.

Therefore, there is enough evidence to claim that the population mean μ1 is greater than μ2,
at the 0.01 significance level.

Question Number 05 [04 Marks]

a) Two salesmen A and B are working in a certain district. From a sample survey conducted by
the Head Office, the following results are obtained as shown in Table 1. State whether there
is any significant difference in the average sales between the two salesmen. Assume the
populations to be approximately normally distributed with equal variances.
Table 1: Comparison of Salesman A and B
Salesman
A B
No. of Samples 20 18
Average Sales (Rs. In Thousands) 175 210
Standard Deviation (Rs. In Thousands) 20 25

Solution

We are given

Let us denote by 1 the salesman A and 2 the salesman B, then

n1= 20

X́ 1=175

s1= 20 and

n2= 18

X́ 2=210

Testing

Step 1: Null and Alternative Hypotheses

Ho: μ1 = μ2

H1: μ1 ≠ μ2 (The claim is whether there is any significant difference in the average sales
between the two salesmen)

Step 2: Level of Significance

Alpha = ɑ = 0.05

Step 3: Critical Region

follows a t distribution with n1+n2 - 2 df. The critical region is R = { t |t| > 2.0281 }

Step 4: Test Statistics

Since the samples are drawn from Normal population with equal variance, we shall apply a
two-sample independent t-test with equal variance,

X́ 1− X́ 2
t=
1 1
√
s∗ ( + )
n1 n2
 Where

2 ( n 1−1 ) s 21 + ( n 2−1 ) s 22
s= is the pooled variance of the two samples.
n 1+n 2−2

( 20−1 ) ¿ 202❑ + ( 18−1 )∗252❑

s2=
20+18−2

18225
s2=
36

s2=506.2 5

s= √ 506.25

s=22.5

So,

175−210
t=
1 1
√
22.5∗ ( + )
20 18

−35
t=
22.5∗ √0.10 56

−35
t=
7.3101

t=−4.7879

Step 5: conclusion

 Since the absolute value of |t| = 4.7879 falls in the region of rejection, we reject the null
hypothesis. Since the null hypothesis is rejected, we conclude that there is enough evidence to
claim that here is any significant difference in the average sales between the two salesmen.

b) The Energy Information Administration gathers data on residential energy consumption and
expenditures and publishes its findings in Residential Energy Consumption Survey:
Consumption and Expenditures. The independent simple random samples of households in
the four U.S. regions yielded the data on last year’s energy consumptions are shown in Table
2. At the 5% significance level, do the data provide sufficient evidence to conclude that a
difference exists in last year’s mean energy consumption by households among the four U.S.
regions?

Table 2: Last year’s energy consumptions for samples of households in the four U.S. regions
Northeast Midwest South West
15 17 11 10
 10 12 7 12
13 18 9 8
14 13 13 7
13 15 - 9
- 12 - -

Solution

We are given
This testing the mean energy consumption of four regions and we use one way ANOVA.
number of regions k=4 and 
n1= 5
n2= 6
n3= 4
n4 = 5
so,
n= n1+n1+n2+n3+n4
n= 5+6+4+5
n= 20

Testing

Step 1: Null and Alternative Hypotheses

Ho: μ1 = μ2 = μ3 = μ4

H1: At least one pair of means differ

Step 2: Level of Significance

Alpha = ɑ = 0.05

Step 3: Critical Region

From the F-table the critical value is 3.2389.

Step 4: Test Statistics

The test statistic is F ratio in one wat ANOVA. We follow the following steps to construct the
ANOVA.

Let Y ijbe the energy consumption of the  j th  residence in the i th  region . The raw data with the
marginal totals:

Northeast Midwest South West Grand

Total
(G.T)
15 17 11 10
10 12 7 12
13 18 9 8
14 13 13 7
13 15 - 9
- 12 - -
Tota 65 87 40 46 238
l

TOTAL ∑ OF SQUARE=TSS=∑ X 2ij −CF

iJ

G. T 2
CF =
N

2382
CF =
20

56644
CF =
20

CF = 2832.2

Now

TSS=∑ X 2ij −CF

iJ

Northeast Midwest South West

225 289 121 100
100 144 49 144
169 324 81 64
196 169 169 49
 169 226 - 81
- 144 - -
Tota 859 1295 420 438 3012
l

TSS=3012−2832.2

TSS=179.8

The region ∑ of squares=R SS=∑ Y 2i . /ni −CF

iJ

652 872 402 462

R S S= + + + −2832.2
5 6 4 5

R S S=845+1261.5+ 400+423.2−2832.2

R S S=2929.7−2832.2

R S S=97.5

Error sum of squares = ESS = TSS – RSS

ESS = 179.8 – 92.5

ESS = 82.3

ANOVA

SOV df SS MS F Cal . F Table . P-value

Regions 4-1 = 3 97.5 32.5000 6.3183 3.2389 0.0050
Error 19-3 = 16 82.3 5.1438
Total 20-1 = 19 179.8

The obtained value of F is 6.3183.

Step 5: Conclusion

Since the calculated value of F is >the critical value (3.2389), (p-value<0.05), we reject the
null hypothesis. Since the null hypothesis is rejected, we conclude that   there is sufficient
evidence to claim that a difference exists in last year’s mean energy consumption by
households among the four U.S. regions