ZAMBIAN OPEN UNIVERSITY

SCHOOL OF BUSINESS STUDIES

2021-SEMESTER TWO (2) ASSIGNMENTS
BBAC 322 / BBA 242- BUSINESS DATA ANALYSIS II / DECISION MAKING
TECHNIQUES II
LECTURER: MR. L. SIMATAA MOBILE NO. 0977-564568
EMAIL: slobosims@yahoo.com

INSTRUCTIONS:
1. Answer all the questions
2. Full credit will only be given if all the working is shown. Answers alone whether
correct or wrong without any working shown will earn a zero mark.

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ASSIGNMENT 1 DUE DATE: 5TH MARCH, 2021

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QUESTION ONE
(a) The actual demand of a product for six months are summarized in the table below:

Month ( t ) Demand Dt

1 80
2 90
3 70
4 100
5 70
6 90

i. Find three months weighted moving averages by assuming the weights, W1 = 0.1 ,
W2 = 0.4 and W3 = 0.5
ii. Compute the mean forecast error
iii. Compute the mean square error (MSE)
iv. Compute the mean absolute deviation (MAD).
v. Compute the Mean absolute percent error (MAPE)

(b) The forecast of a product for the first week of January was 200 units, whereas the actual
demand turned out to be 220 units.
i. Find the forecast for the week of January assuming the smoothing constant α = 0.2

ii. Find the forecast for the third week of third week of January if the actual demand
of the second week is 210 units

(c) A supermarket chain purchases large quantities of white bread for sale during a week. The
stores purchase the bread for K9.75 per loaf and sell it for K13.10 per loaf. Any loaves not
sold by the end of the week can be sold to a local thrift shop for K5.40. Based on past
demand, the probability of various levels of demand is as follows:

Demand(loaves) Probability
6,000 0.10
8,000 0.50
10,000 0.30
12,000 0.10

(i) Construct a payoff table, indicating the events and alternative courses of action.

(ii) Construct a decision tree.

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 (iii)Compute the expected monetary value (EMV) for purchasing 6,000, 8,000, 10,000, and
12,000 loaves.
(iv) Compute the expected opportunity loss (EOL) for purchasing 6,000, 8,000, 10,000,
and 12,000 loaves.
(v) Based on the results of (iii) or (iv), how many loaves would you purchase? Why?

(vi) Compute the coefficient of variation for each purchase level.

(vii) Compute the return-to-risk ratio (RTRR) for each purchase level.
(viii) Based on (vi) and (vii), what action would you choose? Why?

QUESTION TWO
(a) A large steel manufacturing company has three options with regard to production:
(1) Produce commercially
(2) Build pilot plant
(3) Stop producing steel
The management has estimated that their pilot plant, if built has 0.8 chance of high yield
and 0.2 chance of low yield. If the pilot plant does show a high yield, management assigns
a probability of 0.75 that the commercial plant will also have a high yield. If the pilot plant
shows a low yield, there is only a 0.1 chance that the commercial plant will show a high
yield. Finally, management’s best assessment of the yield on a commercial size plant
without building a pilot plant first has 0.6 chance of high yield. A pilot plant will cost
K300,000. The profits earned under high and low yield conditions are K12,000,000 and
K1,200,000 respectively.
i. Draw up an appropriate decision tree for the steel manufacturing company

ii. What is the company’s best strategy under EMV approach?

(b) A tea company appoints four salesmen A, B, C and D and observes their sales in three
months, April, May and June:

Months Salesmen
A B C D
April 36 36 21 35
May 28 29 31 32
June 26 28 29 29

i. Prepare a two – way analysis of variance table

ii. Name the blocking variable and the treatment in this experiment.
iii. Test at the 5% level of significance the null hypothesis that there is significant
difference in sales made by the four salesmen

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 iv. Test at the 5% level of significance the null hypothesis that there is significant
difference in the sales made during different months.

QUESTION THREE
Energy consumption is claimed to be a good predictor of Gross National Product. An economist
recorded the energy consumption ( x ) and the Gross National Product ( y ) for eight countries. The
data are shown in the table below:

Energy Consumption ( x ) 3.4 7.7 12.0 75 58 67 113 131

Gross National Product ( y ) 55 240 390 1100 1390 1330 1400 1900

i. Find the least squares equation for the data.

ii. Estimate the Gross National Product, y , of a country that has an energy consumption
of 100.
iii. Estimate the energy consumption of a country that has a Gross National Product of
3500.
iv. Determine at the 5% level of significance whether there is evidence to indicate a linear
relationship between energy consumption, x , and Gross National Product, y .

v. Find a 95% confidence interval for β1

vi. Find the correlation coefficient, r .
vii. Find the coefficient of determination and interpret its value.
viii. Give the ANOVA table for this problem.