Statistics for Managers

Using Microsoft® Excel®

NINTH EDITION
GLOBAL EDITION

David M. Levine
Department of Information Systems and Statistics

Zicklin School of Business, Baruch College, City University of New York

David F. Stephan
Two Bridges Instructional Technology

Kathryn A. Szabat
Department of Business Systems and Analytics

School of Business, La Salle University

Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong
Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan

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 Contents

Preface 21 1.2 Collecting Data 49

Populations and Samples 49
Data Sources 50
First Things First 31
1.3 Types of Sampling Methods 51
Simple Random Sample 51
USING STATISTICS: “The Price of Admission” 31 Systematic Sample 52
FTF.1 Think Differently About Statistics 32 Stratified Sample 52
Statistics: A Way of Thinking 33 Cluster Sample 52
Statistics: An Important Part of Your Business Education 34 1.4 Data Cleaning 54
FTF.2 Business Analytics: The Changing Face of Statistics 34 Invalid Variable Values 54
“Big Data” 34 Coding Errors 54
FTF.3 Starting Point for Learning Statistics 35 Data Integration Errors 54
Statistic 35 Missing Values 55
Can Statistics ( pl., statistic) Lie? 35 Algorithmic Cleaning of Extreme Numerical Values 55

FTF.4 Starting Point for Using Software 36 1.5 Other Data Preprocessing Tasks 55
Using Software Properly 37 Data Formatting 55
Stacking and Unstacking Data 56
FTF.5 Starting Point for Using Microsoft Excel 38
Recoding Variables 56
More About the Excel Guide Workbooks 39
Excel Skills That Readers Need 39 1.6 Types of Survey Errors 57
Coverage Error 57
REFERENCES 40
Nonresponse Error 57
KEY TERMS 40
Sampling Error 58
EXCEL GUIDE 41 Measurement Error 58
EG.1 Getting Started with Excel 41 Ethical Issues About Surveys 58
EG.2 Entering Data 41
CONSIDER THIS: New Media Surveys/Old Survey Errors 59
EG.3 Open or Save a Workbook 41
EG.4 Working with a Workbook 42 USING STATISTICS: Defining Moments, Revisited 60
EG.5 Print a Worksheet 42 SUMMARY 60
EG.6 Reviewing Worksheets 42 REFERENCES 60
EG.7 If You Use the Workbook Instructions 42 KEY TERMS 61

TABLEAU GUIDE 43 CHECKING YOUR UNDERSTANDING 61

TG.1 Getting Started with Tableau 43 CHAPTER REVIEW PROBLEMS 61

TG.2 Entering Data 44 CASES FOR CHAPTER 1 62
TG.3 Open or Save a Workbook 44 Managing Ashland MultiComm Services 62
TG.4 Working with Data 45 CardioGood Fitness 63
TG.5 Print a Workbook 45 Clear Mountain State Student Survey 63
Learning With the Digital Cases 63
CHAPTER 1 EXCEL GUIDE 65
1 Defining and Collecting EG1.1 Defining Variables 65
Data 46 EG1.2 Types of Sampling Methods 65
EG1.3 Data Cleaning 66
EG1.4 Other Data Preprocessing 66
USING STATISTICS: Defining Moments 46
1.1 Defining Variables 47 CHAPTER 1 TABLEAU GUIDE 67
Classifying Variables by Type 47 TG1.1 Defining Variables 67
Measurement Scales 48 TG1.2 Data Cleaning 67

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2 Organizing and Visualizing EG2.3 Visualizing Categorical Variables 122

EG2.4 Visualizing Numerical Variables 124
Variables 68 EG2.5 Visualizing Two Numerical Variables 127
EG2.6 Organizing a Mix of Variables 128
USING STATISTICS: “The Choice Is Yours” 68 EG2.7 Visualizing a Mix of Variables 129
2.1 Organizing Categorical Variables 69 EG2.8 Filtering and Querying Data 131
The Summary Table 69
CHAPTER 2 TABLEAU GUIDE 131
The Contingency Table 70
TG2.1 Organizing Categorical Variables 131
2.2 Organizing Numerical Variables 73 TG2.2 Organizing Numerical Variables 132
The Frequency Distribution 74
TG2.3 Visualizing Categorical Variables 132
The Relative Frequency Distribution and the Percentage
Distribution 76 TG2.4 Visualizing Numerical Variables 134
The Cumulative Distribution 78 TG2.5 Visualizing Two Numerical Variables 135
TG2.6 Organizing a Mix of Variables 135
2.3 Visualizing Categorical Variables 81
The Bar Chart 81 TG2.7 Visualizing a Mix of Variables 136
The Pie Chart and the Doughnut Chart 82
The Pareto Chart 83
Visualizing Two Categorical Variables 85
3 Numerical Descriptive
2.4 Visualizing Numerical Variables 88
The Stem-and-Leaf Display 88 Measures 138
The Histogram 89
The Percentage Polygon 90 USING STATISTICS: More Descriptive Choices 138
The Cumulative Percentage Polygon (Ogive) 91 3.1 Measures of Central Tendency 139
2.5 Visualizing Two Numerical Variables 95 The Mean 139
The Scatter Plot 95 The Median 141
The Time-Series Plot 96 The Mode 142
2.6 Organizing a Mix of Variables 98 The Geometric Mean 143
Drill-Down 99 3.2 Measures of Variation and Shape 144
2.7 Visualizing a Mix of Variables 100 The Range 144
Colored Scatter Plot (Tableau) 100 The Variance and the Standard Deviation 145
Bubble Chart 101 The Coefficient of Variation 147
PivotChart 101 Z Scores 148
Treemap 101 Shape: Skewness 150
Sparklines 102 Shape: Kurtosis 150
2.8 Filtering and Querying Data 103 3.3 Exploring Numerical Variables 155
Excel Slicers 103 Quartiles 155
The Interquartile Range 157
2.9 Pitfalls in Organizing and Visualizing Variables 105
The Five-Number Summary 158
Obscuring Data 105
The Boxplot 159
Creating False Impressions 106
Chartjunk 107 3.4 Numerical Descriptive Measures for
a Population 162
USING STATISTICS: “The Choice Is Yours,” Revisited 109
The Population Mean 162
SUMMARY 109 The Population Variance and Standard Deviation 163
REFERENCES 110 The Empirical Rule 164
KEY EQUATIONS 110 Chebyshev’s Theorem 164
KEY TERMS 111 3.5 The Covariance and the Coefficient of Correlation 166
CHECKING YOUR UNDERSTANDING 111 The Covariance 166
CHAPTER REVIEW PROBLEMS 111 The Coefficient of Correlation 167

CASES FOR CHAPTER 2 116 3.6 Descriptive Statistics: Pitfalls and Ethical Issues 171
Managing Ashland MultiComm Services 116 USING STATISTICS: More Descriptive Choices,
Digital Case 116 Revisited 171
CardioGood Fitness 117 SUMMARY 172
The Choice Is Yours Follow-Up 117 REFERENCES 172
Clear Mountain State Student Survey 117 KEY EQUATIONS 172
CHAPTER 2 EXCEL GUIDE 118 KEY TERMS 173
EG2.1 Organizing Categorical Variables 118 CHECKING YOUR UNDERSTANDING 173
EG2.2 Organizing Numerical Variables 120 CHAPTER REVIEW PROBLEMS 174

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CASES FOR CHAPTER 3 177

Managing Ashland MultiComm Services 177
5 Discrete Probability
Digital Case 177 Distributions 206
CardioGood Fitness 177
More Descriptive Choices Follow-Up 177 USING STATISTICS: Events of Interest at Ricknel Home
Clear Mountain State Student Survey 177 Centers 206
CHAPTER 3 EXCEL GUIDE 178 5.1 The Probability Distribution for a Discrete Variable 207
EG3.1 Measures of Central Tendency 178 Expected Value of a Discrete Variable 207
EG3.2 Measures of Variation and Shape 179 Variance and Standard Deviation of a Discrete Variable 208
EG3.3 Exploring Numerical Variables 179 5.2 Binomial Distribution 211
EG3.4 Numerical Descriptive Measures for a Population 180 Histograms for Discrete Variables 214
EG3.5 The Covariance and the Coefficient of Correlation 180 Summary Measures for the Binomial Distribution 215
5.3 Poisson Distribution 218
CHAPTER 3 TABLEAU GUIDE 181
TG3.1 Exploring Numerical Variables 181 5.4 Covariance of a Probability Distribution and its
Application in Finance 221
5.5 Hypergeometric Distribution 221
4 Basic Probability 182 USING STATISTICS: Events of Interest …, Revisited 221
SUMMARY 222
USING STATISTICS: Probable Outcomes at Fredco REFERENCES 222
Warehouse Club 182
KEY EQUATIONS 222
4.1 Basic Probability Concepts 183 KEY TERMS 222
Events and Sample Spaces 183
CHECKING YOUR UNDERSTANDING 222
Types of Probability 184
CHAPTER REVIEW PROBLEMS 223
Summarizing Sample Spaces 185
Simple Probability 185 CASES FOR CHAPTER 5 225
Joint Probability 187 Managing Ashland MultiComm Services 225
Marginal Probability 187 Digital Case 225
General Addition Rule 188 CHAPTER 5 EXCEL GUIDE 226
4.2 Conditional Probability 191 EG5.1 The Probability Distribution for a Discrete Variable 226
Calculating Conditional Probabilities 191 EG5.2 Binomial Distribution 226
Decision Trees 193 EG5.3 Poisson Distribution 226
Independence 194
Multiplication Rules 195
Marginal Probability Using the General
Multiplication Rule 196
6 The Normal Distribution
4.3 Ethical Issues and Probability 199 and Other Continuous
4.4 Bayes’ Theorem 199 Distributions 228
CONSIDER THIS: Divine Providence and Spam 200
USING STATISTICS: Normal Load Times at MyTVLab 228
4.5 Counting Rules 201
6.1 Continuous Probability Distributions 229
USING STATISTICS: Probable Outcomes at Fredco
Warehouse Club, Revisited 201 6.2 The Normal Distribution 230
Role of the Mean and the Standard Deviation 231
SUMMARY 201
Calculating Normal Probabilities 232
REFERENCES 202
KEY EQUATIONS 202 VISUAL EXPLORATIONS: Exploring the Normal
Distribution 236
KEY TERMS 202
Finding X Values 237
CHECKING YOUR UNDERSTANDING 202
CONSIDER THIS: What Is Normal? 240
CHAPTER REVIEW PROBLEMS 203
6.3 Evaluating Normality 242
CASES FOR CHAPTER 4 204
Comparing Data Characteristics to Theoretical Properties 242
Digital Case 204
Constructing the Normal Probability Plot 243
CardioGood Fitness 204
The Choice Is Yours Follow-Up 204 6.4 The Uniform Distribution 245
Clear Mountain State Student Survey 204 6.5 The Exponential Distribution 247
CHAPTER 4 EXCEL GUIDE 205 6.6 The Normal Approximation to the Binomial
EG4.1 Basic Probability Concepts 205 Distribution 247
EG4.2 Bayes’ Theorem 205 USING STATISTICS: Normal Load Times …, Revisited 248
SUMMARY 248

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REFERENCES 248 8.2 Confidence Interval Estimate for the Mean

KEY EQUATIONS 249 (σ Unknown) 280
KEY TERMS 249 Student’s t Distribution 280
The Concept of Degrees of Freedom 281
CHECKING YOUR UNDERSTANDING 249
Properties of the t Distribution 281
CHAPTER REVIEW PROBLEMS 249
The Confidence Interval Statement 283
CASES FOR CHAPTER 6 251 8.3 Confidence Interval Estimate for the Proportion 288
Managing Ashland MultiComm Services 251
8.4 Determining Sample Size 291
CardioGood Fitness 251
Sample Size Determination for the Mean 291
More Descriptive Choices Follow-Up 251
Sample Size Determination for the Proportion 293
Clear Mountain State Student Survey 251
Digital Case 251 8.5 Confidence Interval Estimation and Ethical Issues 296
CHAPTER 6 EXCEL GUIDE 252 8.6 Application of Confidence Interval Estimation in
Auditing 296
EG6.1 The Normal Distribution 252
EG6.2 Evaluating Normality 252 8.7 Estimation and Sample Size Determination for Finite
Populations 296
8.8 Bootstrapping 296
7 Sampling Distributions 254 USING STATISTICS: Getting Estimates at Ricknel Home
Centers, Revisited 297
USING STATISTICS: Sampling Oxford Cereals 254 SUMMARY 297
7.1 Sampling Distributions 255 REFERENCES 297
7.2 Sampling Distribution of the Mean 255 KEY EQUATIONS 298
The Unbiased Property of the Sample Mean 255 KEY TERMS 298
Standard Error of the Mean 257 CHECKING YOUR UNDERSTANDING 298
Sampling from Normally Distributed CHAPTER REVIEW PROBLEMS 298
Populations 258
Sampling from Non-Normally Distributed Populations—The CASES FOR CHAPTER 8 301
Central Limit Theorem 261 Managing Ashland MultiComm Services 301
Digital Case 302
VISUAL EXPLORATIONS: Exploring Sampling
Sure Value Convenience Stores 302
Distributions 265
CardioGood Fitness 302
7.3 Sampling Distribution of the Proportion 266 More Descriptive Choices Follow-Up 302
7.4 Sampling from Finite Populations 269 Clear Mountain State Student Survey 302
USING STATISTICS: Sampling Oxford Cereals, CHAPTER 8 EXCEL GUIDE 303
Revisited 269 EG8.1 Confidence Interval Estimate for the Mean (s Known) 303
SUMMARY 270 EG8.2 Confidence Interval Estimate for the Mean (s Unknown) 303
REFERENCES 270 EG8.3 Confidence Interval Estimate for the Proportion 304
KEY EQUATIONS 270 EG8.4 Determining Sample Size 304
KEY TERMS 270
CHECKING YOUR UNDERSTANDING 270
CHAPTER REVIEW PROBLEMS 271 9 Fundamentals of Hypothesis
CASES FOR CHAPTER 7 272 Testing: One-Sample Tests 305
Managing Ashland MultiComm Services 272
Digital Case 272 USING STATISTICS: Significant Testing at Oxford
CHAPTER 7 EXCEL GUIDE 273 Cereals 305
EG7.1 Sampling Distribution of the Mean 273 9.1 Fundamentals of Hypothesis Testing 306
The Critical Value of the Test Statistic 307
Regions of Rejection and Nonrejection 308

8 Confidence Interval Risks in Decision Making Using Hypothesis Testing 308

Z Test for the Mean (σ Known) 310
Estimation 274 Hypothesis Testing Using the Critical Value Approach 310
Hypothesis Testing Using the p-Value Approach 314
USING STATISTICS: Getting Estimates at Ricknel Home A Connection Between Confidence Interval Estimation and
Centers 274 Hypothesis Testing 316
8.1 Confidence Interval Estimate for the Mean Can You Ever Know the Population Standard Deviation? 317
(σ Known) 275 9.2 t Test of Hypothesis for the Mean (σ Unknown) 318
Sampling Error 276 Using the Critical Value Approach 319
Can You Ever Know the Population Standard Deviation? 279 Using the p-Value Approach 320

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Checking the Normality Assumption 321 USING STATISTICS: Differing Means for Selling …,
9.3 One-Tail Tests 324 Revisited 370
Using the Critical Value Approach 324 SUMMARY 371
Using the p-Value Approach 326 REFERENCES 372
9.4 Z Test of Hypothesis for the Proportion 328 KEY EQUATIONS 372
Using the Critical Value Approach 329 KEY TERMS 372
Using the p-Value Approach 330 CHECKING YOUR UNDERSTANDING 373
9.5 Potential Hypothesis-Testing Pitfalls and Ethical CHAPTER REVIEW PROBLEMS 373
Issues 332
CASES FOR CHAPTER 10 375
Important Planning Stage Questions 332
Managing Ashland MultiComm Services 375
Statistical Significance Versus Practical Significance 333
Digital Case 375
Statistical Insignificance Versus Importance 333
Sure Value Convenience Stores 376
Reporting of Findings 333
CardioGood Fitness 376
Ethical Issues 333
More Descriptive Choices Follow-Up 376
9.6 Power of the Test 333 Clear Mountain State Student Survey 376
USING STATISTICS: Significant Testing …, Revisited 334 CHAPTER 10 EXCEL GUIDE 377
SUMMARY 334 EG10.1 Comparing the Means of Two Independent
REFERENCES 334 Populations 377
KEY EQUATIONS 335 EG10.2 Comparing the Means of Two Related Populations 379
KEY TERMS 335 EG10.3 Comparing the Proportions of Two Independent
Populations 380
CHECKING YOUR UNDERSTANDING 335
EG10.4 F Test for the Ratio of Two Variances 381
CHAPTER REVIEW PROBLEMS 335
CASES FOR CHAPTER 9 337
Managing Ashland MultiComm Services 337 11 Analysis of Variance 382
Digital Case 337
Sure Value Convenience Stores 338
USING STATISTICS: The Means to Find Differences
CHAPTER 9 EXCEL GUIDE 339 at Arlingtons 382
EG9.1 Fundamentals of Hypothesis Testing 339 11.1 One-Way ANOVA 383
EG9.2 t Test of Hypothesis for the Mean (s Unknown) 339 F Test for Differences Among More Than Two Means 386
EG9.3 One-Tail Tests 340 One-Way ANOVA F Test Assumptions 390
EG9.4 Z Test of Hypothesis for the Proportion 340 Levene Test for Homogeneity of Variance 391
Multiple Comparisons: The Tukey-Kramer Procedure 392
11.2 Two-Way ANOVA 397
10 Two-Sample Tests 341 Factor and Interaction Effects 397
Testing for Factor and Interaction Effects 399
USING STATISTICS: Differing Means for Selling Streaming Multiple Comparisons: The Tukey Procedure 403
Media Players at Arlingtons? 341 Visualizing Interaction Effects: The Cell Means Plot 404
10.1 Comparing the Means of Two Independent Interpreting Interaction Effects 404
Populations 342 11.3 The Randomized Block Design 409
Pooled-Variance t Test for the Difference Between Two 11.4 Fixed Effects, Random Effects, and Mixed Effects
Means Assuming Equal Variances 342
Models 409
Evaluating the Normality Assumption 345
USING STATISTICS: The Means to Find Differences at
Confidence Interval Estimate for the Difference Between Two
Means 347 Arlingtons, Revisited 409
Separate-Variance t Test for the Difference Between Two SUMMARY 409
Means, Assuming Unequal Variances 348 REFERENCES 410
CONSIDER THIS: Do People Really Do This? 349 KEY EQUATIONS 410
10.2 Comparing the Means of Two Related Populations 351 KEY TERMS 411
Paired t Test 352 CHECKING YOUR UNDERSTANDING 411
Confidence Interval Estimate for the Mean Difference 357 CHAPTER REVIEW PROBLEMS 411
10.3 Comparing the Proportions of Two Independent CASES FOR CHAPTER 11 413
Populations 359 Managing Ashland MultiComm Services 413
Z Test for the Difference Between Two Proportions 359 PHASE 1 413
Confidence Interval Estimate for the Difference Between PHASE 2 413
Two Proportions 363 Digital Case 414
10.4 F Test for the Ratio of Two Variances 366 Sure Value Convenience Stores 414
10.5 Effect Size 370 CardioGood Fitness 414

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More Descriptive Choices Follow-Up 414

Clear Mountain State Student Survey 414
CHAPTER 11 EXCEL GUIDE 415
EG11.1 The Completely Randomized Design: One-Way ANOVA 415
EG11.2 The Factorial Design: Two-Way ANOVA 417
12 Chi-Square and
Nonparametric Tests 419
USING STATISTICS: Avoiding Guesswork About Resort
Guests 419
12.1 Chi-Square Test for the Difference Between
Two Proportions 420
12.2 Chi-Square Test for Differences Among More Than
Two Proportions 427
The Marascuilo Procedure 430
The Analysis of Proportions (ANOP) 432
12.3 Chi-Square Test of Independence 433
12.4 Wilcoxon Rank Sum Test for Two Independent
Populations 439
12.5 Kruskal-Wallis Rank Test for the One-Way ANOVA 445
Assumptions of the Kruskal-Wallis Rank Test 448
12.6 McNemar Test for the Difference Between Two
Proportions (Related Samples) 449
12.7 Chi-Square Test for the Variance or Standard
Deviation 449
12.8 Wilcoxon Signed Ranks Test for Two Related
Populations 450
USING STATISTICS: Avoiding Guesswork …, Revisited 450
REFERENCES 450
SUMMARY 450
KEY EQUATIONS 451
KEY TERMS 452
CHECKING YOUR UNDERSTANDING 452
CHAPTER REVIEW PROBLEMS 452
CASES FOR CHAPTER 12 454
Managing Ashland MultiComm Services 454
PHASE 1 454
PHASE 2 454
Digital Case 455
Sure Value Convenience Stores 455
CardioGood Fitness 455
More Descriptive Choices Follow-Up 455
Clear Mountain State Student Survey 455
CHAPTER 12 EXCEL GUIDE 457
EG12.1 Chi-Square Test for the Difference Between Two
Proportions 457
EG12.2 Chi-Square Test for Differences Among More Than Two
Proportions 457
EG12.3 Chi-Square Test of Independence 458
EG12.4 Wilcoxon Rank Sum Test: A Nonparametric Method
for Two Independent Populations 458
EG12.5 Kruskal-Wallis Rank Test: A Nonparametric Method
for the One-Way ANOVA 459
13 Simple Linear Regression 460
USING STATISTICS: Knowing Customers at Sunflowers
Apparel 460
Preliminary Analysis 461
13.1 Simple Linear Regression Models 462
13.2 Determining the Simple Linear Regression Equation 463
The Least-Squares Method 463
Predictions in Regression Analysis: Interpolation Versus
Extrapolation 466
Calculating the Slope, b1, and the Y Intercept, b0 467
VISUAL EXPLORATIONS: Exploring Simple Linear
Regression Coefficients 469
13.3 Measures of Variation 471
Computing the Sum of Squares 471
The Coefficient of Determination 473
Standard Error of the Estimate 474
13.4 Assumptions of Regression 475
13.5 Residual Analysis 476
Evaluating the Assumptions 476
13.6 Measuring Autocorrelation: The Durbin-Watson
Statistic 480
Residual Plots to Detect Autocorrelation 480
The Durbin-Watson Statistic 481
13.7 Inferences About the Slope and Correlation
Coefficient 484
t Test for the Slope 484
F Test for the Slope 485
Confidence Interval Estimate for the Slope 487
t Test for the Correlation Coefficient 487
13.8 Estimation of Mean Values and Prediction
of Individual Values 490
The Confidence Interval Estimate
for the Mean Response 491
The Prediction Interval for an Individual Response 492
13.9 Potential Pitfalls in Regression 494
USING STATISTICS: Knowing Customers …, Revisited 496
SUMMARY 497
REFERENCES 498
KEY EQUATIONS 498
KEY TERMS 499
CHECKING YOUR UNDERSTANDING 499
CHAPTER REVIEW PROBLEMS 500
CASES FOR CHAPTER 13 503
Managing Ashland MultiComm Services 503
Digital Case 503
Brynne Packaging 503
CHAPTER 13 EXCEL GUIDE 504
EG13.1 Determining the Simple Linear Regression Equation 504
EG13.2 Measures of Variation 505
EG13.3 Residual Analysis 505
EG13.4 Measuring Autocorrelation: the Durbin-Watson Statistic 506
EG13.5 Inferences About the Slope and Correlation Coefficient 506
EG13.6 Estimation of Mean Values and Prediction
of Individual Values 506
CHAPTER 13 TABLEAU GUIDE 507
TG13.1 Determining the Simple Linear Regression Equation 507
TG13.2 Measures of Variation 507

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Testing the Quadratic Effect 560

14 Introduction to Multiple The Coefficient of Multiple Determination 563
Regression 508 15.2 Using Transformations in Regression Models 564
The Square-Root Transformation 565
USING STATISTICS: The Multiple Effects of OmniPower The Log Transformation 566
Bars 508 15.3 Collinearity 568
14.1 Developing a Multiple Regression Model 509 15.4 Model Building 570
Interpreting the Regression Coefficients 509 The Stepwise Regression Approach to Model Building 571
Predicting the Dependent Variable Y 511 The Best Subsets Approach to Model Building 572
14.2 Evaluating Multiple Regression Models 513 15.5 Pitfalls in Multiple Regression and Ethical Issues 577
Coefficient of Multiple Determination, r 2 514 Pitfalls in Multiple Regression 577
Adjusted r 2 514 Ethical Issues 577
F Test for the Significance of the Overall Multiple
Regression Model 515
USING STATISTICS: Valuing Parsimony …, Revisited 577
SUMMARY 578
14.3 Multiple Regression Residual Analysis 517
REFERENCES 579
14.4 Inferences About the Population Regression
Coefficients 519 KEY EQUATIONS 579
Tests of Hypothesis 519 KEY TERMS 579
Confidence Interval Estimation 520 CHECKING YOUR UNDERSTANDING 579
14.5 Testing Portions of the Multiple Regression Model 522 CHAPTER REVIEW PROBLEMS 579
Coefficients of Partial Determination 525 CASES FOR CHAPTER 15 581
14.6 Using Dummy Variables and Interaction Terms 527 The Mountain States Potato Company 581
Interactions 533 Sure Value Convenience Stores 582
CONSIDER THIS: What Is Not Normal? (Using a Categorical Digital Case 582
Dependent Variable) 538 The Craybill Instrumentation Company Case 582
14.7 Logistic Regression 539 More Descriptive Choices Follow-Up 583

14.8 Cross-Validation 544 CHAPTER 15 EXCEL GUIDE 584

EG15.1 The Quadratic Regression Model 584
USING STATISTICS: The Multiple Effects …, Revisited 545
EG15.2 Using Transformations in Regression Models 584
SUMMARY 545
EG15.3 Collinearity 585
REFERENCES 547
EG15.4 Model Building 585
KEY EQUATIONS 547
KEY TERMS 548
CHECKING YOUR UNDERSTANDING 548 16 Time-Series Forecasting 586
CHAPTER REVIEW PROBLEMS 548
CASES FOR CHAPTER 14 551 USING STATISTICS: Is the ByYourDoor Service Trending? 586
Managing Ashland MultiComm Services 551 16.1 Time-Series Component Factors 587
Digital Case 551
16.2 Smoothing an Annual Time Series 589
CHAPTER 14 EXCEL GUIDE 552 Moving Averages 589
EG14.1 Developing a Multiple Regression Model 552 Exponential Smoothing 591
EG14.2 Evaluating Multiple Regression Models 553
16.3 Least-Squares Trend Fitting and Forecasting 594
EG14.3 Multiple Regression Residual Analysis 553 The Linear Trend Model 594
EG14.4 Inferences About the Population Regression The Quadratic Trend Model 596
Coefficients 554
The Exponential Trend Model 597
EG14.5 Testing Portions of the Multiple Regression Model 554 Model Selection Using First, Second,
EG14.6 Using Dummy Variables and Interaction Terms 554 and Percentage Differences 599
EG14.7 Logistic Regression 554 16.4 Autoregressive Modeling for Trend Fitting
and Forecasting 603
Selecting an Appropriate Autoregressive Model 604
15 Multiple Regression Determining the Appropriateness of a Selected Model 605

Model Building 556 16.5 Choosing an Appropriate Forecasting Model 612

Residual Analysis 612
The Magnitude of the Residuals Through Squared
USING STATISTICS: Valuing Parsimony at WSTA-TV 556 or Absolute Differences 613
15.1 The Quadratic Regression Model 557 The Principle of Parsimony 614
Finding the Regression Coefficients and Predicting Y 558 A Comparison of Four Forecasting Methods 614
Testing for the Significance of the Quadratic Model 560
16.6 Time-Series Forecasting of Seasonal Data 616

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Least-Squares Forecasting with Monthly

or Quarterly Data 616 18 Getting Ready to Analyze
16.7 Index Numbers 622 Data in the Future 648
CONSIDER THIS: Let the Model User Beware 622
USING STATISTICS: Is the ByYourDoor Service Trending? USING STATISTICS: Mounting Future Analyses 648
Revisited 622 18.1 Analyzing Numerical Variables 649
SUMMARY 622 Describe the Characteristics of a Numerical Variable 649
REFERENCES 623 Reach Conclusions About the Population Mean
or the Standard Deviation 649
KEY EQUATIONS 623
Determine Whether the Mean and/or Standard Deviation
KEY TERMS 624
Differs Depending on the Group 650
CHECKING YOUR UNDERSTANDING 625 Determine Which Factors Affect the Value of a Variable 650
CHAPTER REVIEW PROBLEMS 625 Predict the Value of a Variable Based on the Values
CASES FOR CHAPTER 16 626 of Other Variables 651
Managing Ashland MultiComm Services 626 Classify or Associate Items 651
Digital Case 626 Determine Whether the Values of a Variable Are Stable
Over Time 651
CHAPTER 16 EXCEL GUIDE 627
18.2 Analyzing Categorical Variables 651
EG16.1 Smoothing an Annual Time Series 627
Describe the Proportion of Items of Interest
EG16.2 Least-Squares Trend Fitting and Forecasting 628 in Each Category 651
EG16.3 Autoregressive Modeling for Trend Fitting and Reach Conclusions About the Proportion of Items
Forecasting 628 of Interest 652
EG16.4 Choosing an Appropriate Forecasting Model 629 Determine Whether the Proportion of Items of Interest Differs
EG16.5 Time-Series Forecasting of Seasonal Data 629 Depending on the Group 652
Predict the Proportion of Items of Interest Based
on the Values of Other Variables 652
17 Business Analytics 630 Cluster or Associate Items 652
Determine Whether the Proportion of Items of Interest
Is Stable Over Time 652
USING STATISTICS: Back to Arlingtons for the Future 630
USING STATISTICS: The Future to Be Visited 653
17.1 Business Analytics Overview 631
CHAPTER REVIEW PROBLEMS 653
Business Analytics Categories 631
Business Analytics Vocabulary 632
CONSIDER THIS: What’s My Major If I Want 19 Statistical Applications
to Be a Data Miner? 632
Inferential Statistics and Predictive Analytics 633
in Quality Management
Microsoft Excel and Business Analytics 634 (online) 19-1
Remainder of This Chapter 634
17.2 Descriptive Analytics 634 USING STATISTICS: Finding Quality at the
Dashboards 635 Beachcomber 19-1
Data Dimensionality and Descriptive Analytics 636 19.1 The Theory of Control Charts 19-2
17.3 Decision Trees 636 The Causes of Variation 19-2
Regression Trees 637 19.2 Control Chart for the Proportion: The p Chart 19-4
Classification Trees 638
19.3 The Red Bead Experiment: Understanding
Subjectivity and Interpretation 639 Process Variability 19-10
17.4 Clustering 639 19.4 Control Chart for an Area of Opportunity:
17.5 Association Analysis 640 The c Chart 19-12
17.6 Text Analytics 641 19.5 Control Charts for the Range and the Mean 19-15
17.7 Prescriptive Analytics 642 The R Chart 19-15
Optimization and Simulation 643 The X Chart 19-18

USING STATISTICS: Back to Arlingtons …, Revisited 643 19.6 Process Capability 19-21
REFERENCES 643 Customer Satisfaction and Specification Limits 19-21
Capability Indices 19-22
KEY TERMS 644
CPL, CPU, and C pk 19-23
CHECKING YOUR UNDERSTANDING 644
19.7 Total Quality Management 19-26
CHAPTER 17 SOFTWARE GUIDE 645
19.8 Six Sigma 19-27
SG17.1 Descriptive Analytics 645
The DMAIC Model 19-28
SG17.2 Predictive Analytics for Clustering 646
Roles in a Six Sigma Organization 19-29
Lean Six Sigma 19-29

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USING STATISTICS: Finding Quality at the Beachcomber, A.3 Rules for Algebra: Exponents and Square Roots 656
Revisited 19-30 A.4 Rules for Logarithms 657
SUMMARY 19-30 A.5 Summation Notation 658
A.6 Greek Alphabet 661
REFERENCES 19-31
KEY EQUATIONS 19-31 B. Important Software Skills and Concepts 662
B.1 Identifying the Software Version 662
KEY TERMS 19-32
B.2 Formulas 662
CHAPTER REVIEW PROBLEMS 19-32 B.3 Excel Cell References 663
CASES FOR CHAPTER 19 19-35 B.4 Excel Worksheet Formatting 665
The Harnswell Sewing Machine Company Case 19-35 B.5E Excel Chart Formatting 666
PHASE 1 19-35 B.5T Tableau Chart Formatting 667
PHASE 2 19-35 B.6 Creating Histograms for Discrete Probability
PHASE 3 19-36 Distributions (Excel) 668
B.7 Deleting the “Extra” Histogram Bar (Excel) 668
PHASE 4 19-36
PHASE 5 19-36 C. Online Resources 670
Managing Ashland Multicomm Services 19-37 C.1 About the Online Resources for This Book 670
C.2 Data Files 670
CHAPTER 19 EXCEL GUIDE 19-38
C.3 Microsoft Excel Files Integrated With This Book 676
EG19.2 Control Chart for the Proportion: The p Chart 19-38 C.4 Supplemental Files 676
EG19.4 Control Chart for an Area of Opportunity:
D. Configuring Software 677
The c Chart 19-39
D.1 Microsoft Excel Configuration 677
EG19.5 Control Charts for the Range and the Mean 19-40
D.2 Supplemental Files 678
EG19.6 Process Capability 19-41
E. Table 679
E.1 Table of Random Numbers 679

20 Decision Making (online) 20-1

E.2
E.3
The Cumulative Standardized Normal Distribution 681
Critical Values of t 683
E.4 Critical Values of x2 685
USING STATISTICS: Reliable Decision Making 20-1 E.5 Critical Values of F 686
20.1 Payoff Tables and Decision Trees 20-2 E.6 Lower and Upper Critical Values, T1, of the Wilcoxon
Rank Sum Test 690
20.2 Criteria for Decision Making 20-6
E.7 Critical Values of the Studentized Range, Q 691
Maximax Payoff 20-6
E.8 Critical Values, dL and dU, of the Durbin-Watson Statistic, D
Maximin Payoff 20-7 (Critical Values Are One-Sided) 693
Expected Monetary Value 20-7 E.9 Control Chart Factors 694
Expected Opportunity Loss 20-9 E.10 The Standardized Normal Distribution 695
Return-to-Risk Ratio 20-11
F. Useful Knowledge 696
20.3 Decision Making with Sample Information 20-16 F.1 Keyboard Shortcuts 696
20.4 Utility 20-21 F.2 Understanding the Nonstatistical Excel Functions 696

CONSIDER THIS: Risky Business 20-22 G. Software FAQs 698

G.1 Microsoft Excel FAQs 698
USING STATISTICS: Reliable Decision Making,
G.2 PHStat FAQs 698
Revisited 20-22
G.3 Tableau FAQs 699
SUMMARY 20-23
H. All About PHStat 700
REFERENCES 20-23
H.1 What is PHStat? 700
KEY EQUATIONS 20-23 H.2 Obtaining and Setting Up PHStat 701
KEY TERMS 20-23 H.3 Using PHStat 701
CHAPTER REVIEW PROBLEMS 20-23 H.4 PHStat Procedures, by Category 702

CASES FOR CHAPTER 20 20-26

Digital Case 20-26 Self-Test Solutions and Answers to
CHAPTER 20 EXCEL GUIDE 20-27 Selected Even-Numbered Problems 703
EG 20.1 Payoff Tables and Decision Trees 20-27
EG 20.2 Criteria for Decision Making 20-27 Index 743
Credits 750
Appendices 655
A. Basic Math Concepts and Symbols 656
A.1 Operators 656
A.2 Rules for Arithmetic Operations 656

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