Table of Contents

QUESTION ONE...........................................................................................................................................2
QUESTION TWO..........................................................................................................................................5
QUESTION THREE........................................................................................................................................9
QUESTION FOUR.......................................................................................................................................11
QUESTION FIVE.........................................................................................................................................15

pg. 1
QUESTION ONE
i)

Demand Forecas Forecast ABS

Month (t) (Dt) t Error FE2 ABS PERCENTAGE

1 80 -

2 90 -

3 70 -

4 100 79 21 441 21 0.21

5 70 87 (17) 289 17 0.24

6 90 82 8 64 8 0.09

4 264.67 15.33 0.18

MFE MSE MAD MAPE
ii) The mean forecast error

=4

iii) MSE

=264.67

iv) MAD

=15.33

v) MAPE

=0.18

PART B

i)

ACTUA FORECASTE
WEEK L D
1 220 200
2 220
3

ii)

pg. 2
 ACTUA FORECASTE
WEEK L D
1 220 200
2 210 220
3 218

PART C

i)

Demand Probability
6000 0.10
8000 0.50
10000 0.30
12000 0.10

SUPPLY
6,000 8,000 10,000 12,000
20,100 11,400 2,700 (6,000)
20,100 26,800 18,100 9,400
20,100 26,800 33,500 24,800
20,100 26,800 33,500 40,200
20,100 25,260 22,720 15,500

ii)

pg. 3
 iii) EMV

SUPPLY
6,000 8,000 10,000 12,000
20,100 11,400 2,700 (6,000)
20,100 26,800 18,100 9,400
20,100 26,800 33,500 24,800
20,100 26,800 33,500 40,200
20,100 25,260 22,720 15,500

iv) EOL

REGRET TABLE
DEMAND PROBABILITY 6000 8000 10000 12000
6,000 0.10 - 15400 30800 46200
8,000 0.50 0 0 15400 30800
10,000 0.30 0 0 0 15400
12,000 0.10 0 0 0 0
EOL 0 1540 10780 24640

v) Considering EMV and the EOL, purchasing 8,000 loaves would be the best alternative among
others because it is more profitable.

pg. 4
 vi)

SD TABLE
DEMAND PROBABILITY 6000 8000 10000 12000
6,000 0.10 - 19209960 40080040 46483360
8,000 0.50 0 1185800 10672200 18972800
10,000 0.30 0 711480 34862520 25613280
12,000 0.10 0 237160 11620840 60712960
SD 0 4620 9860.811 12320
CV 0% 18% 43% 79%
vii)

SD TABLE
DEMAND PROBABILITY 6000 8000 10000 12000
6,000 0.10 - 19209960 40080040 46483360
8,000 0.50 0 1185800 10672200 18972800
10,000 0.30 0 711480 34862520 25613280
12,000 0.10 0 237160 11620840 60712960
SD 0 4620 9860.811 12320
CV 0% 18% 43% 79%
RTRR 5.467532 2.30407 1.262987

viii) It would be the best action to choose as its accumulated the lowest CV nad the Highest
RTRR.

QUESTION TWO
PART A

pg. 5
To decide the best strategy under the EMV approach, we find the expected
value for each of the above decision. The expected value is the sum of the
product of probability and the corresponding profit minus the cost.
EMVat node A=0.75x12,000,000+0.25x1,200,000=9,300,000

EMV at node D2 is the same as EMV at node A

EMVat node B=0.1x12,000,000+0.9x1,200,000=2,280,000

EMV at node D3 is the same as EMV at node B

EMV at node E after considering the

Cost of building the pilot is=0.8x EMVat node D2+0.2X EMVat node D3-Cost of pilot

Pilot=0.8x9,300,000+0.2x2,280,000-300,000

=7,596,000

pg. 6
Thus the EMV, if we build a pilot plant and then build the commercial plant
is 7,596,000
EMV of directly building a commercial plant is 0.6x12,000,000+0.4x1,200,000
=7,680,000

The EMV of halting steel manufacturing is zero.

As can be seen, the greatest EMV is for immediately developing a commercial

plant.

Hence the best strategy for the company is to build the commercial plant
directly.

PART B

Given that number of treatments (r)=4

Number of blocks (S)=3

Total no, of observations N=rs=4x3=12

For sales

Null hypothesis:H01:t1= t2= t3= t4

There is no significant difference in sales made by town salesmen.

Alternative hypothesis: H11: t1≠ t2≠ t3≠ t4

There is a significant difference in sales made by the town salesmen.

For months

Null hypothesis:H02:b1= b2= b3

There is no significant difference in the sales made during different months.

Alternative hypothesis: H12: b1≠ b2≠ b3

There is a significant difference in sales made during different months.

Salesman
Month
A B C D TOTAL
APRIL 36 36 21 35 128
MAY 28 29 31 32 120
JUNE 26 28 29 29 112

pg. 7
 TOTAL 90 93 81 96 360

Correction factor (CF)=G2/N=3602/12

=10,800

Total sum of squares (TSS)=ƩƩXi2-CF

=11,010-10,800

=210

Treatment sum of squares = 1/sƩTp2-CF

=1/3[902+932+812+962] -10,800

=10,842-10,800

=32

Errors sum of squares

ESS=TSS-SStr-SSb

=210-42-32

=136

ANOVA TABLE

Source of Degree of Sum of Mean sum of F

variation freedom squares squares
Treatments r-1=4-1=3 SStr=42 SStr/(r-1)=42/3=14 Fcal=22.6667/14=
Blocks s-1=3-1=2 SSb=32 SSb/(s-1)=32/2=16 Fcal=22.667/16
Errors (r-1)(s-1)=6 136 136/6=22.6667
Total 11 210

For salesman/treatments

Fcal=22.667/14

=1.6191

Ftabulated (6,3) d.f at 95% =8.94

Fcal<Ftab for (6,3) d.f at 95% we accept the null hypothesis because there is no significant
difference in sales made by the four salesmen.
For blocks/months
Fcal=22.667/16

pg. 8
=1.4167
Ftabulated (6,2) d.f at 95%=19.3

Fcal<Ftab for (6,2) d.f at 95%, we accept the null hypothesis. Because there is no significant
difference in the sales made during different months.

QUESTION THREE

i) B=(n∑xy-∑x∑y)/[n∑x2-(∑x)]

=(8*666045-467.1*7805)/(8*43622.85-(467.1)2

=(5328360-3645715.5)/(348982.8-218182.41)

B=12.86

A=y-bx

A=975.625-12.86*58.3875

A=224.5

pg. 9
 The regression equation is

Y=224.5+12.86x

ii) When x=100

Y=224.5+12.86+100

Y=1510.5

iii) If y=3500

3500=224.5+12.86x

12.86x=3275.5

X=254.71

Therefore, energy consumption of the country is 254.71

vi) r=(n∑xy-∑x∑y)/[√(n∑x2√n∑y2-(∑y)2]

r=(8*666045-467.1*7805)/(√(8*43622.85-467.17 2)(8*10693725-78052)

=1682644.5/(√130800.89*24631775

R=0.9374

vi) coefficient of determination=0.93742

r2=0.8787

energy consumption and gross national product explains 87.87% variability in dataset.

Hypothesis:

H0: P= 0

H1: P≠ 0

The sample size n=8

Df=(n-2)

=8-2

=6

ἀ=0.05

rc=0.707

pg. 10
r=0.9374

r>rc, reject H0

There is a linear relationship between x and y, meaning energy consumption and gross national product.

Source of
variation SS DF MS F P

1,768,005.1 252572.1
Between 5 7 6 0.4313

4,684,988.9 585623.6
Within 3 8 2 0.3577

6,452,994.0
Total 8 15

QUESTION FOUR
Given information 

Supplier Good Minor defects Major defects

A 90 3 7

B 170 18 7

C 135 6 9

Alpha = 0.05

i) 

Supplier Good Minor defects Major defects

pg. 11
A

Observed 90 3 7

Expected 88.76 6.07 5.17

O-E 1 -3 2

(O-E)2/E 0.02 1.55 0.65

Observed 170 18 7

Expected 173.09 11.83 10.08

O-E -3.09 6.17 -3.08

(O-E)2/E 0.06 3.22 0.94

Observed 135 6 9

Expected 133.15 9.10 7.75

O-E 1.85 -3.10 1.25

(O-E)2/E 0.03 1.06 0.20

X2=∑(o-e)2/e

X2=0.02+1.55+0.65+0.06+3.22+0.94+0.03+1.06+0.2

=7.71

pg. 12
Calculation of df 
df = (r-1) (c-1) 
df = (3-1)(3-1) 
df = 2(2) 
df = 4 

Thus, the critical value from the table is 9.488

Hence, the Null hypothesis will not be rejected. Whereas, suppliers and spare
parts quality are independent. 

ii) Supplier and spare parts quality has no connection with each other. Thus,
defects of spare parts are not dependent upon the supplier. 

PART B

(i)

0 7 0

1 20 20

2 12 24

3 9 27

4 1 4

5 1 5

Mean =∑fx/∑f

=80/50

=1.6

Mean number of living flies=1.6

pg. 13
EXPECTED FREQUENCY
Observed Expected
Number of frequency frequency -
living (x) (O) E
0 7 7.3
1 20 17.1
2 12 16.1
3 9 7.6
4 1 1.75
5 1 0.15
50 50

Null and alternative hypothesis

H0:PA=PB

H1: PA ≠ PB
Significance level,ἀ=0.01

The test statistic is X2=∑(0-E)2/E

Where O= observed values and E= Expected values

Col 1 Col 2 Total

Row 1 -
Observed 24 22 46
Expected 23 23 46
O-E 1 -1 0
(O-E)2/E 0.04 0.04 0.09
Row 2 -
Observed 16 18 34
Expected 17 17 34
O-E -1 1 0
(O-E)2/E 0.06 0.06 0.12
Total -
Observed 40 40 80
Expected 40 40 80
O-E 0 0 0
(O-E)2/E 0.1 0.1 0.2

Hence, the test statistic is 0.2.

pg. 14
Degrees of freedom:

Df=(r-1)(c-1)

=(2-1)(2-1)

=1

Critical value:

The chi square critical value for a right tailed test, for a significance level of
ἀ=0.01 is X2=6.635.

Since the test statistic value is less than the critical value, so we fail to reject
H0. Hence there is no significant difference between population A and
population B.

QUESTION FIVE
PART A

Index number
A number showing the variation in a price or value compared with the price or value at a specified
earlier time (often represented by the number 100).

Time series

a time series is a series of data points indexed in time order. Most commonly, a time series is a
sequence taken at successive equally spaced points in time. Thus it is a sequence of discrete-time
data.

PART B

Taking 1998 as base year, base price =6

Index =(current
Year price price/6)*100
1998 6 100
1999 7 116.67
2000 7 116.67
2001 8 133.33
2002 10 166.67
2003 14 233.32
2004 12 200
2005 13 216.67

pg. 15
Taking 2002 as base , base price =10
Index =(current
Year price price/10)*100
1998 6 60
1999 7 70
2000 7 70
2001 8 80
2002 10 100
2003 14 140
2004 12 120
2005 13 130

Average of price of
1998,1999,2000=6.67
Index =(current
Year price price/6.67)*100
1998 6 89.96
1999 7 104.94
2000 7 104.94
2001 8 119.94
2002 10 149.92
2003 14 209.89
2004 12 179.91
2005 13 194.90

PART C

Calculation of five yearly moving average

Production 5 yearly 5 yearly moving Short term

Year in 000 tons moving total average fluctuation
197
1 105 - -
197
2 107 547 109.4 -2.4
197
3 109 558 111.6 -2.6
197
4 112 569 113.8 -1.8
197 114 581 116.2 -2.2

pg. 16
 5
197
6 116 592 118.4 -2.4
197
7 118 602 120.4 -2.4
197
8 121 611 122.2 -1.2
197
9 123 620 124 -1
198
0 124 628 125.6 -1.6
198
1 125 - - -
198
2 127 - - -
198
3 129 - - -

Hence five yearly moving averages are 109.4,111.6,113.8,116.2,118.4,120.4,122.2,124 and 125.6

Short term fluctuations are -2.4,-2.6,-1.8,-2.2,-2.4,-2.4,-1.2,-1 and -1.6.

PART D

Laspeyre's price index number

[(sum of (price at observation
period*Base quantity)]/[(Sum of
(price at base period*Base
Laspeyre's price index number quantity)]*100 Formula

2000 Base period

2005 Observation period

(Sum of (price of observation

period*Base quantity) 535 (22*15)+(27*5)+(7*10)

(Sum of (price at base

period*base quantity) 365 (15*15)+(20*5)+(4*10)
(Sum of (Price at observation
period*base quantity)/(Sum of
(price at base period*base
quantity) 1 535/365

(Sum of (Price at observation

period*Base quantity)/(Sum of
(price at base period*base
quantity)*100 147 1.4658*100

pg. 17
 Paasche's price
index number
[(sum of (price at
observation
period*Base
quantity)]/[(Sum
of (price at base
period*Base
Paasche's price index number quantity)]*100 Formula

2000 Base period

Observation
2005 period

(Sum of (price of observation (22*12)+(27*4)+(7*5

period*Base quantity) 407 )

(Sum of (price at base (15*12)+(20*4)+(4*5

period*base quantity) 280 )
(Sum of (Price at observation
period*base quantity)/(Sum of
(price at base period*base
quantity) 1 407/280

(Sum of (Price at observation

period*Base quantity)/(Sum of
(price at base period*base
quantity)*100 145 1.4536*100

Laspeyre's price index 146.58

Paasche's price index 145.36

pg. 18