4601AFYPC Business Mathematics and Statistics

Revision Section B:

Descriptive Statistics, Confidence Interval and Hypothesis testing

1. As part of a national survey, a random sample of train passengers were asked how much they
spent per month on train travel. The sample results for monthly expenditure on train travel
are contained within the following table:

Monthly Expenditure Number of Train passengers

Under £20 25
£20 to under £40 55
£40 to under £60 85
£60 to under £80 20
£80 to under £120 10

When calculated from the ungrouped sample information, the mean and standard deviation for
Train passenger monthly expenditure were, respectively, £44.50 and £23.15.

(a) Using the tabulated sample results, calculate the mean and standard deviation for monthly
cost of train travel.
(10 marks)

(b) Using the ungrouped sample information construct a 99% confidence interval for the
mean monthly cost of train travel. Briefly explain the derived confidence interval.
(5 marks)

(c) Last year, using information supplied by train companies, the mean monthly cost of train
travel was £41.50.
For a significance level of 5%, do the results arising from the ungrouped random sample
indicate that the mean monthly cost of train travel has increased when compared to the
previous year?
(5 marks)

TOTAL 20 MARKS

Sep – Dec 2022

4601AFYPC Business Mathematics and Statistics

Probability and Normal Distribution

2. (a) An analysis of the overdue invoices for goods sold by a printing company indicated that
80% were overdue by less than one month, 20% were overdue by more than one month.

Three invoices have been selected from all the overdue invoices.

i. Draw the probability tree that shows, in terms of the overdue duration, all the possible
outcomes (and corresponding probabilities) arising from the selection of the three
overdue invoices.
(6 marks)

ii. Calculate the probability that exactly one of the invoices will be overdue by less than
one month.
(2 marks)

iii. Determine the probability that at least two of the invoices will be overdue by more than
one month.
(2 marks)

(b) Records indicate that the amounts outstanding for the overdue invoices are approximately
normally distributed with a mean of £65 and standard deviation of £25.

i. Calculate the percentage of overdue invoices having an amount outstanding that exceeds
£105.
(3 marks)

ii. Calculate the percentage of overdue invoices having an amount outstanding less than £35.
(3 marks)

iii. Determine the percentage of overdue invoices having an amount outstanding that is
between £40 and £100.
(4 marks)

TOTAL 20 MARKS

Sep – Dec 2022

4601AFYPC Business Mathematics and Statistics

Net Present Value and Irr (Investment Appraisal)

3. Loafo a baking company, wishes to replace an old bread making machine by acquiring a new
bread making machine. Two bread making machines (Megabred and Crusta) have been
identified as being potential acquisitions. The acquisition costs and estimated net operational
savings during the next 4 years for each bread making machine appear below.

Megabred: An initial acquisition cost of £140,000, payable in two identical instalments at

the beginning and end of the year of acquisition. For years 1 to 4, the respective annual net
operational savings are £75,000, £40,000, £30,000 and £25,000. The expected resale value
(at the end of 4 years) of the waste sorting machine is £20,000.

Crusta: An acquisition cost of £100,000, payable at the time of acquisition. The annual net
operational savings are, respectively, £55,000, £50,000, £40,000 and £20,000 for years 1 to
4. After 4 years, the expected cost of disposal for the waste sorting machine is £10,000.

The estimated cost of capital is 10% per annum.

(a) Determine the Net Present Value for each bread making machine.
(12 marks)

(b) For a cost of capital of 12% calculations indicate that the Net Present values for
Megabread and Crusta are £16,304.50 and £23,796.50 respectively.
Estimate the internal rate of return for each bread making machine.
(6 marks)

(c) Using the solutions obtained in parts (a) and (b), advise Loafo as to the best bread making
machine to acquire.
(2 marks)

TOTAL 20 MARKS

Sep – Dec 2022

4601AFYPC Business Mathematics and Statistics

Test of Association and Goodness of Fit

4. A large airline company has recently changed the ‘conditions of employment’ for staff
employed within its headquarters. Two months after the introduction of the revised
‘conditions of employment’, the Human resources department conducted a random survey of
staff to determine the impact on employee motivation arising from the introduction of the
revised ‘conditions of employment’.

The summarised results of the random survey appear within the following table:

GRADE OF STAFF
Employee Motivation Total
Administrative Supervisory Managerial
Minor improvement 10 5 15 30
No improvement 15 0 20 35
Significant improvement 25 20 10 55

(a) Stating appropriate hypotheses, establish whether there is any association between
Employee Motivation and the Grade of Staff employed within the Airline company
headquarters. Assume a significance level of 10%.
(15 marks)

(b) If an employee is selected at random from the survey respondents, determine the
probability that the employee selected :

i. is a supervisory grade employee or has no improvement as the employee motivation,

(2 marks)

ii. has minor improvement as the employee motivation, given that the grade of staff was
administrative.
(3 marks)

TOTAL 20 MARKS

Sep – Dec 2022

4601AFYPC Business Mathematics and Statistics

Interest, Net Present Value, Linear Programming

5. (a) (i) Calculate the initial deposit that will realise £14,000 (initial deposit plus accrued
interest) after 6 years when placed within an account yielding 1.25% interest, compounded
annually.
(2 marks)

(ii) Find the fixed annual rate of interest, compounded annually, that will realise £18,000
(initial deposit plus accrued interest) after 4 years for an initial deposit of £17,000.
(3 marks)

(b) A printing business is considering the acquisition of a new printing machine. The initial
purchase price of the printing machine is £85,000. The expected annual net cash inflows
arising from the purchase of the printing machine are contained within the following table:

Year 1 2 3 4 5
Net Cash Inflow £24,500 £23,000 £21,000 £19,000 £18,000

i. Using the Net Present Value method of investment appraisal, assess the viability of
purchasing the printing machine. The cost of capital is 7% per annum.
(7 marks)

ii. Estimate the Internal Rate of Return associated with the proposed purchase of the printing
machine.
(3 marks)

(c) Kronos manufactures two types of watches the : Kingcron and MegaKron. The
production of the watches requires three Machining, Assembly, and Packaging.

The per unit labour requirements (expressed in minutes) for each Kingcron and MegaKron
are contained within the following table:

Machining Assembly Packaging

Kingcron 7 11 6
MegaKron 11 17 7

Kronos employs 2 machinists, each available for 420 minutes per day; 5 assemblers, each
available for 480 minutes per day and 1 packer available for 360 minutes each day.
The per unit profit contributions for the Kingcron and MegaKron are, respectively, £330
and £650.
For maximisation of daily profit contribution, express the above information as a
linear programming model.
(5 marks)
TOTAL 20 MARKS

Sep – Dec 2022