You are on page 1of 86

PAN African e Network Project

DBM
Quantitative Techniques in Management

Semester - 1
Session - 1

Dr. Sarika Jain

Text and References

Text
Quantitative Techniques

C.R. Kothari

Student Study Material (SSM)


Quantitative Techniques

Arun Sharma

References
London N.P., Linear Programming, Tata McGraw-Hill
Gupta S.P.& Gupta M.P. 1995, Business Statistics, 10th Ed. Sultan Chand &
Sons
Kapoor V.K. 1997, Operations Research, 5th Ed. Sultan Chand & Sons
Sharma J.K. 1997, Operations Research: Theory & Application, Mac Millan
India Ltd.
Gupta S.P., Statistical Techniques, Sultan Chand & Sons
Grobner D.F. & Shannon P.W., Essential of Business Statistics: A Decision
Making Approach, MacMillan College Publishing Co.
Fleming M.C. & Joseph G.N. 1996, Statistics for management, 2nd Ed. Prentice
Hall of India
Allen R.G.D. 1997, Mathematics Analysis for Economics, AITBS Publishers &
Distributors

INTRODUCTION TO
STATISTICS

Statistical thinking will one day be as necessary as the


ability to read and write. H. G. Wells
For decision makers, it is important to develop the ability
to extract the meaningful information from raw data to
make better decisions.

Learning of statistics enables the decision maker to understand


1. Present and describe information (data) so as to improve decisions.
2. Draw conclusions about the large population based upon
information obtained from samples.
3. Seek out relationship between pair of variables to improve
processes.
4. Obtain reliable forecasts of statistical variables of interest.

Importance and Scope of


Statistics
1.

Statistics and planning: Statistics in indispensable into planning in the modern age which is termed as the
age of planning. Almost all over the world the govt. are re-storing to planning for economic development.

2.

Statistics and economics: Statistical data and techniques of statistical analysis have to immensely useful
involving economical problem. Such as wages, price, time series analysis, demand analysis.

3.

Statistics and business: Statistics is an irresponsible tool of production control. Business executive are
relying more and more on statistical techniques for studying the much and desire of the valued customers.

4.

Statistics and industry: In industry statistics is widely used inequality control. In production engineering to
find out whether the product is confirming to the specifications or not. Statistical tools, such as inspection
plan, control chart etc.

Importance and Scope of


Statistics
5. Statistics and mathematics: Statistics are intimately related recent advancements in statistical technique are the outcome of
wide applications of mathematics.
6. Statistics and modern science: In medical science the statistical tools for collection, presentation and analysis of observed facts
relating to causes and incidence of dieses and the result of application various drugs and medicine are of great importance.
7. Statistics, psychology and education: In education and physiology statistics has found wide application such as, determining or
to determine the reliability and validity to a test, factor analysis etc.
8. Statistics and war: In war the theory of decision function can be a great assistance to the military and personal to plan
maximum destruction with minimum effort.

Importance and Scope of


Statistics
Statistics in business and management:
1. Marketing: Statistical analysis are frequently used in providing information for making decision in the field of marketing it is necessary first to find out
what can be sold and the to evolve suitable strategy, so that the goods which to the ultimate consumer. A skill full analysis of data on production
purchasing power, man power, habits of compotators, habits of consumer, transportation cost should be consider to take any attempt to establish a
new market.
2. Production: In the field of production statistical data and method play a very important role. The decision about what to produce? How to produce?
When to produce? For whom to produce is based largely on statistical analysis.
3. Finance: The financial organization discharging their finance function effectively depend very heavily on statistical analysis of peat and tigers.

Importance and Scope of Statistics


4. Banking: Banking institute have found if increasingly to establish research department within their organization for the purpose of gathering and analysis information,
not only regarding their own business but also regarding general economic situation and every segment of business in which they may have interest.
5. Investment: Statistics greatly assists investors in making clear and valued judgment in his investment decision in selecting securities which are safe and have the
best prospects of yielding a good income.
6. Purchase: the purchase department in discharging their function makes use of statistical data to frame suitable purchase policies such as what to buy? What quantity
to buy? What time to buy? Where to buy? Whom to buy?

Importance and Scope of Statistics


7. Accounting: statistical data are also employer in accounting particularly in auditing function, the technique of sampling and destination is frequently used.
8. Control: the management control process combines statistical and accounting method in making the overall budget for the coming year including sales,
materials, labor and other costs and net profits and capital requirement.

DATA CLASSIFICATION and


PRESENTATION

In the beginning, we collect data.

This is raw data.

DATA and STATISTICS

DESCRIPTION OF DATA

Various Stages of Statistics


Collection
of Data

Analysis
of Data

Organization
of Data

Presentation
of Data

EXAMPLE:

Ryan wants to know what kinds of food are


the classmates favourites. Find the correct
order of the stages of the statistics
procedures.
(a) Organize the data collected in a table.
(b) Set a questionnaire about the favorite food of classmates.
(c) Analyze the collected data and obtain the conclusion by
using the diagram.
(d) Use a suitable statistical diagram to present the data.
b

A)

Collection of Data
1. Previous Information
Search for relevant information from books,
newspapers, magazines, world wide web, etc.
2. Questionnaire
Set a questionnaire and distribute to each member
of the target group to obtain the relevant information.

A)

Collection of Data
3. Observation
Obtain the required information through direct
observation, measurement or counting.
4. Experiment
Obtain the required information by doing real
experiments.
5. Interview
Through household surveys, street surveys or
telephone interviews to obtain the required data.

EXAMPLE:

Suggest a suitable way to collect each of the following sets of data:


(a) The weights of 30 students in a certain class.
(b) The amount of pocket money that my sister spends each day.
(c) The number of customers shopping in a store between
7:00 a.m. and 12:00 p.m.
(d) The number of births in Hong Kong from 2000 to 2005.

(a) Questionnaire

(b) Interview

(c) Observation

(d) Previous information

B)

Classification of Data
1. Discrete Data
Discrete data can only take up certain values and
these values are usually obtained by counting, and
so are often positive integers.
E.g. the number of rotten apples in a box.
Note : Discrete data may NOT be numbers. Some examples are
peoples religions and favourite singers.
These data are called nominal data.

B)

Classification of Data
2. Continuous Data
Continuous data can take up any value within a
reasonable interval and these values are usually
obtained from measurements.
E.g. the weights of the apples in a box.

EXAMPLE:

The sports shoes sold in the department stores


can have sizes of 5, 5 1 , 6, only, so the
2
sizes of the sports shoes are discrete data.
However, the time (measured in hours)
spent on watching TV per day can be any
value between 0 and 24, e.g. 2, 3.4, 4.15,
etc. Hence the time spent on watching TV
is a kind of continuous data.

EXAMPLE:

Determine whether each of the following sets of data is discrete or


continuous.
(a) The number of blue ball pens in a

Discrete data

(b) bag.
The time that a group of students spent
on their individual presentation.

Continuous data

(c) The weights of 20 children at the age


between 6 and 10.

Continuous data

(d) The number of people who go to Central


by ferry at a particular time of day.

Discrete data

Organization of Discrete Data


1. We can use a frequency distribution table to organize
the data that has been collected.
2. The number of tallies recorded for each value is called
the frequency of that value.

Organization of Discrete Data


For example, the frequency distribution table below
shows the ages of 40 students in Form 1A:
Age

Tally

Number of
students

11

//

12

//// //// ////

15

13

//// //// //// //

17

14

//// /

EXAMPLE:

From the data about the favourite extra-curricula activities of 40


Form 1 students given on the left below, we can organize them
into a frequency distribution table on the right.

EXAMPLE:

Given below are the numbers of mistakes made by


40 students of Form 1A in an English dictation.
1

11

13

17

10

22

18

11

10

14

20

16

10

The teacher arranges the number of mistakes 0 3 into


the first group, 4 7 into the second group, 8 11 into
the third group, 12 15 into the fourth group, 16 19
into the fifth group and 20 23 into the sixth group.
Now try to organize the given data into a frequency
distribution table.

According to the above data and the teachers arrangement, the


following frequency distribution table can be obtained.
Number of
mistakes

Tally

Number of
students

03

//// ////

47

//// //// ///

13

8 11

//// //// /

11

12 15

//

16 19

///

20 23

//

Presentation and Analysis of Discrete Data


A

Pie Charts

Broken-line Graphs

Stem-and-leaf Diagrams

Scatter Diagrams

Choosing Suitable Statistical Graphs to Present Data

Presentation and Analysis of Data


A)

Pie Charts
1. Understanding Pie Charts
i. A pie chart is appropriate to present the various
statistical items as percentages of the whole.
E.g.

Favourite ball games played


by F.1 students in a school

A)

Pie Charts
1. Understanding Pie Chart
ii. Each item can be indicated as a percentage of the
whole set of data or as the angle of the sector.
E.g.

Monthly expenditure
of a family

Monthly expenditure
of a family

A)

Pie Charts
2. Drawing a Pie Chart
i.

Express each item as a percentage of the whole,


then calculate the angle of each sector.
ii. Construct a circle of suitable radius, and draw the
various sectors according to the angles obtained in
(i).
iii. Label clearly the item represented by each sector
and the corresponding percentage (or angle of the
sector).
iv. Give a title to the pie chart.

The pie chart shows the favourite singers of


120 teenagers.
(a) Find the value of x.
(b) What percentage of the teenagers are the
fans of Nick?

(a) x + 90 + 225 = 360

x = 360 90 225
= 45

Favourite singers of
120 teenagers

(b) The percentage of the teenagers who are


the fans of Nick
= 225 100%
360
= 62.6%

Favourite singers of
120 teenagers

EXAMPLE:

In a survey, 400 F.1F.3 students were asked what kind


of music they like most.The results are shown in the
following pie chart.
Favourite kinds of music of 400
F.1F.3 students

(a) Find the value of x in the pie chart.


(b) Find the number of students who love folk music.
(c) Among those students who love folk music, 56
are F.1 students and 49 are F.2 students.
i. Calculate the number of F.3 students who
love folk music.
ii. Draw a pie chart to show, in percentages, the
distribution of students who love folk music
in each form.

(a) 40 + 35 + 5 + x = 100

x = 100 40 35 5
= 20

(b) Number of students who love folk music


= 400 35%
= 140
(c) i. Number of F.3 students who love
folk
music
= 140
56 49
= 35

(c) ii. We first construct the following table:

Total:

140

100%

360o

(c) ii.

The required pie chart:


The distribution of students who love
folk music in each form

B)

Broken-line Graphs
1. Understanding Broken-line Graphs
i. A broken-line graph is used to show the change
in the data over a period of time and their overall
tendency.
E.g.

Annual profits of a company

Year

B)

Broken-line Graphs
2. Drawing a Broken-line Graph
i. List on the horizontal axis, the time of happenings
of the statistical item in order of magnitude.
ii. List the frequencies of the item on the vertical
axis.
iii. All necessary scales, items, values and units
should be shown clearly on the two axes.
iv. Use or x to indicate points that represent the
frequency of the corresponding statistical item.
v. Join adjacent points by line segments.
vi. Give a title to the broken-line graph.

EXAMPLE:

(a) Which period of time did


the number of visitors
increase the most? What
was the increase in
visitors?

160
160

Number
Numberof
ofVisitors
Visitorsto
tothe
thePark
Parkin
inaa
Particular
ParticularDay
Day

140
140

Numberof
ofVisitors
Visitors
Number

The broken-line graph shows


the number of visitors to the
park in a particular day.

120
120
100
100
80
80
60
60
40
40
20
20
00
12:00
12:00

14:00
14:00

16:00
16:00 18:00
18:00
Time
of
Day
Time of Day

(b) Find the difference in the number of visitors


between 14:00 and 18:00 in that particular day.

20:00
20:00

22:00
22:00

160
160

Number
Numberof
ofVisitors
Visitorsto
tothe
thePark
Parkin
inaa
Particular
ParticularDay
Day

Numberof
ofVisitors
Visitors
Number

140
140
120
120
100
100
80
80
60
60
40
40
20
20
00
12:00
12:00

14:00
14:00

16:00
16:00 18:00
18:00
Time
of
Day
Time of Day

20:00
20:00

22:00
22:00

(a) From 12:00 to 14:00. The increase in visitors was 70.


(b) The difference in the number of visitors between 14:00 and
18:00 in that particular day
= 120 80
= 40

EXAMPLE:

The given bar chart shows


the monthly rainfall of a
certain city last year. Paul
lives in that city. The
windows in his home leaked
badly in the four most heavy
rainfall months last year. He
intends to fix the leakage
before those four rainy
months come again this year.

Monthly rainfall (mm)

Monthly rainfall of a certain city last year

Month

EXAMPLE:

(a) With reference to last years data shown above, before


which month should Paul fix the windows?
(b) Draw a broken-line graph to present the
monthly rainfall of that city in last year.

(a) The four most heavy rainfall months last year


were April, May, June and July.
Paul should fix the windows before April.

(b) The broken-line graph showing the monthly rainfall


of that city last year is as follows:

Monthly rainfall (mm)

Monthly rainfall of a certain city last year

Month

C)

Stem-and-leaf Diagrams
1. Understanding Stem-and-leaf Diagrams
i. A stem-and-leaf diagram is used to present the
data in a graphical way and record the values of
all the original data.
E.g.

The weights of 25 students


Stem (10 kg) Leaf (1 kg)
3
4
5
6

8
0
0
1

9
2 3 3 4 6 7 7 8 9
0 1 2 2 2 5 6 8
3 5 7

C)

Stem-and-leaf Diagrams
1. Understanding Stem-and-leaf Diagrams
ii. If we want to compare two groups of related data,
we can use back-to-back stem-and-leaf
E.g.
diagram.

The lifetimes (in hours) of 30 Brand A batteries and 30 Brand B batteries

C)

Stem-and-leaf Diagrams
2. Drawing a Stem-and-leaf Diagram
i. Check the range of the collected data and choose
the place values for the stems and the leaves.
ii. Arrange the numbers in the stem from top to
bottom in an ascending order of magnitude.
iii. List each datum to the right of its corresponding
stem.
iv. Arrange the data in the leaves in ascending order.

The following stem-and-leaf diagram shows the amount of daily


pocket money of students in Class A.
The amount of daily pocket money of students in Class A
Stem ($10) Leaf ($1)
0
1
2
3
4
5

5
2
0
0
0
1

5
5
0
0
0
3

8
5
2 2 3 4 7
0 5 5 8 8
2 2 4 5
5

EXAMPLE:

(a) How many data are recorded in this stem-and-leaf diagram?


(b) It is known that Eric is one of the student
in Class A and he has the largest amount
of daily pocket money. Find the amount
of his daily pocket money.

(a) 30 data are recorded in the stem-and-leaf diagram.


(b) The amount of Erics daily pocket money is $55.

EXAMPLE:

The areas (in square feet) of the homes of 20 students


from F.1A are shown below.
310 430 400 882 790 620 325 622 450 390
730 395 345 560 560 515 481 385 450 390
Using 100 sq. ft. as the stem and
1 sq. ft. as the leaf, construct a
stem-and-leaf diagram to present
the above data.

Areas of Homes of 20 Students from F.1A


Stem (100 sq.ft.)
Leaf (1 sq.ft.)
3

10 25 45 85 90 90 95

00 30 50 50 81

15 60 60

20 22

30 90

82

EXAMPLE:

The results of the IQ test for 2 groups of students A and


B are as follows:
81

Group A
103 119

100

Group B
93 102

86

113

117

85

98

115

112

102

100

114

120

126

121

127

118

114

120

115

112

121

88

90

101

123

106

107

(a) Construct a back-to-back stem-and-leaf diagram to


present the IQ of these two groups of students.
(b) If the IQ of a student is 120 or above, then he/she is
considered as a gifted student.Which group, A or B,
has more gifted students?

(a)

IQ of two groups of students


Group B
Leaf (Units digits)

Stem (Tens digits)

3
7 6 2 2 1 0 0
8 5 4 4 3 2
3 0

8
9
10
11
12

Group A
Leaf (Units digits)
1
0
3
2
0

5 6 8
8
5 7 9
1 1 6 7

(b) From the diagram in (a), there are more students in group A
whose IQ are 120 or above.
Group A has more gifted students.

Scatter Diagrams
1. Understanding Scatter Diagrams
i. A scatter diagram is appropriate to show whether
two variables have close relationship with each other.
E.g.

Incomes and expenditures of 15 families


Expenditure ($)

D)

Income ($)

Example

D)

Scatter Diagrams
1. Understanding Scatter Diagrams
ii. In general, the two variables x and y may relate in
different ways.

values of x increase,
values of y increase

values of x increase,
values of y decrease

two variables do not


have a clear relationship

D)

Scatter Diagrams
2. Drawing a Scatter Diagram
i.

Indicate clearly on the x-axis and y-axis the


variable that each axis represents.

ii. Scales, values and units should be shown clearly


on the two axes.
iii. Represent the corresponding values of the two
variables on the rectangular coordinate plane using
a point or x.
iv. Give a title to the scatter diagram.

EXAMPLE:

The heights of fathers and their sons are shown in the scatter
diagram.
Sons' height
height (cm)
(cm)
Sons'

195
195

Heights
Heights of
of fathers
fathers and
and their
their sons
sons

190
190
185
185
180
180
175
175
170
170
165
165
160
160
155
155
140
140

150
150

160
160

170
170

180
180

Fathers'
Fathers'height
height (cm)
(cm)

190
190

200
200

Do you think there is a relationship between the heights of


fathers and their sons?

Yes, there is a correlation between the heights of fathers and the


heights of their sons.
From the scatter diagram, it can be seen that:
the taller the father is, the taller his son will be.

EXAMPLE:

A group of 10 students studied last


night for their dictation test today.
The table below shows the time that
each student spent on studying and
the number of mistakes that they
made in todays dictation test.

Student
Time spent on studying
(min)
No. of mistakes

EXAMPLE:

(a) Draw a scatter diagram to show the relationship


between the time spent on studying by the 10
students last night and the number of mistakes they
make in the dictation test today.

(b) According to the scatter diagram


obtained in (a), do you think there is a
relationship between the time that a
student spent on studying and the number
of mistakes that he makes in the dictation
test?

(a) The required scatter diagram is:

Number of mistakes

Distribution of time spent on studying and number of


mistakes made in the dictation test

Time spent on studying (min)

(b) From the scatter diagram in (a), it can be seen that:


the more time a student spent on studying for the dictation
test, the fewer mistakes he/she makes.

E)

Choosing Suitable Statistical Graphs to Present Data


There are many different types of statistical graphs.
The one that should be chosen to present the collected
data depends on the nature and the number of data, the
purpose of the survey, the points to be emphasized,
etc.

EXAMPLE:

1. There were 5 major spendings for a certain company last


year.We can show the relationship between each spending
and the total spending by using a pie chart.
Major spendings for a company last year

EXAMPLE:

2. We can show the change in number of students in a certain


secondary school over the last 6 years by using a brokenline graph.

Number of students

Number of students in a secondary school

Year

EXAMPLE:

3. We can show the relationship between the time spent by 30


students in doing their project and the marks they obtained
from the project by using a scatter diagram.

Mark

Time spent and marks obtained


from the project

Time spent (hour)

EXAMPLE:

4. In one of the Home Ownership Schemes provided by the


government, 10 different sizes of flats are available. The
distribution of the areas of these flats can be shown in a
stem-and-leaf diagram.
Areas of flats
Stem (100 sq.ft.)

Leaf (1 sq.ft.)

15 24

30 25 70 89

40 48 90

28

EXAMPLE:

In September 1999, the Walt Disney


Company decided to build a theme
park in Hong Kong.The admission
fee of the theme park would be
around $250 to $350. Some citizens
were interviewed to ask their views
on the admission fees. The
following results were obtained.
Opinion

Number of citizens

Expensive

217

Moderate

285

Cheap

16

EXAMPLE:

Which statistical graph is most suitable to present the above


data, and at the same time
(a) shows clearly the number of citizens in each category.
(b) shows the number of citizens in each category as a
percentage of the total number.
(a) A bar chart can best present the above data.
(b) A pie chart can best present the above data.

Misuse of Statistical Diagrams


Statistical diagrams are sometimes used deliberately
to exaggerate or conceal the truth, and to mislead the
readers.

What should we be careful when we are reading statistical


diagrams?
Check whether the scales on the two axes have been
drawn correctly.
Check whether the sizes of the groups have been distorted
or exaggerated in such a way to mislead people.
The items of two statistical graphs cannot be compared
by the sizes of the angles in the graphs alone.

EXAMPLE:

The following graph is a bar chart shown in the advertisement


of the Hurryson Telecommunications Company.

Charge per minute ($)

Charges on long-distance calls

Telecommunications Company

EXAMPLE:

(a) Measure the lengths of the bars of HK United and


Hurryson, express the length of the bar of Hurryson
Telecommunications Company as a fraction of that
of HK United.
(b) Now express the actual charges of Hurryson as a
fraction of HK United and compare this result with
that obtained in (a). Do you agree that this bar chart
is misleading? Explain your answer.

(a) The length of the bar for Hurryson is

1
that of HK United.
5

(b) Actual charge per minute of HK United = $3.2


Actual charge per minute of Hurryson = $3
$3 15

The required fraction =


$3.2 16
Since 15 1 , the bar chart has a misleading effect.
16 5

EXAMPLE:

Monthly salary ($)

The Money Commercial College used the following


diagram to show the highest monthly salary of their fresh
graduates in the years 2004 and 2005.

Year

EXAMPLE:

(a) Find the areas of the two triangles A and B in the


statistical diagram shown above. Express the area
of B as a multiple of the area of A.
(b) Find out, from the diagram, the actual
highest monthly salaries in the two
years. Express the one in 2005 as a
multiple of that in 2004.

(a) Suppose each small square in the figure has a side of 1 unit:
Area of triangle B = 1 16 30 sq. units
2
= 240 sq. units
Area of triangle A = 1 8 15 sq. units
2
= 60 sq. units
The required multiple = 240 4
60
Thus, the area of B is 4 times that of A.

(b) From the diagram,


the highest monthly salary in 2005 = $12 000
the highest monthly salary in 2004 = $6 000
The required multiple = $12 000 2
$6 000
The highest monthly salary in
2005 was 2 times that in 2004.

EXAMPLE:

Fig. A below shows the profits of ABC company from 2000 to


2004. In order to show the shareholders that the companys
profit has increased a lot since 1990. The managing director of
the company added the profit of the company in 1990 to the
graph (Fig. B).
Profit of ABC company from
1990 to 2004

Profit ($ million)

Profit ($ million)

Profit of ABC company from


2000 to 2004

Fig. A

Year
Year

Fig. B

EXAMPLE:

(a) As compared with Fig. A, does


Fig. B

give the readers an

impression that the companys


profit increases rapidly?
(b) Do you think that the managing director is
misleading the readers in Fig. B? Why?

(a) Yes, Fig. B gives the readers an impression that the


companys profit increases rapidly.
(b) Yes, the managing director is misleading the readers in
Fig. B.

Because the profits in the years 1991 to 1999 are

not shown, people may be misled to think that the profit


increases rapidly from 1990 to 2000.

GRAPHICAL REPRESENTATION OF DATA


Advantages:

If a body of information is presented using a simple diagram or


graph, then it is more readily understandable.

They are much easier on the eye, being more visually attractive.

They are easier on the brain, in that they are less difficult to
comprehend at a glance.

Disadvantages:

They are not always precise.


They often do not allow for further analysis.

Please forward your query


To: sjain@amity.edu