STATISTIC FOR MANAGEMENT II
1. The IQ scores of University students are normally distributed with the mean of 120 and
standard deviation of 10.
a. What is the probability that the IQ score of any one student chosen at random is
between 120 and 125?
b. If a random sample of 25 students is taken, what is the probability that the mean of
this sample will be between 120 and 125?
a. To calculate the probability that the IQ score of any one student chosen at random is
between 120 and 125,
We need to find the z-scores for these values using the formula:
z = (X - μ) / σ
Where:
X = IQ score
μ = mean IQ score (120)
σ = standard deviation (10)
For X = 120:
z1 = (120 - 120) / 10 = 0
For X = 125:
z2 = (125 - 120) / 10 = 0.5
Next, we look up the corresponding probabilities in the standard normal distribution table. The
probability that a z-score falls between 0 and 0.5 is approximately 0.1915. Therefore, the
probability that the IQ score of any one student chosen at random is between 120 and 125 is
approximately 0.1915.
b. To calculate the probability that the mean of a random sample of 25 students will be
between 120 and 125,
We need to find the standard error of the mean (SEM) first:
SEM = σ / sqrt(n)
Where:
σ = standard deviation (10)
n = sample size (25)
SEM = 10 / sqrt(25) = 10 / 5 = 2
Next, we convert the IQ scores of 120 and 125 to z-scores using the SEM:
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
For X = 120:
z1 = (120 - 120) / 2 = 0
For X = 125:
z2 = (125 - 120) / 2 = 2.5
We then look up the corresponding probabilities in the standard normal distribution table. The
probability that a z-score falls between 0 and 2.5 is approximately 0.4938. Therefore, the
probability that the mean of this sample will be between 120 and 125 is approximately 0.4938.
2. What mean by Estimation? Its significance for Managers & briefly explain the two
major types of Estimations.
Estimation refers to the process of predicting or approximating a value, quantity, or outcome
based on available information and data. It is a crucial aspect of decision-making for managers as
it helps in planning, budgeting, resource allocation, and setting goals. Effective estimation
enables managers to make informed decisions and forecasts, leading to better organizational
performance and success.
There are two major types of estimations:
A. Point Estimation: Point estimation involves providing a single value as an estimate of the
parameter of interest. This value is considered the best guess or most likely value based on the
available data. Point estimates are useful for making quick decisions and simplifying complex
problems. However, they do not provide information about the uncertainty or variability
associated with the estimate.
B. Interval Estimation: Interval estimation involves providing a range or interval within which
the true value of the parameter is expected to lie, along with a level of confidence. This type of
estimation takes into account the uncertainty in the estimate and provides a more comprehensive
understanding of the possible outcomes. Interval estimates are useful for assessing the reliability
and accuracy of the estimate and are commonly used in statistical inference and hypothesis
testing.
3. From a random sample of 36 Addis Ababa civil service personnel, the mean age and the
sample standard deviation were found to be 40 years and 4.5 years respectively. Construct
a 95 percent confidence interval for the mean age of civil servants in Addis.
To construct a 95% confidence interval for the mean age of civil servants in Addis Ababa, we can
use the formula for the confidence interval:
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
CI = X̄ ± (Z * (σ / √n))
Where:
CI = Confidence Interval
X̄ = Sample mean age (40 years)
Z = Z-score for 95% confidence level (1.96 for a 95% confidence level)
σ = Sample standard deviation (4.5 years)
n = Sample size (36)
Plugging in the values:
CI = 40 ± (1.96 * (4.5 / √36))
CI = 40 ± (1.96 * (4.5 / 6))
CI = 40 ± (1.96 * 0.75)
CI = 40 ± 1.47
Therefore, the 95% confidence interval for the mean age of civil servants in Addis Ababa is
approximately 38.53 to 41.47 years.
4. The foreman of ABC Mining Company has estimated the average quantity of iron ore
extracted to be 36.8 tons per shift and the sample standard deviation to be 2.8 tons per shift,
based upon a random selection of 4 shifts. Construct a 90% confidence interval around this
estimate.
To construct a 90% confidence interval around the estimate of the average quantity of iron ore
extracted per shift, we can use the formula for a confidence interval for the population mean when
the population standard deviation is unknown and the sample size is small (n < 30):
Confidence Interval = X̄ ± t*(SEM)
Where:
X̄ = sample mean (36.8 tons per shift)
t = t-score for a 90% confidence level with degrees of freedom (df) = n - 1 = 4 - 1 = 3
SEM = sample standard deviation / sqrt(n)
Given:
Sample mean (X̄) = 36.8 tons per shift
Sample standard deviation = 2.8 tons per shift
Sample size (n) = 4
Degrees of freedom (df) = 3
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
Calculate SEM:
SEM = 2.8 / sqrt (4) = 2.8 / 2 = 1.4
Find the t-score for a 90% confidence level with df = 3 from the t-distribution table. The t-score is
approximately 2.353.
Construct the confidence interval:
Lower Limit = 36.8 - 2.353 * 1.4
Upper Limit = 36.8 + 2.353 * 1.4
Lower Limit
36.8 - 3.2942
33.5058
Upper Limit
36.8 + 3.2942
40.0942
Therefore, the 90% confidence interval around the estimate of the average quantity of iron ore
extracted per shift is approximately 33.51 tons to 40.09 tons.
5. An investment consultant reports that the average 12-month return on a random sample
of 50 projects was 20.74%. If the standard deviation was 5% for the entire large group of
stocks from which the sample of projects was chosen, construct a 95% confidence interval
for the average 12-month return for all projects in this group.
To construct a 95% confidence interval for the average 12-month return for all projects in the
group, we can use the formula for the confidence interval:
CI = X̄ ± Z * (σ / √n)
Where:
CI = Confidence Interval
X̄ = Sample mean (20.74%)
Z = Z-score for a 95% confidence level (1.96)
σ = Standard deviation of the entire group (5%)
n = Sample size (50)
Plugging in the values:
CI = 20.74 ± 1.96 * (5 / √50)
Calculating the standard error of the mean (SEM):
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
SEM = 5 / √50
0.7071
Now, we can calculate the confidence interval:
CI = 20.74 ± 1.96 * 0.7071
CI = 20.74 ± 1.3866
CI = (19.3534, 22.1266)
Therefore, the 95% confidence interval for the average 12-month return for all projects in this
group is approximately 19.35% to 22.13%.
6. A company is considering five possible names for its new product. Before choosing a
name, the firm decides to test whether all five names are equally appealing. A random
sample of 100 people is chosen, and each person is asked to state her or his choice of the
best name among the five possibilities. The numbers of people who chose each one of the
names are as follows.
Name A B C D E
Number of choices 4 12 34 40 10
Required: Conduct the chi-square test at α = 0.01.
Null Hypothesis (H0): The names are equally appealing.
Alternative Hypothesis (H1): The names are not equally appealing.
Next, we calculate the expected frequencies for each name under the assumption that they are
equally appealing. The total number of choices is 100, so the expected frequency for each name
would be 100 / 5 = 20.
Expected frequencies:
Name A: 20
Name B: 20
Name C: 20
Name D: 20
Name E: 20
Now, we calculate the chi-square statistic using the formula:
χ² = Σ ((O - E) ² / E)
Where:
O = Observed frequency
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
E = Expected frequency
Calculating the chi-square statistic for each name:
χ² = ((4 - 20)² / 20) + ((12 - 20)² / 20) + ((34 - 20)² / 20) + ((40 - 20)² / 20) + ((10 - 20)² /
20)
χ² = (256 / 20) + (64 / 20) + (196 / 20) + (400 / 20) + (100 / 20)
χ² = 12.8 + 3.2 + 9.8 + 20 + 5
χ² = 51.8
Next, we determine the degrees of freedom for the chi-square test. Since we have 5 categories
(names) and we are testing for equality, the degrees of freedom would be 5 - 1 = 4.
Finally, we compare the calculated chi-square value of 51.8 with the critical chi-square value at α
= 0.01 and 4 degrees of freedom. If the calculated value exceeds the critical value, we reject the
null hypothesis and conclude that the names are not equally appealing.
7. Explain ANOVA & why business researchers conduct ANOVA?
ANOVA, or Analysis of Variance, is a statistical method used to analyze the differences among
group means in a sample. It compares the means of two or more groups to determine if there is a
statistically significant difference between them. ANOVA tests the null hypothesis that all group
means are equal against the alternative hypothesis that at least one group mean is different.
Business researchers conduct ANOVA for several reasons:
1. Comparison of multiple groups: ANOVA allows researchers to compare the means of more
than two groups simultaneously. This is useful in business research when analyzing the impact of
multiple factors or treatments on a dependent variable.
2. Efficiency: ANOVA is more efficient than conducting multiple t-tests for each pair of groups.
It helps researchers avoid the problem of inflated Type I error rates that can occur with multiple
comparisons.
3. Identifying significant factors: ANOVA helps researchers identify which factors have a
significant impact on the dependent variable. By analyzing the variance between groups and within
groups, researchers can determine the factors that contribute most to the variation in the data.
4. Testing interactions: ANOVA can also be used to test for interactions between different factors
or treatments. This allows researchers to understand how the effects of one factor may depend on
the levels of another factor.
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
Overall, ANOVA is a powerful statistical tool that helps business researchers make informed
decisions based on the analysis of group differences and relationships between variables.
8. A psychologist was interested in whether different TV shows lead to a more positive
outlook on life. People were split into 3 groups and then taken to a room to view a program.
The three groups saw: The American Got Talent show, BBC News and DSTV. After the
program a blood sample was taken and serotonin levels measured (remember more
serotonin means happier).
TV shows
American Got Talent show BBC News DSTV
11 8 10
7 6 6
6 7 12
Carry out a one-way ANOVA to test the hypothesis that some TV shows make people
happier than others. Test at 5% level of significance.
To conduct a one-way ANOVA to test the hypothesis that some TV shows make people happier
than others, we will follow these steps:
A. State the null and alternative hypotheses:
Null Hypothesis (H0): There is no significant difference in serotonin levels among the viewers of
the three TV shows.
Alternative Hypothesis (H1): There is a significant difference in serotonin levels among the
viewers of the three TV shows.
B. Calculate the mean serotonin levels for each group:
- American Got Talent show: (11 + 8 + 10) / 3 = 9.67
- BBC News: (7 + 6 + 6) / 3 = 6.33
- DSTV: (6 + 7 + 12) / 3 = 8.33
C. Calculate the overall mean serotonin level:
Overall mean = (9.67 + 6.33 + 8.33) / 3 = 8.11
D. Calculate the sum of squares within groups (SSW) and sum of squares between groups
(SSB):
SSW = ((11-9.67)²+ (8-9.67)²+ (10-9.67)²+ (7-6.33)²+ (6-6.33)²+ (6-6.33)²+ (6-8.33)²+ (7-
8.33)²+ (12-8.33)²) = 15.33
STATISTIC FOR MANAGEMENT II SOLUTION
STATISTIC FOR MANAGEMENT II
SSB = (3*(9.67-8.11)²) + (3*(6.33-8.11)²) + (3*(8.33-8.11)²) = 6.67
E. Calculate the degrees of freedom for between groups (k-1) and within groups (N-k):
k = 3 (number of groups)
N = 9 (total number of observations)
df_between = k - 1 = 2
df_within = N - k = 6
F. Calculate the mean squares for between groups (MSB) and within groups (MSW):
MSB = SSB / df_between = 6.67 / 2 = 3.335
MSW = SSW / df_within = 15.33 / 6 = 2.555
H. Calculate the F-statistic:
F = MSB / MSW = 3.335 / 2.555 = 1.307
I. Determine the critical F-value from the F-distribution table for df_between = 2 and
df_within = 6 at a significance level of 5%. The critical F-value is approximately 5.14.
L. Compare the calculated F-statistic to the critical F-value:
Since 1.307 < 5.14, we fail to reject the null hypothesis.
Therefore, based on the results of the one-way ANOVA test, there is no significant difference in
serotonin levels among the viewers of the three TV shows at a 5% level of significance.
STATISTIC FOR MANAGEMENT II SOLUTION