MASTER OF COMMERCE AND

BUSINESS ADMINISTRATION

LEARNING

MODULE 2
√
1+ −3
Descriptive Statistics ρ :=
2

The Open University of Kenya

Developed by: Dr. Jacob Ong’ala

Reviewed by:
Programme Title Masters of Commerce & Business Administration

Course Title MCA 807 - Statistical Methods

Learning Module number Module 2

Learning module title Descriptive Statistics

Module Developer Dr. Jacob Ong’ala

Reviewed by
LEARNING MODULE 2 MCA 807 - Statistical Methods

Module 2 - Descriptive Statistics

Instructional Hours: 4

Ð Module Overview

In this module, you will learn how to effectively summarize and present data using measures
of central tendency and dispersion, and how to select the best measures for summarizing
business data.

Module Learning Outcomes

By the end of this module, you should be able to:
1. Organize data into frequency tables and cross tabulations
2. Describe the various measures of central tendency and dispersion as used
in business and economic data.
3. Use appropriate descriptive measures in various business problems
4. Assess the suitability of different descriptive statistics for various business
and economic scenarios.

Learning Activities

1. Read the lecture notes (PDF)

2. Read the assigned reference materials
3. Watch lecture videos
4. Complete the module assessment/Quiz

READING TASKS

Read the following Lecture notes and attempt the tasks that follows

1. Data organization

Data organization involves systematically arranging data to facilitate efficient analysis, inter-
pretation, and decision-making. Proper data organization is crucial in business and economics
because it enables accurate insights, supports strategic decisions, and improves overall oper-
ational efficiency

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1.1. Importance of Data Organization in Business

Here are some of the importance of data organization in business.

• Efficient Data Retrieval: Well-organized data allows quick access to specific information,
which is crucial for timely decision-making in a fast-paced business environment.
• Accurate Analysis: Proper data organization reduces errors and ensures that analyses are
based on accurate and consistent data.
• Improved Data Quality: Organizing data helps in identifying and correcting errors, incon-
sistencies, and missing values, thus enhancing data quality.
• Data Integration and Comparison: Organized data can be easily integrated from various
sources, enabling comprehensive analyses and comparisons across different datasets.
• Compliance and Reporting: Proper organization of data is necessary for regulatory com-
pliance and accurate financial reporting.
The most common method of data organization is into rows and columns, forming a table.
Each row represents a data record, and each column represents a variable or attribute. This is
also implied in most statistical software.

1.1.1. Tabulation

Data tabulation is the process of systematically organizing raw data into a tabular format (rows
and columns) to make it easier to read, analyze, and interpret. It transforms complex data sets
into manageable summaries that highlight key information, making it easier to draw insights
and support decision-making in business and economic contexts. Below are some data tables
that are common in business field.
1. Frequency Distribution Tables: summarizes the data points by counting the frequency
(the number of times) each distinct value or category appears. This method helps sim-
plify large datasets by condensing them into a more manageable form that shows the
distribution of the data.
(a) Frequency table for ungrouped data frequency table for discrete or ungrouped
data organizes raw data into a table that displays the number of occurrences (fre-
quency) of each distinct value. This type of table is particularly useful for summa-
rizing and analyzing small datasets where each data point is distinct and does not
require grouping into intervals.

ő Example 1:
Consider a dataset representing the number of products sold by a small
business in a week:

Data: 4, 6, 4, 8, 6, 6, 4, 7, 8, 7, 6, 4, 8, 4, 7
Unique Values: 4, 6, 7, 8
Frequencies: 4 appears 6 times, 6 appears 4 times, 7 appears 3 times and
8 appears 3 times.

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Hence the frequency table is shown below.

Value Frequency
4 6
6 4
7 3
8 3
Total 16

Content Curated Video 1

This video demonstrate how to constract a frequency
distribution of ungrouped data. Watch it the answer
the questions that follow. • Link to YouTube Video

ç • construct a frequency table for the dataset 5, 3, 8, 6,

3, 5, 8, 7, 6, 5
• Constract a frequency table for the following blood
groups . A+, O-, B+, AB+, A-, O+, B-, AB-, A+, O-,
B+, A-, O+, AB+, A+, B-, O-, AB-, A-, B+

(b) Frequency table for grouped data Consider a survey conducted to understand the
age demographics of a company’s customer base. The collected data is categorized
into different age groups, and the number of customers in each group is counted.

Age Group and Number of Customers (Frequency)

Age Group Number of Customers (Frequency)

18-24 45
25-34 80
35-44 60
45-54 30
55-64 20
65+ 15
Total 250

• The age group ”25-34” has the highest number of customers (80), indicating this
is the most common age range among the customers surveyed.
• The age group ”65+” has the fewest customers (15), suggesting fewer older cus-
tomers engage with the business.
• Class-limits: The maximum and minimum values of a class-interval are called
upper classlimit and lower class-limit respectively. For example “18-24” , 18 is
the lower class limit, and 24 is the upper class limit
• Class boundaries are the true limits of a class interval in a grouped frequency
distribution. There can sometimes be a gap between the upper limit of one class
and the lower limit of the next. From Table 1 below, 19 in the first class and 20
in the second class, which makes it challenging to place values like 19.6. Class

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boundaries fill these gaps, making sure that every potential data value is included
in a class and that all data points are accurately counted. They are particularly
crucial when working with continuous data.
1
Lower Class Boundary = Lower class limit − ×d
2
1
Upper Class Boundary = Lower class limit + ×d
2
where d is the common difference between the upper class limit of a class inter-
val and the lower class limit of the next higher class interval.

Considering the grouped frequency distribution Table 1 above:

– Lower class limits: 18, 25, 35, ...
– Upper class limits: 24, 34, 44, ...
For the first class interval (18 - 24) and the second class interval (25 - 34):

d = 25 − 24 = 1

Calculating the Class Boundaries

1
– Lower Class Boundary for 18 - 24:10 − × 1 = 18 − 0.5 = 17.5
2
1
– Upper Class Boundary for 18 - 24: 19 + × 1 = 24 + 0.5 = 24.5
2

Steps to Construct a Grouped Frequency Distribution

i. Determine the Range of Data:

Range = Maximum value − Minimum value

ii. Decide on the Number of Classes (k):
This number is typically between 5 and 20, depending on the size of the dataset.
A common guideline is to use Sturges’ formula to estimate the number of classes:

k = 1 + 3.322 log(n)

where n is the total number of observations.

iii. Calculate the Class Width:
Determine the class width h using:
Range
h=
k
iv. Determine Class Limits and Class Boundaries:
Start from the minimum value as the lower class limit of the first class.
v. Tally the Frequencies:
Count the number of observations (data points) that fall within each class in-
terval. This gives the frequency for each class.

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vi. Construct the Frequency Table:

Organize the data into a table with columns for the class intervals, class bound-
aries, frequency, relative frequency (if needed), and cumulative frequency (if
needed).

ő Example 2:
Using the following data set:

22, 25, 30, 34, 38, 22, 24, 27, 29, 31, 33, 35, 39, 28, 22, 24, 26, 32,

36, 23, 27, 28, 29, 21, 37, 30, 22, 33, 29, 34
• Range: = 39 − 21 = 18
• Number of Classes (k): = 1 + 3.322 log(30) ≈ 6
18
• Class Width (h): = =3
6
Class Interval Class Boundaries Frequency Relative Frequency Cumulative Freq
21 - 23 20.5 - 23.5 6 0.20 6
24 - 26 23.5 - 26.5 4 0.13 10
27 - 29 26.5 - 29.5 7 0.23 17
30 - 32 29.5 - 32.5 4 0.13 21
33 - 35 32.5 - 35.5 5 0.17 26
36 - 39 35.5 - 39.5 4 0.13 30

Content Curated Video 2

Watch the video in the link (from 0.0min-7.14 min) then
try the following questions
Link to Video
Question: A retail company is analyzing the number of

ç units sold per day over a month to understand the sales

performance. The company has collected the following
data representing the number of units sold each day for
a 30-day period: Dataset: 15, 22, 18, 30, 25, 20, 17,
28, 31, 26, 22, 19, 23, 27, 25, 21, 29, 24, 30, 26, 18,
22, 25, 27, 28, 31, 20, 22, 24, 19. Question: Construct
a grouped frequency distribution table for the dataset

2. Two-Way Tables (Contingency Tables) Two-way tables, also known as contingency

tables, are used to display the relationship between two categorical variables. They
help in summarizing and analyzing the frequency distribution of variables to understand
how they interact with each other.
A two-way table consists of rows and columns, where:
• Rows represent categories of one variable.
• Columns represent categories of another variable.

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• The cells of the table show the frequency of observations that fall into each combina-
tion of row and column categories.

ő Example 3:
Consider a dataset that includes information on customer satisfaction and pur-
chase type. The variables are:
• Customer Satisfaction: Satisfied, Neutral, Unsatisfied
• Purchase Type: Online, In-Store
The two-way table will summarize the number of customers falling into each
combination of these categories.

Constructing a Two-Way Table

To construct a two-way table:
(a) Identify Variables: Determine the two categorical variables to analyze.
(b) List Categories: List all possible categories for each variable.
(c) Organize Data: Count the frequency of occurrences for each combination
of categories.
(d) Fill in Table: Populate the table with the frequency counts.
Data:
• 30 customers, 12 Satisfied Online, 8 Satisfied In-Store, 5 Neutral Online, 2
Neutral In-Store, 3 Unsatisfied Online, 0 Unsatisfied In-Store

Two-Way Table
Customer Satisfaction Online In-Store Total
Satisfied 12 8 20
Neutral 5 2 7
Unsatisfied 3 0 3
Total 20 10 30

Content Curated Video 3

ç Watch the video (0.00min to 3.34 min) then attempt the quiz
that follows
Link to the Video

1.1.2. Practical Application using statistical Software

You can watch the following video lectures to learn how to create frequency tables and cross
tabulations in R and SPSS.

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Content Curated Video 4

Watch the video then attempt the quiz that follows
• Using R link to video

ç • Using SPSS (frequency table) link to video

• Using SPSS (Contigency table) link to video

2. Measures of Central Tendency

Central Tendency refers to statistical measures that identify a single value representing the
center or typical value of a dataset. The most common measures of central tendency are
the mean, median, and mode. These measures provide a summary of the data by identifying
the most representative value, allowing businesses and analysts to understand the ”average”
behavior or characteristics within a dataset.

2.0.1. Mean

The mean, often referred to as the arithmetic average, is a measure of central tendency that
represents the average value of a data set. It is widely used in business and economics to
summarize data and make informed decisions.
The mean is calculated by summing all the values in a data set and then dividing by the number
of values. It provides a central value around which the data points are distributed.

Formula:
n
1∑
Mean(x) = xi
n i=1

where:
n
∑
xi = Sum of all data points
i=1

n = Number of data points

ő Example 4:
Calculate the mean of the following sales figures for a company over 5 months:
$25,000, $30,000, $22,000, $30,000, $28,000.

Solution:
25, 000 + 30, 000 + 22, 000 + 30, 000 + 28, 000 135, 000
Mean(x) = =
5 5

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Mean(x) = $27, 000

Mean of Grouped Data

The mean of grouped data is calculated when data is organized into intervals (or classes)
rather than individual values. This is common in business applications where data is collected
in ranges, such as sales revenue, production output, or employee salaries.
The formula for the mean of grouped data is:

∑k
i=1 fi · xi
Mean(x) = ∑k
i=1 fi

where:
• fi = Frequency of the ith class (the number of data points within each class)
• xi = Midpoint of the ith class (calculated as the average of the lower and upper boundaries
of the class)
• k = Number of classes

ő Example 5:
Consider a company that tracks the number of sales transactions within different
revenue ranges over a month. The data is grouped into the following intervals:
Revenue Range ($) Number of Transactions (Frequency)
10,000 - 19,999 5
20,000 - 29,999 8
30,000 - 39,999 12
40,000 - 49,999 7
50,000 - 59,999 3

Solution:
First, calculate the midpoint (xi ) for each revenue range and then calculate the prod-
uct of the frequency and the midpoint for each class:
Revenue Range ($) Frequency (fi ) Midpoint (xi ) Product (fi · xi )
10,000 - 19,999 5 15,000 75,000
20,000 - 29,999 8 25,000 200,000
30,000 - 39,999 12 35,000 420,000
40,000 - 49,999 7 45,000 315,000
50,000 - 59,999 3 55,000 165,000
Sum the products and the frequencies:

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k
∑
fi · xi = 75, 000 + 200, 000 + 420, 000 + 315, 000 + 165, 000 = 1, 175, 000
i=1

k
∑
fi = 5 + 8 + 12 + 7 + 3 = 35
i=1

Finally, calculate the mean:

1, 175, 000
Mean(x) = ≈ 33, 571.43
35

2.0.2. Median

The median is a measure of central tendency that represents the middle value in a data set
when the values are arranged in ascending or descending order. Unlike the mean, the median
is not affected by extreme values (outliers), making it a robust measure for skewed distribu-
tions. It is widely used in various fields, including business, economics, and social sciences, to
summarize data.
The median is particularly useful in situations where the data is skewed or contains outliers.
For example, in income data where a few individuals may have exceptionally high incomes,
the median provides a better representation of the central tendency than the mean.

How to Calculate the Median

For an Odd Number of Observations

If the data set has an odd number of observations, the median is simply the middle value when
the data is arranged in order.
Steps:
1. Arrange the data in ascending or descending order.
2. Identify the middle value.
Formula:
Median = x( n+1 )
2

where n is the number of observations.

ő
[Link] Example
Example 6: of Observations)
(Odd Number
Consider the following data set representing the monthly sales (in thousands of dol-
lars) of a small business over seven months:

20, 25, 22, 30, 28, 35, 27

Solution:

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1. Arrange the data in ascending order: 20, 22, 25, 27, 28, 30, 35.
2. The number of observations n = 7 (which is odd), so the median is the middle
value:
Median = 27 (fourth value in the ordered data)
Thus, the median sales value is $27,000.

For an Even Number of Observations

If the data set has an even number of observations, the median is the average of the two
middle values.
Steps:
1. Arrange the data in ascending or descending order.
2. Identify the two middle values.
3. Calculate the average of these two values.
Formula:
x( n ) + x( n +1)
Median = 2 2

2
where n is the number of observations.

ő Example 7:
Consider the following data set representing the weekly production units of a factory
over six weeks:
120, 115, 130, 125, 110, 140
Solution:
1. Arrange the data in ascending order: 110, 115, 120, 125, 130, 140.
2. The number of observations n = 6 (which is even), so the median is the average
of the third and fourth values:
120 + 125 245
Median = = = 122.5
2 2
Thus, the median production units are 122.5.

Median for Grouped Data

For grouped data, the median is calculated using the following formula:

(n )
2
−F
Median = L + ×c
f
where:
• L = Lower boundary of the median class
• n = Total number of observations
• F = Cumulative frequency of the class before the median class

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• f = Frequency of the median class

• c = Class interval width

ő Example 8:
Consider a company that categorizes employee salaries into intervals as follows:
Salary Range ($) Number of Employees
20,000 - 29,999 5
30,000 - 39,999 8
40,000 - 49,999 12
50,000 - 59,999 7
60,000 - 69,999 3
Solution:
1. The total number of employees n = 35.
2. The cumulative frequency just before the median class is 13 (from the first two
classes).
3. The median class is 40, 000 − 49, 999, with L = 40, 000, f = 12, and class
width c = 10, 000.
Using the formula:
( )
35
− 13
Median = 40, 000 + 2 × 10, 000
12
( )
17.5 − 13
Median = 40, 000 + × 10, 000
12
( )
4.5
Median = 40, 000 + × 10, 000 = 40, 000 + 3, 750 = 43, 750
12
Thus, the median salary is $43,750.

Applications of the Median in Business

The median is frequently used in business to analyze data such as:

• Income distributions to determine the middle income level.
• Sales figures to find the typical sales performance, avoiding the influence of outliers.
• Property prices to gauge the central market price, especially in markets with extreme vari-
ations.

2.0.3. Mode

The mode is a measure of central tendency that identifies the most frequently occurring value
in a data set. Unlike the mean and median, which focus on the central point of the data,
the mode highlights the value that appears most often. The mode is particularly useful for
categorical data, where the most common category is of interest.

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Importance of the Mode

The mode is an important measure when analyzing data sets that have values repeating. It
provides insights into the most common or popular items, which is crucial in fields like busi-
ness, marketing, and social sciences. For example, in retail, the mode can indicate the most
sold product, which helps in inventory management.

How to Calculate the Mode

For Ungrouped Data

The mode is simply the value that occurs most frequently in a data set.
Steps:
1. List all the values in the data set.
2. Count the frequency of each value.
3. Identify the value with the highest frequency.
Example (Ungrouped Data)

ő Example 9:
Consider the following data set representing the number of units sold of different
products:
10, 15, 15, 20, 25, 15, 30, 25, 20
Solution:
1. The value 15 appears three times, more than any other value.
2. Therefore, the mode is 15.
Thus, the mode of the data set is 15 units.

For Grouped Data

For grouped data, the mode is the class with the highest frequency. If the data is continuous,
the mode can be estimated using the following formula:
( )
fm − f1
Mode = L + ×c
(fm − f1 ) + (fm − f2 )

where:
• L = Lower boundary of the modal class
• fm = Frequency of the modal class
• f1 = Frequency of the class before the modal class
• f2 = Frequency of the class after the modal class
• c = Class interval width

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ő Example 10:
Consider a company that has categorized the number of items produced daily into
intervals as follows:
Number of Items Produced Frequency
50 - 59 5
60 - 69 12
70 - 79 20
80 - 89 15
90 - 99 8
Solution:
1. The modal class is 70 − 79, as it has the highest frequency of 20.
2. The class width c = 10.
3. The lower boundary of the modal class L = 70.
4. The frequency of the modal class fm = 20.
5. The frequency of the class before the modal class f1 = 12.
6. The frequency of the class after the modal class f2 = 15.
Using the formula:
( )
20 − 12
Mode = 70 + × 10
(20 − 12) + (20 − 15)
( ) ( )
8 8
Mode = 70 + × 10 = 70 + × 10
8+5 13

Mode ≈ 70 + 6.15 = 76.15

Applications of the Mode in Business

The mode is commonly used in business applications to:

• Identify the most popular product or service.
• Determine the most common customer preferences or behaviors.
• Analyze categorical data such as the most frequent customer feedback or complaint.

3. Measures of Variability

A measure of variability is a statistic that summarizes how much the values in a dataset are
spread out. It answers the question: how dispersed are the data points? While measures
of central tendency describe a typical or average value, measures of variability indicate how
far the data points generally lie from this central value. Variability is considered within the
context of a distribution of values. Low variability suggests that the data points are closely
clustered around the central value, while high variability indicates that they are more widely
spread out.
In statistical terms, the concepts of variability, dispersion, and spread are used interchange-
ably to describe the range of a distribution. Just as there are various ways to measure central

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tendency, there are several methods to measure variability. This section will explain the com-
mon measures of variability, including the range, interquartile range, variance, and standard
deviation, helping you decide which is most appropriate for your data.
To understand variability, condesider a study where you are investigating the amounts of time
spent on phones daily by different groups of people. Using simple random samples, you col-
lect data from 3 groups:
• Sample A: high school students,
• Sample B: college students,
• Sample C: adult full-time employees.

Source: [Link]

All three of your samples have the same average phone use, at 195 minutes or 3 hours and
15 minutes. This is the x-axis value where the peak of the curves are.
However each sample has different spreads. Sample A has the largest variability while Sam-
ple C has the smallest variability.

3.1. Range

The range measures the extent of your data by determining the difference between the small-
est and largest values in the dataset. It is the simplest measure of variability to compute.
To calculate the range, subtract the smallest value from the largest value in the dataset.

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ő Example 11:
Consider the following 8 data points from Sample A (in minutes):

Data: 72, 110, 134, 190, 238, 287, 305, 324

The largest value (H) is 324, and the smallest value (L) is 72.
The range R is calculated as:

R = H − L = 324 − 72 = 252

Thus, the range of this data set is 252 minutes.

3.2. Interquartile Range

The interquartile range (IQR) measures the spread of the central portion of your data distribu-
tion. For any ordered dataset, the interquartile range covers the middle 50% of the values. The
first quartile (Q1) includes the lowest 25% of values, while the fourth quartile (Q4) includes
the highest 25%.
The interquartile range is determined by subtracting the first quartile (Q1) from the third quar-
tile (Q3), providing the range of the middle half of the data.

ő Example 12:
To determine the interquartile range for a dataset of 8 values, you first identify the
positions of Q1 and Q3. Multiply the number of data points (8) by 0.25 to find the
25th percentile (Q1) and by 0.75 to find the 75th percentile (Q3).

Q1 position: 0.25 × 8 = 2
Q3 position: 0.75 × 8 = 6
Q1 corresponds to the value in the 2nd position, which is 110, and Q3 corresponds to
the value in the 6th position, which is 287. The interquartile range IQR is calculated
as:
IQR = Q3 − Q1 = 287 − 110 = 177
Therefore, the interquartile range of this dataset is 177 minutes.

Unlike the range, the interquartile range is less sensitive to outliers, as it focuses on the central
portion of the data, avoiding extreme values.

3.3. Standard Deviation

Standard deviation is a measure of the dispersion or spread of data points around the mean.
It quantifies how much individual data points in a dataset differ from the average value. A
low standard deviation indicates that data points are close to the mean, while a high standard

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deviation suggests a wide range of values.

Formula

For a population, the standard deviation (denoted by σ) is calculated as:

√
∑N 2
i=1 (xi − µ)
σ=
N
where:
• N is the number of data points.
• xi represents each data point.
• µ is the mean of the data points.
For a sample, the standard deviation (denoted by s) is calculated as:
√∑
n 2
i=1 (xi − x̄)
s=
n−1
where:
• n is the number of data points in the sample.
• x̄ is the sample mean.

Steps to Calculate Standard Deviation

1. Calculate the Mean: Find the average of the dataset.

2. Subtract the Mean: Subtract the mean from each data point to find the deviation of each
point.
3. Square the Deviations: Square each deviation to eliminate negative values.
4. Find the Average of Squared Deviations: For a population, divide by the total number
of data points N. For a sample, divide by n − 1.
5. Take the Square Root: Finally, take the square root of the average squared deviation to
obtain the standard deviation.

ő Example 13:
Consider a dataset representing the ages of 5 employees: 28, 32, 35, 40, 45.
• Step 1: Calculate the mean:
28 + 32 + 35 + 40 + 45
µ= = 36
5
• Step 2: Subtract the mean from each data point:

28−36 = −8, 32−36 = −4, 35−36 = −1, 40−36 = 4, 45−36 = 9

• Step 3: Square the deviations:

(−8)2 = 64, (−4)2 = 16, (−1)2 = 1, 42 = 16, 92 = 81

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• Step 4: Find the average of squared deviations:

64 + 16 + 1 + 16 + 81
σ2 = = 35.6
5
• Step 5: Take the square root to find the standard deviation:
√
σ = 35.6 ≈ 5.97

Thus, the population standard deviation is approximately 5.97.

Importance of Standard Deviation

• Comparing Variability: Standard deviation is crucial in comparing the variability between

different datasets.
• Understanding Data Distribution: A higher standard deviation indicates a more spread out
distribution, while a lower one indicates that the data is clustered closely around the mean.
• Use in Normal Distribution: In a normal distribution, standard deviation helps define the
range within which a certain percentage of data points lie.
Standard deviation is a fundamental concept in statistics, providing insight into the spread and
consistency of data. Its calculation is essential in various fields, including finance, research, and
quality control.

Content Curated Video 5

ç Take a break by watching this video that summarized the standard

deviant in a simple way. (watch upto 7.48 min) Click here to watch
the video

3.4. Standard Deviation for Grouped Data

When dealing with grouped data, the calculation of standard deviation is slightly different as
the data is organized into classes with frequencies. The standard deviation for grouped data
provides a measure of the spread or dispersion of the data points around the mean, considering
the frequency of each class.

Formula

For grouped data, the standard deviation (denoted by s) is calculated using the formula:
√∑
fi (xi − x̄)2
s= ∑
fi

where:
• fi is the frequency of the i-th class.
• xi is the midpoint of the i-th class.

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• x̄ is the mean of the grouped data, calculated as:

∑
fi xi
x̄ = ∑
fi

Steps to Calculate Standard Deviation for Grouped Data

1. Determine the Class Midpoints: For each class interval, calculate the midpoint xi as the
average of the lower and upper class boundaries.
2. Calculate the Mean: Compute the mean x̄ using the formula:
∑
fi xi
x̄ = ∑
fi
3. Compute the Deviation for Each Class: Subtract the mean x̄ from each class midpoint
xi to find the deviation.
4. Square the Deviations: Square each deviation to eliminate negative values.
5. Multiply by the Class Frequency: Multiply the squared deviations by the corresponding
class frequency fi .
6. Sum the Results: Sum these values across all classes. ∑
7. Divide by the Total Frequency: Divide by the total frequency fi .
8. Take the Square Root: Finally, take the square root of the result to obtain the standard
deviation.

ő Example 14:
Consider the following grouped data representing the test scores of students:
Class Interval fi xi xi − x̄ (xi − x̄)2 fi (xi − x̄)2
10-20 3 15 -26.25 689.06 2067.19
20-30 7 25 -16.25 264.06 1848.42
30-40 15 35 -6.25 39.06 585.94
40-50 10 45 3.75 14.06 140.63
50-60 5 55 13.75 189.06 945.31
Total 40 5587.5
• Step 1: Determine the Class Midpoints:

Midpoints (xi ) : 15, 25, 35, 45, 55

• Step 2: Calculate the Mean:

3 × 15 + 7 × 25 + 15 × 35 + 10 × 45 + 5 × 55 1650
x̄ = = = 41.25
3 + 7 + 15 + 10 + 5 40
• Step 3: Compute the Deviation for Each Class:

Deviations (xi − x̄) : −26.25, −16.25, −6.25, 3.75, 13.75

• Step 4: Square the Deviations:

Squared Deviations : 689.06, 264.06, 39.06, 14.06, 189.06

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LEARNING MODULE 2 MCA 807 - Statistical Methods

• Step 5: Multiply by the Class Frequency:

fi (xi − x̄)2 : 2067.19, 1848.42, 585.94, 140.63, 945.31

• Step 6: Sum the Results and Divide by Total Frequency:

∑
Sum fi (xi − x̄)2 = 5587.5

5587.5
Variance s2 = = 139.69
40
• Step 7: Take the Square Root to Find Standard Deviation:
√
s = 139.69 ≈ 11.82

Thus, the standard deviation for this grouped data is approximately 11.82.

3.5. Choosing the Right Descriptive Measures

Choosing the right descriptive measures is essential for accurately summarizing and interpret-
ing data. By considering the type of data and the specific goals of your analysis, you can select
the most appropriate measures to draw meaningful conclusions. The following tables outline
how to select appropriate measures based on the type of data and the goals of your analysis.
Measures of Central Tendency
Data Type Recommended Measure Description
Nominal Mode Most frequent category
Ordinal Median Middle value in ordered data
Interval/Ratio Mean Arithmetic average
Skewed Interval/Ratio Median Less affected by outliers
Measures of Dispersion
Data Type Recommended Measure Description
Nominal/Ordinal Range Difference between max and min values
Skewed Interval/Ratio Interquartile Range (IQR) Spread of the middle 50% of data
Interval/Ratio Variance Average squared deviation from the mean
Interval/Ratio Standard Deviation Square root of variance
Choosing Descriptive Measures Based on Analysis Goals
Analysis Goal Recommended Measures Description
Summarizing Data Mean and SD (Normal Data) Standard summary for symmetric data
Summarizing Data Median and IQR (Skewed Data) Robust summary for skewed data
Comparing Groups Mean and SD Compare central tendency and spread
Comparing Groups Median and Range/IQR Compare central tendency for ordinal data
Detecting Outliers Range, IQR, SD Identify and evaluate outliers

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QUIZ/QUESTIONS

A. Attempt the Quiz

A retail store is analyzing the relationship between the type of purchase (Online or In-Store)
and the customer’s response to a recent marketing campaign (Positive, Neutral, or Negative).
The store has collected data from 50 customers, and their responses are as follows: (Note:
The response for each customer is separated by semicolon )
Data: Online, Positive; In-Store, Neutral; Online, Negative; Online, Positive; In-Store, Posi-
tive; Online, Neutral; In-Store, Negative; Online, Positive; In-Store, Positive; Online, Neutral;
In-Store, Neutral; Online, Negative; In-Store, Positive; Online, Positive; In-Store, Negative; On-
line, Neutral; In-Store, Positive; Online, Positive; In-Store, Neutral; Online, Positive; In-Store,
Positive; Online, Negative; In-Store, Neutral; Online, Neutral; In-Store, Negative; Online, Posi-
tive; In-Store, Neutral; Online, Negative; In-Store, Positive; Online, Positive; In-Store, Positive;
Online, Neutral; In-Store, Positive; Online, Negative; In-Store, Neutral; Online, Positive; In-
Store, Positive; Online, Neutral; In-Store, Negative; Online, Positive; In-Store, Neutral; Online,
Positive; In-Store, Positive; Online, Negative; In-Store, Neutral
Tasks: Construct a two-way table to display the frequencies of the responses (Positive, Neu-
tral, Negative) based on the type of purchase (Online, In-Store).

B. After reading the notes, attempt the quiz

1. A company tracks the monthly sales (in thousands of dollars) for its five sales represen-
tatives over a six-month period: $50, $45, $60, $55, $40, and $50. What is the mean
monthly sales?
A) $50,000
B) $48,000
C) $52,000
D) $47,000
Correct Answer: A) $50,000
2. The quarterly profits (in thousands of dollars) of a small business over four quarters are
$80, $100, $90, and $70. What is the mean profit per quarter?
A) $85,000
B) $90,000
C) $80,000
D) $75,000
Correct Answer: A) $85,000
3. A retail store recorded the number of units sold for a product over seven days: 12, 15,
10, 20, 18, 10, and 14. What is the median number of units sold?
A) 12
B) 14

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LEARNING MODULE 2 MCA 807 - Statistical Methods

C) 15
D) 10
Correct Answer: B) 14
4. A company’s revenue (in thousands of dollars) over five months is as follows: $25, $30,
$22, $28, and $30. What is the median revenue?
A) $25,000
B) $28,000
C) $30,000
D) $22,000
Correct Answer: B) $28,000
5. A restaurant owner tracks the number of customers visiting each day over a week: 45,
50, 60, 55, 50, 60, and 50. What is the mode of the customer visits?
A) 45
B) 50
C) 55
D) 60
Correct Answer: B) 50
6. A company has five product lines with the following sales figures (in units): 100, 150,
120, 150, and 130. What is the mode of the sales figures?
A) 100
B) 120
C) 130
D) 150
Correct Answer: D) 150

C. Attempt the following quiz

1. Given the data set: 5, 8, 12, 15, 18, calculate the standard deviation.
2. Explain how outliers can affect the standard deviation of a data set.
3. Why is the standard deviation considered a better measure of dispersion compared to
the range?
4. Calculate the standard deviation for the following grouped data:

Class Interval Frequency (fi )

10 − 20 4
20 − 30 6
30 − 40 10
40 − 50 8
50 − 60 2
5. Find the interquartile range (IQR) for the following data set: 25, 28, 31, 34, 36, 39, 42, 45.
6. calculate the IQR from the grouped in question 4:

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CORE READING AND REFERENCES

1. Statistics for Business and Economics (13th ed.). (2017). McClave, J. T., & Sincich, T.
Pearson. (Chapters: Statistics, Data, & Statistical Thinking and Methods for Describing
Sets of Data)
2. Mind on Statistics (5th ed.). (2015). Utts, J. M., & Heckard, R. F. Cengage Learning.
3. On the ”probable error” of a coefficient of correlation deduced from a small sample.
(1921). Fisher, R. A. Metron, 1(1), 3-32. [Link]
11818031
4. Exploratory data analysis. (1977). Tukey, J. W. Addison-Wesley.
5. Descriptive Statistics. (2021). Statistics How To. Retrieved from [Link]
com/descriptive-statistics/
6. Descriptive statistics. (2021). Khan Academy. Retrieved from [Link]
org/math/statistics-probability/describing-relationships-quantitative-data

END OF MODULE ASSESSMENT

Attempt all the questions

1. A retail company is analyzing the sales performance of two different product categories
over the last quarter. The sales data for each category is highly skewed due to a few
extreme values.
(a) Which measure of central tendency (mean, median, or mode) would be most ap-
propriate for summarizing the typical sales performance of each product category?
Justify your choice.
(b) In addition to the central tendency, which measure of dispersion (range, interquar-
tile range, or standard deviation) would best complement your chosen central ten-
dency measure to describe the sales distribution? Explain why.
2. An economist is studying the income distribution of two different regions. Region A has
a normal income distribution, while Region B has an income distribution with significant
outliers due to a few very high-income individuals.
(a) For Region A, recommend and justify the most suitable measures of central ten-
dency and dispersion.
(b) For Region B, recommend and justify the most suitable measures of central ten-
dency and dispersion, considering the presence of outliers.
3. A marketing analyst has collected data on customer preferences for three different prod-
ucts (Product A, Product B, and Product C) across two regions (Region X and Region Y).
The data set includes the number of customers who prefer each product in both regions.
Customer Preferences Data:
• Region X:

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– Product A: 150 customers

– Product B: 120 customers
– Product C: 130 customers
• Region Y:
– Product A: 180 customers
– Product B: 160 customers
– Product C: 140 customers
(a) Organize this data into a cross-tabulation (contingency table) that shows the num-
ber of customers preferring each product in each region.
(b) Based on the cross-tabulation, calculate the row and column totals, and interpret
the results in the context of the regional preferences for each product.
4. A retail company has gathered monthly sales data for its stores in three different cities.
The data is as follows:
• City A: 120, 135, 150, 145, 160, 155, 170
• City B: 80, 90, 95, 85, 100, 105, 110
• City C: 200, 210, 220, 215, 225, 230, 240
(a) Organize the sales data for each city into a frequency table, using appropriate in-
tervals.
(b) Using the frequency tables, calculate the mean and standard deviation of the sales
for each city. Which city shows the highest variability in sales? Explain how these
descriptive measures can help the company in making business decisions.

VALUING AND TAKE HOME

Descriptive statistics help you summarize and understand data distributions. With knowledge
of mean, median, range, and standard deviation, you’re well-equipped to interpret data and
prepare for effective data visualization.

WHAT’S NEXT?

Next topic will focus on presenting data visually through charts and graphs, which will en-
hance our ability to identify patterns and communicate insights effectively. By combining our
statistical knowledge with visualization techniques, we can better interpret data and convey
our findings in a more accessible and impactful way.

MCA 807: Statistical Methods

Module 2 End of Module Assessment-Rubric
1. (a) The median would be the most appropriate measure of central tendency for sum-
marizing the typical sales performance. This is because the median is not affected
by extreme values (outliers) and provides a better representation of the central lo-
cation of the data in a skewed distribution. The mean, on the other hand, could be

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LEARNING MODULE 2 MCA 807 - Statistical Methods

distorted by the extreme sales values, leading to a misleading summary of typical

performance.
(b) The interquartile range (IQR) would be the best measure of dispersion to comple-
ment the median. The IQR focuses on the middle 50% of the data and is not affected
by extreme values, making it more reliable for skewed distributions. The range and
standard deviation could be significantly influenced by the outliers, thereby giving
a less accurate picture of the data’s spread.
2. (a) For Region A, where the income distribution is normal, the mean would be the most
suitable measure of central tendency, as it accurately reflects the average income
in a normal distribution. The standard deviation would be the appropriate measure
of dispersion, as it describes the spread of data around the mean, providing a clear
sense of how much incomes vary from the average.
(b) For Region B, where there are significant outliers, the median would be the most
appropriate measure of central tendency, as it is robust to the influence of extreme
values and better represents the typical income in the presence of outliers. The
interquartile range (IQR) would be the most suitable measure of dispersion, as it
provides a clear view of the spread of the central portion of the income distribution,
without being skewed by the extreme high incomes.
.
3. a. Cross-tabulation (Contingency Table):

Region Product A Product B Product C Total

Region X 150 120 130 400
Region Y 180 160 140 480
Total 330 280 270 880
b. Interpretation:
From the cross-tabulation, we observe the following:
- **Product A** is preferred by a total of 330 customers across both regions, making
it the most popular product. - **Region Y** has a higher overall customer preference
(480 customers) compared to Region X (400 customers). - The preferences are fairly
consistent across regions, but Region Y has more customers preferring each product
compared to Region X.
This data suggests that Product A has broad appeal, while Region Y could be a key
market due to its higher customer numbers.
4. a. Frequency Tables:
City A:

Sales Interval Frequency

120 − 130 1
130 − 140 1
140 − 150 2
150 − 160 2
160 − 170 1
City B:

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Sales Interval Frequency

80 − 90 2
90 − 100 2
100 − 110 3
City C:

Sales Interval Frequency

200 − 210 2
210 − 220 2
220 − 230 2
230 − 240 1
b. Mean and Standard Deviation Calculations:
City A:
120 + 135 + 150 + 145 + 160 + 155 + 170
Mean = = 147.86
7
√
(120 − 147.86)2 + (135 − 147.86)2 + · · · + (170 − 147.86)2
Standard Deviation = = 17.44
7
City B:
80 + 90 + 95 + 85 + 100 + 105 + 110
Mean = = 95.00
7
√
(80 − 95)2 + (90 − 95)2 + · · · + (110 − 95)2
Standard Deviation = = 10.79
7
City C:
200 + 210 + 220 + 215 + 225 + 230 + 240
Mean = = 220.00
7
√
(200 − 220)2 + (210 − 220)2 + · · · + (240 − 220)2
Standard Deviation = = 13.69
7
Interpretation:
- **City A** shows the highest variability in sales, as indicated by the highest standard
deviation (17.44). - The company can use this information to focus on stabilizing sales
in City A, while leveraging the consistent sales performance in City C. - Understanding
these descriptive measures helps the company in making informed business decisions,
such as allocating resources or tailoring marketing strategies to each city’s unique sales
patterns.

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