Series 2 Examination 2011

BUSINESS STATISTICS
Level 3
Wednesday 6 April
Subject Code: 3009

Time allowed: 3 hours

INSTRUCTIONS FOR CANDIDATES

Answer 5 questions.

All questions carry equal marks.

There is a list of formulae at the end of the paper.

Graph paper is provided within the answer book.

Write your answers in blue or black ink/ballpoint. Pencil may be used only for graphs, charts,
diagrams, etc.

All answers must be correctly numbered but need not be in numerical order.

Workings must be shown.

Make sure your answers are accurate and neat.

You may use a calculator provided the calculator gives no printout, has no word display
facilities, is silent and cordless. The provision of batteries and their condition is your
responsibility.

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Page 1 of 7

ASE 3009 2 11 1

QUESTION 1
The Marketing Manager of an internet trading company, has been investigating a possible link
between the different parts of the world and customer expenditure. A random sample of 1250
customers showed the following distribution.
World Region

Expenditure

Under 200
200 and
under 750
750 and
over

(a)

Europe

Asia

North
America

Rest of the
World

60

90

115

35

120

260

280

40

70

50

105

25

Test whether there is a significant association between different parts of the world
and customer expenditure.
(12 marks)

Before trading on the internet, the company operated a mail order business, and the percentage
distribution of customer expenditure was as follows:

(b)

Europe

Asia

North
America

Rest of the
World

19%

33%

40%

8%

Has the distribution of customer expenditure changed since the company changed
trading from mail order to the internet?
(8 marks)
(Total 20 marks)

QUESTION 2
(a)

Explain, and give a business example of, what is meant in probability by:
(i)
(ii)

mutually exclusive events

dependent events.
(8 marks)

An industrial chemical company has three new products (A, B and C) in development. It estimates the
probability of successful development of the products as 0.5, 0.6 and 0.7 respectively.
(b)

Find the probability that:

(i)
(ii)
(iii)

all three products are successful

no product is successful
one product is successful.
(8 marks)

(c)

Given exactly one product is successful what is the probability it is product B?

(4 marks)
(Total 20 marks)

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QUESTION 3
(a)

Explain what the correlation coefficient measures.

(4 marks)

The table below shows the length of service for a random sample of 10 employees, and the value of
their weekly output.
Employee

Service (years)

Value of weekly
output
000

(b)

35.3

46.3

34.9

35.2

10

45.9

35.2

14

46.1

37.9

35.8

36.9

Calculate the product-moment correlation coefficient between length of service and

the value of weekly output and comment on your answer.
(10 marks)

(c)

Test if the correlation coefficient differs significantly from zero.

(6 marks)
(Total 20 marks)

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QUESTION 4
In 2010 a random sample of 360 small businesses revealed the following distribution for annual sales.
Number of
businesses

Sales 000
Over 40 and up to 60
Over 60 and up to 80
Over 80 and up to 100
Over 100 and up to 140
Over 140 and up to 200
(a)

65
77
86
74
58

Estimate the mean and the standard deviation of sales per business.
(8 marks)

In the previous year mean sales were 93,650.

(b)

Test whether there has been a significant increase in the average sales for small businesses.
(7 marks)

(c)

Calculate a 95% confidence interval for the mean sales in 2010

(5 marks)
(Total 20 marks)

QUESTION 5
(a)

What are the benefits of a good quality control system to a business?

(4 marks)

Quality control procedures are used, which set the warning limits at the 0.025 probability point and
action limits at the 0.001 probability point. This means, for example, that the upper action limit is set so
that the probability of the means exceeding the limit is 0.001.
In a manufacturing process, the internal diameter of a boring is set at 200 mm, with a standard
deviation of 2 mm. Samples of 8 items at a time are taken from the production line to check the
accuracy of the manufacturing process.
(b)

(i)

Calculate the values of the action and warning limits and construct a quality
control chart to monitor the manufacturing process.

(iii)

The results for 5 samples are given below. Plot these on your quality control
chart and comment on the results.

(8 marks)

(4 marks)
sample number
sample mean mm

(c)

1
201.2

2
197.5

3
201.9

4
202.3

5
198.7

The process mean changed to 200.1 mm and the standard deviation remained at 2 mm.
Calculate the probability that the mean of a random sample of 8 components would be
below the lower warning limit.
(4 marks)
(Total 20 marks)

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QUESTION 6
(a)

In what circumstances might a significance test based on the normal distribution be

used in preference to a significance test based on the t distribution?
(4 marks)

A company manufacturing light bulbs develops a new proces which it claims increases the life of the
bulbs. 10 bulbs from the old process are tested to destruction using the old process and a further 10
bulbs from the new process are tested to destruction.
Life using
the old
process
(hours)

2,300

2,290

2,360

2,340

2,330

2,370

2,240

2,320

2,330

2,350

Life using
the new
process
(hours)

2,290

2,300

2,370

2,380

2,360

2,380

2,260

2,330

2,340

2,370

(b)

Test whether the new process has increased the life of the light bulbs.

(c)

What is meant by Type 1 error? From your conclusions in (b) might a type 1 error
have been committed?

(12 marks)

(4 marks)
(Total 20 marks)

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QUESTION 7
(a)

Describe the four components of a time series.

(4 marks)

The table below shows the quarterly sales for a company in 000 units.

(b)

Year

Quarter 1

Quarter 2

Quarter 3

Quarter 4

2008

117

133

150

188

2009

143

152

177

252

2010

159

198

209

325

Calculate the centred trend values and the average quarterly variations for the time
series.
(10 marks)

(c)

Estimate the sales for quarter 2 of 2011 and comment on the likely accuracy of the estimates.
(6 marks)
(Total 20 marks)

QUESTION 8
(a)

Explain how:
(i)
(ii)

a stratified random sample would be taken

a quota sample would be taken.

In each case give one advantage and one disadvantage of the method.
(8 marks)
(b)

Explain the term sampling distribution of the mean.

(4 marks)

The data below was obtained from counting the number of customers visiting each of two branches of
a company over a number of weeks during 2010.

(c)

Branch X

Branch Y

Mean number of customers

1516

1634

Standard deviation

158

186

Sample size (no. weeks)

32

41

Test whether there is a significant difference between the mean number of

customers visiting the two branches.
(8 marks)
(Total 20 marks)

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LEVEL 3

3009/2/11

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