16 CHAPTER ONE Introduction and Data Collection

People use statistical techniques to help communicate and present important information to others both inside and outside their businesses. Every day, as in these examples. people misuse these techniques:

• A sales manager working with an "easy-to-use" charting program chooses an inappropriate chart that obscures data relationships.

• The editor of an annual report presents a chart of revenues with an abridged Y-axis that creates the false impression of greatly rising revenues.

• An analyst generates meaningless statistics about a set of categorical data, using analyses designed for numerical data.

Identifying and preventing misuses of statistics, whether intentional or not, is an important responsibility for all managers. The Web Cases help you develop the skills necessary for this important task.

Web Cases send you to Web sites that are related to the Using Statistics scenarios that begin each chapter. You review internal documents as well as publicly stated claims, seeking to identify and correct the misuses of statistics. Unlike a traditional case study, but much like realworld situations, not all of the information you encounter will be relevant to your task, and you may occasionally discover conflicting information that you need to resolve before continuing with the case.

To assist your learning, the Web Case for each chapter begins with the learning objective and a summary of the problem or issue at hand. Each case directs you to one or more Web pages where you can discover information to answer case questions that help guide your exploration. If you prefer, you can view these pages by opening corresponding HTML files that can be found on this Web Case folder on the Student CD. You can find an index of all files/pages by opening the SpringvilleCC.htm file in the Web Case folder or by visiting the Springville Chamber of Commerce page, at www.prenhall.com/ Spriugvitle/Sprtngvlllerl'Cihrm.

Web Case Example

To illustrate how to learn from a Web Case, open a Web browser and link to www.prenhall.com/Sprtngville/ Good Tunes.htrn, or open the Good_Tunes.htm file in the WebCase folder on the book's CD. This Web page represents the home page of Good Tunes, the online retailer

mentioned in the Using Statistics scenario in tbis chapter. Recall that the privately held Good Tunes is seeking financing to expand its business by opening retail locations. Since it is in management's interest to show that Good Tunes is a thriving business, it is not too surprising to discover the "our best sales year ever" claim in the "Good Times at Good Tunes" entry at the top of their home page.

The claim is also a hyperlink, so click on our best sales year ever to display the page that supports the claim. How would yon support such a claim? with a table of numbers? a chart? remarks attributed to a knowledgeable source? Good Tunes has used a chart to present "two years ago" and "latest twelve months" sales data by category. Are there any problems with the choices made on this Web page'? Absolutely':

First, note that there are no scales for the symbols used, so it is impossible to know what the actual sales volumes are. In fact, as you will learn in Section 2.6, charts that incorporate symbols in this way are considered examples of chartjunk and would never be used by people seeking to

.properly use graphs.

This important point aside, another question that arises is whether the sales data represent the number of units sold or something else. The use of the symbols creates the impression that unit sales data are being presented. If the data are unit sales, does such data best support the claim being made-or would something else, such as dollar volumes-be a better indicator of sales at Good Tunes?

Then there are those curious chart labels. "Latest twelve months" is ambiguous; it could include months from the current year as well as months from one year ago and therefore may not be an equivalent time period to "two years ago." Since the business was established in 1997, and the claim being made is "best sales year ever," why hasn't management included sales figures for evelY year?

Is Good Tunes management hiding something, or are they just unaware of the proper use of statistics? Either way, they have failed to properly communicate a vital aspect of their story.

In subsequent Web Cases, you will be asked to provide this type of analysis, using the open-ended questions of the case as your guide. Not all the cases are as straightforward as this sample, and some cases include perfectly appropriate applications of statistics.

74 CHAPTER TWO Presenting Data in Tables and Charts

In the Using Statistics scenario, you were asked to gather , information to help make wise investment choices. Sources for such information include brokerage firms and investment counselors. Apply your knowledge about the proper use of tables and charts in this Web Case about the claims of foresight and excellence by a Springville financial servicesfirm.

Visit the End Run Financial Services Web site at www, pl'enhall.com/Springville/EndRull.htm (or open the EndRun.htm file in the Student CD-ROM's WebCase folder). Review the company's investment claims and supporting data ancl then answer the following,

1. How does the presentation of the general information about EnclRun on its home page affect your perception of the business?

I

I

2. Is EndRun's claim about having more winners than losers a fair and accurate reflection of the qual ity of its investment service? If you clo not think that the claim is a fair and accurate one, provide an alternate presentation that you think is fair and accurate.

3. EnclRun's "Big Eight" mutual funds are part of the sample found in the workbook. Is there any other relevant clata from that file that could have been included in the Big Eight table? How would that new data alter your perception of Endkun 's claims?

4. EndRun is proud that all Big Eight funds have gained in value over the past five years, Do you agree that Endkun should be proud of its selections? Why or why not?

1. Huff, D., How to Lie with Statistics (New York: Norton, 1954).

2, Microsoft Excel 2007 (Redmond, WA: Microsoft Corporation, 2007),

3. Tufte, E, R" Envisioning Information (Cheshire, CT:

Graphics Press, 1990).

4. Tufte, E, R., The Visual Display of Quantitative Information, 2nd ed. (Cheshire, CT: Graphics Press, 2002).

5:,'Tufte, E, R., Visual Explanations (Cheshire, CT: Graphics Press, 1997),

6, Wainer, H" Visual Revelations: Graphical Tales of Fate and Deception front Napoleon Bonaparte to Ross Perot (New York: Copernicus/Springer- Verlag, 1997).

142 CHAPTER THREE Numerical Descriptive Measure

For what variable in the Chapter 2 "Managing the Springville Herald" case (see page 73) are numerical descriptive measures needed? For the variable you identify:

1. Compute the appropriate numerical descriptive measures, and generate a box-and-whisker plot.

2. Identify another graphical display that might be useful and construct it. What conclusions can you form

from that plot that cannot be made from the box-andwhisker plot?

3. Summarize your findings in a report that can be included with the task force's study.

Apply your knowledge about the proper use of numerical descriptive measures in this continuing Web Case front Chapter 2.

Visit EndRun Investing Services, at www.prenhaU.com/ Sprlngvllle/Endkun.hrm (or open the Endlcun.htm file in the Student CD-ROM Web Case folder) a second time and reexamine their supporting clata and then answer the following:

1. Can descriptive measures be computed for any variables?

How would such summary statistics support EndRun's

claims? How would those summary statistics affect your perception of End Run 's record?

2. Evaluate the methods EndRun used to summarize the results of its customer survey (see www.prenhall.com/ Sprlugvllle/Elt Survey.htrn or the ER_SlII·vey.htm file on the Student CD-ROM Web Case folder. Is there anything you would do differently to summarize these results?

3. Note that the last question of the survey has fewer responses than the other questions. What factors may have limited the number of responses to that question?

1. Kendall, M. G., A. Stuart, and 1. K. Ord, Kendall's Advanced Theory of Statistics, Volume 1: Distribution Theory, 6th ed. (New York: Oxford University Press, 1994).

2. Microsoft Excel 2007 (Redmond, WA: Microsoft Corporation, 2007).

3. Tukey, 1., Exploratory Data Analysis (Reading, MA:

Addison-Wesley, 1977).

4. Vellernan, P. F., and D. C. Hoaglin, Applications, Basics, and Computing of Exploratory Data Analysis (Boston:

Duxbury Press, 1981).

176 CHAPTER FOUR Basic Probability

Apply your knowledge abo II! contingency tables and the proper application of simple and joint probabilities in this continuing Web Casefrom Chapter 3.

Visit the EndRun Guaranteed Investment Package (GIP) Web page, at www.prenhall.comfSpringvillef ER_Guaranteed.htm or open this Web page file from the Student CD-ROM Web Case folder. Read the claims and examine the supporting c1ata. Then answer the following:

1. How accurate is the claim of the probability of success for Endkun's GIP? In what ways is the claim mislead-

1. Bellhouse, D. R., "The Reverend Thomas Bayes, FRS; A Biography to Celebrate the Tercentenary of His Birth," Statistical Science 19 (2004), 3-43.

2. Lowd, D., and C. Meek, "Good Word Attacks on Statistical Spam Filters," presented at the Second Conference on Email and Anti-Spain, CEAS 2005.

ing? How would you calculate and state the probability of having an annual rate of return not less than 15%?

2. What mistake was made in reporting the 7% probability claim? Using the table found on the "Winning Probabilities" Web page, ER_Gual·anteed3.htm, compute tbe proper probabilities for the group of investors.

3. Are there any probability calculations that would be appropriate for rating an investment service? Why or why not?

3. Microsoft Excel 2007 (Redmond, WA: Micros 2007).

4. Paulos, J. A., Innumeracy (New York: Hill 1988).

5. Silberman, S., "The Quest for Meaning," February 2000.

8.02,

Find the probability of winning

a. the jackpot.

b. the $175,000 prize. (Note that this requires matching all

five numbers but not matching the Mega Ball.)

c. $5,000.

d. $150.

e. $10.

f. $7.

g. $3.

h. $2.

Web Case 209

i. nothing.

j. All stores selling Mega Millions tickets are required to have a brochure that gives complete game rules and probabilities of winning each prize (the probability of having a losing ticket is not given). The slogan for all lottery games in the state of Ohio is "Play Responsibly. Odds Are, You'll Have Fun." Do you think Ohio's slogan and the requirement of making available complete game rules and probabilities of winning is an ethical approach to running the lottery system?

l\I1anaging the Springville Herald.

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The Herald marketing department is seeking to increase home-delivery sales through an aggressive direct-marketing campaign that includes mailings, discount coupons, and telephone solicitations. Feedback from these efforts indicates that getting their newspapers delivered early in the morning is a very important factor for both prospective as well as existing subscribers. After several brainstorming sessions, a team consisting of members from the marketing and circu lation departments decided that guaranteeing newspaper delivery by a specific time could be an important selling point in retaining and getting new subscribers. The team concluded that the Herald should offer a guarantee that customers will receive their newspapers by a certain time or else that day's issue is free.

To assist the team in setting a guaranteed delivery time, Al Leslie, the research director, noted that the circulation department had data that showed the percentage of new spapers yet undelivered every quarter hour from 6 a.m. to 8 a.111. Jan Shapiro remembered that customers were asked on their subscription forms at what time they would be looking for their copy of the Herald to be delivered. These data were subsequently combined and posted on an internal Herald Web page. (See Circulation_Data.htm in the HeraldCase folder on the Student CD or go to www.prenhall.corn/ HeraldCase/Cil'culatioll_Data.htm).

... ~

lW-eb Ca~e~

Apply your knowledge about expected value and the covariance in this continuing Web Case front Chapters 3 and 4.

Visit the EndRun Bulls and Bears Web page, at www.prenhall.com/Springville/ER_BullsandBea).s.htm (or open the Web page file from the Student CD-ROM Web Case folder), read the claims, and examine the supporting data. Then answer the following:

1. Are there any "catches" about the claims the Web site makes for the rate of return of Happy Bull and Worried Bear Funds?

EXERCISES

Review the internal data and propose a reasonable time (to the nearest quarter hour) to guarantee delivery. To help explore the effects of your choice, calculate the following probabilities:

SH5.l If a sample of 50 customers is selected on a given day, what is the probability, given your selected delivery time, that

a. less than 3 customers will receive a free newspaper?

b. 2,3, or 4 customers will receive a free newspaper? ~, c. more than 5 customers will receive a free newspaper?

SH5.2 Consider the effects of improving the newspaper delivery process so that the percentage of newspapers that go undelivered by your guaranteed delivery time decreases by 2%. If a sample of 50 customers is selected on a given day, what is the probability, given your selected delivery time (and the delivery improvement), that

a. less than 3 customers will receive a free newspaper?

b. 2,3, or 4 customers will receive a free newspaper?

c. more than 5 customers "vi II receive a free newspaper?

2. What subjective data influence the rate-of-return analyses of these funds? Could EndRun be accused of making false and misleading statements? Why or why not?

3. The expected-return analysis seems to show that the Worried Bear Fund has a greater expected return than the Happy Bull Fund. Should a rational investor then never invest in the Happy Bull Fund? Why or why not?

6.59 Problem 1.28 on page 15 describes a survey of 50 MBA students (see the file Wht"'4?4tw).

a. Select a sample of 50 undergraduate students and conduct a similar survey for those students.

b. For the data collected in (a), repeat (a) and (b) of Problem 6.58.

c. Compare the results of (b) to those of Problem 6.58.

246 CHAPTER SIX The Normal Distribution and Other Continuous Distributions

b. For the data collected in (a), repeat (a) and (b) of Problem

6.56.

c. Compare the results of (b) to those of Problem 6.56.

6.58 Problem 1.28 on page 15 describes a survey of 50 MBA students (see the file WhH"4'Htw). For these data, for each numerical variable, decide whether the data are approximately normally distributed by

a. comparing data characteristics to theoretical properties.

b. constructing a normal probability plot.

EXERCISES

SH6.! Assuming that the distribution has not changed from what it was in the past year, what is the probability that the blackness of the spot is

a. less than 1.0?

b. between 0.95 and 1.0?

c. between 1.0 and 1.05?

d. less than 0.95 or greater than 1.05?

SH6.2 The objective of the production team is to reduce the probability that the blackness is below 0.95 or above 1.05. Should the team focus on process _, improvement that lowers the mean to the target value of 1.0 or on process improvement that reduces the standard deviation to 0.075? Explain.

.~~ ..

~ana,gin9 the Sl2ringville. Herald

",-._,,";;$" "',,-;- _"- ~.' -' ",- . , .< ~ -. • "-" .~ •. "-.':J ~". •

The production department of the newspaper has embarked on a quality improvement effort. Its first project relates to the blackness of the newspaper print. Each day, a deterrnination needs to be made concerning how black the newspaper is printed. Blackness is measured on a standard scale in which the target value is l.0. Data collected over the past year indicate that the blackness is normally distributed, with a mean of 1.005 and a standard deviation of 0.10. Each day, one spot on the first newspaper printed is chosen, and the blackness of the spot is measured. The blackness of the newspaper is considered acceptable if the blackness of the spot is between 0.95 and 1.05.

Apply your knowledge about the 1101'IIIai distribution in this Web Case, which extends the Using Statistics scenario ji'OIII this chapter.

To satisfy concerns of potential advertisers, the management of OurCampus! has undertaken a research project to learn the amount of time it takes users to download a complex video features page. The marketing department has collected data and has made some claims based on the assertion that the data follow a normal distribution. These data and conclusions can be found in a report located on the internal Web page www.prenhall.com/Spring .. ilIe/ OurDownloadkesearch.htm (or in the file with the same name in the Student CD-ROM Web Case folder).

I. Gunter, B., "Q-Q Plots," Quality Progress (February 1994), 81-86.

2. Levine, D. M., P Ramsey, and R. Smidt, Applied Statistics for Engineers and Scientists Using Microsoft Excel and Minitab (Upper Saddle River, NJ: Prentice I-Tall, 2001).

Read this marketing report and then answer the following:

1. Can the collected data be approximated by the normal distribution?

2. Review and evaluate the conclusions made by the OurCampusl marketing department. Which conclusions are correct? Which ones are incorrect?

3. If Ourt.ampusl could improve the mean time by five minutes, how would the probabilities change?

3 Microsoft Excel 2007 (Redmond, WA: Microsoft Corp., 2007).