BST510 STUDY SKILLS INCLUDING BUSINESS STATISTICS 2015-16

As is customary, I find myself tasked with providing feedback on the recent business
statistics examination. Rather than it being an onerous task, this year it is a pleasure
to say congratulations and well-done. It appears most people have worked diligently
and consciously during the semester, and this is an excellent set of results.

The average of 64.4% was slightly higher to last years cohort. Grades still ranged
from 20 to 100%, with two students being faultless (100) and 16 others scoring above
90. There was also a slight negative skew to this years distribution, with slightly
more students scoring 60s, and 70s rather than 30s and 40s. Moreover, the good
performance was not limited to the multiple-choice or one easier longer question in
Section B. In fact, the banker on descriptive statistics was rather poorly answered in
many cases, suggesting people were under prepared or lacked knowledge of how to
deal with grouped data and frequency tables (see comments below). Nevertheless, the
choice of second question was evenly split among the other three which was good to
see. Indeed, the discrete probability and Normal / chi-squared questions were both
very well handled.

In terms of exam technique, some students need to take more care when reading the
paper, and both correlation and descriptive statistics questions showed evidence of
misunderstanding. We wanted to simplify the calculation of authors royalties, so
divided by 10, hence 1 = 10, 2 = 20, but that distinction was often over looked.
Likewise, the experiment was about identifying defective parts travelling on an
assembly line. The faster the line travelled, the harder it was for workers to spot the
defects. It was not a production line the faster the manufacturing process ran the
fewer defects produced was not true and marks were deducted accordingly. Now
Ill offer some comments on each of the longer questions and multiple-choice, with
the discussion weighted to reflect how many people attempted each one.

Multiple-choice questions. Overall the multiple choice were well done (average 7
out of 10), although there was little evidence of workings for some questions that
required calculations resulting in students scoring full marks or nothing. It was good
to see only a few people treated them as short questions writing out explanations for
each alternative which obviously took a long time but for limited gains. Nevertheless,
a sketch of the histogram was appreciated and rewarded.

The multiple-choice were designed to test breadth of knowledge, and most people
were confident calculating quartiles and the central limit theorem. Surprisingly q7 on
regression and q2 about the mode were the lowest scoring. If a firm spent 2000 on
advertising, but expenditure was measured in 100s, then X =20 (and not 2000), and
6 + 0.8*20 = 22 units of Y, or predicted sales of 22,000. The mode is the value that
occurs most frequently and a variable can be multi-modal, but with ordinal data which
has the (=, < >) properties you can calculate both the mode and median ordering and
sorting are legitimate mathematical operations.

Finally, there was a transcription error on q6 about the statistical significance of the
correlation coefficient, so both options A and C were treated as correct. We reject the
null hypothesis if the correlation derived from the empirical data (r = 0.4) is greater

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than the critical value derived from tables. With 22 degrees of freedom, (i) using the
abridged table on page 3, the critical values given were 0.344 (1t) and 0.396 (2t), so
the correlation was significant for both tests. But, the critical values for the 2t test
were in the wrong order and should have been read right-to-left. If you had used the
full table given on page 14 and extracted the correct critical values 0.344 (1t) and
0.404(2t), the correlation was only significant with a 1-tailed test option C. In the
interests of fairness, and given some questions asking for clarification, both options
have been treated as correct.

Q11. Descriptive statistics. This question involved relatively basic statistics. Also, it
was the most popular of the four longer questions. Given these facts, it is surprising
to find how poorly it was done. Noting the principal issues in parts (a) to (d) in turn:

(a). To avoid unnecessarily large numbers in the calculations, the data table records
author earnings in units of 10. Thus, the mean was not 32.42, nor was it 32.42. It
is 324.20. Similarly, the standard deviation was 875.90, not 87.50 or 87.50. Only
a few students observed these distinctions. (ii) Students often got at least one of the
midpoints wrong. Sadly, many people produced a mystifying list of midpoints whose
origins we could not fathom. (iii) n = 1000 (a sample of 1000 authors earnings), not
n = 6, which was the number of class intervals used (labelled to A-F). (iv) As usual,
many students calculated (f.x)2 rather than f.x2.

(b). The most widely quoted version of Chebeyshevs rule is that at least 75% of data
points lie within the interval: mean 2sd. Do the calculation to find what this interval
is (it turns out to be 0 to 207 units), then go and check against the tabled data whether
this is true it should always be true. So many students didnt seem to realise they
needed to do this. Of those who did, it is important to be more convincing than simply
saying something like, We can see from the table that Chebyshevs rule holds true.
Convincing evidence is that the interval 0 to under 100 (Classes A & B & C) included
740+152+40 = 932 authors out of 1000 (i.e., 93.2%). Therefore, the interval 0 to 207
must include at least 93.2% (> 75%). Therefore, Chebyshevs rule holds.

(c). Typical author: Median or mean here? We probably would like to use the mode to
describe the typical authors earnings if the mode were not so difficult to measure. A
simple criterion is that if the distribution is approximately Normally distributed, then
use the mean as the typical authors earnings. Otherwise, particularly if the
distribution is skewed, use the median. This is an abstract statement, but the question
pertains to this dataset, so your answer should have included the following
information: that the mean (324.20) >> median (44.30) here, thus highly positive
skew here, therefore prefer the median here. Context really does matter.

(d). Was the question so difficult that a large minority of students chose not to answer
it at all? Currently PLR operates a cap on earnings, set at 6600. To understand the
implications of the cap, lets imagine that each author gets 10p every time one of their
books is borrowed. If author A is borrowed 66,000 times, A gets 6,600. If author B
is borrowed 90,000 times, B still only gets 6,600. If the cap were removed, B would
get 9,000. Hence, removing the cap increases net earnings for the sample, increases
the mean, increases the dispersion / spread (e.g., standard deviation). But there are
also practical issues linked to having an open interval (e.g., 500 and above). How do

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we calculate the midpoint of such an open interval? Really, as the question is about
analysing next years data, which we know nothing, students should focus on the
processes of analysis - that is, the issue of having an open interval.

Q12. Discrete probability distributions. This was the highest scoring of the longer
questions undertaken by a large minority of students who showed good understanding
of the issues. Part (a) explored one of the two fundamental assumptions of the Poisson
distribution, namely that the event occurs at a constant rate throughout the interval.
So, if there were 35 incidents on a 50 mile stretch of motorway per 7-day week, then
using the idea of proportionality, there should be 7 such incidents along a 10-mile
stretch (1/5 distance) per week. Likewise, there should be 17.5 incidents on a 25 mile
stretch per week, and thus 2.5 (17.5 / 7) per day. The implicit assumption underlying
these calculations is that each mile of motorway is equally likely to be associated with
an incident (ok), as is each day of the week(?), though from experience we know there
is more traffic on the road on Fridays than Tuesdays.

Part (a) also acted as a primer to part (b), which concerned the expected number of
incidents (mu) on a 50 mile stretch of motorway per day, namely 5 (35 / 7 days). The
calculations P(X > 1) were handled well, with most students subtracting P(X=0) and
P(X=1) from 1. Part (c) was about the number of absentees from a road crew
comprising 7 workers. It was a Binomial problem with a natural upper-limit at
most all 7 workers could be absent. The problem asked for the chance of less than 2
workers being absent. It required the calculation of P(X=0) + P(X=1), but a minority
of students included P(X=2), thus determining the chance of two or fewer absentees.
As usual, there were minor errors associated with raising numbers to the power 0
(e.g., 0.15^0 = 1, not 0.15), and handling factorials (0! = 1 and not zero). Overall, the
question was very well done with several maximums (100).

Q13. Correlation & regression. This was the most popular of the longer questions,
but only ever so slightly more than Q12 and Q14. While most scatterplot discussions
mentioned the key words linear relationship and outlying values, the discussion often
lacked conviction. You really needed to describe what you saw noting that Trail B
was below expectations (a possible outlier warranting further investigation) and the
possible curvilinear trend and, more importantly, draw out the implications for the
calculation of the correlation it would be weakened. The ? referred to Trial C, but
had nothing to do with missing middle problem. In part (b), the calculation of the
correlation was done well, but a few marks were lost if you failed to interpret your
result. There were the usual arithmetic errors, in particular the Sum Y2 does not equal
(Sum Y)2, while others forgot to square root the denominator. Strangely, a small
minority calculated the regression slope and intercept instead. This was not what was
required, and marks were deducted accordingly. Always read the question!

Part (c) concerned interpreting the regression coefficients. The problem was about the
number of defected parts identified / spotted as the speed of the assembly line was
varied. It was not about a manufacturing process and the number of defects produced.
So, the intercept showed the number of defects spotted when the assembly line was
stationary (X = 0) maybe not very managerially useful information. Likewise, the
slope showed that as the speed of the assembly line increased by 1 meter per minute,

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0.25 fewer defect parts were spotted. In other words, as the line got faster, it became
more difficult for workers to identify the defect parts, not faster manufacturing speed
being linked to fewer defect products produced. The final part required a discussion
of the coefficient of determination (R2) which measures the proportion of the variance
in the dependent variable that is explained by the predictor variable. Here 76% of the
variance was explained, so we should be reasonably confident in any predictions. The
unexplained variance might reflect differences in the number of employees who were
on the assembly spotting the defect parts or simply fatigue was it the first or the last
time the experiment was run? Always read the question carefully context matters.

Q14. Normal & Chi-squared. Again, a sizeable minority of students undertook this
question, with some concentrating on part (a) and others parts (b) to (d). Part (a) was
a relatively straightforward Normal distribution question identify the proportion of
telephone calls taking (i) more than 30 seconds, (ii) between 15 and 25 seconds to be
answered. There was some confusion with a few students not subtracting from 1 the
probabilities associated with two areas in the tails (ii), thus calculating the chance of a
call not being answered within 15 to 25 seconds. A simple picture identifying the
critical regions would have resolved this issue, but often was omitted. Likewise, as
Normal tables are reported to two decimal places, so should calculated Z values;
along with a pithy sentence interpreting your results. Finally, a few students used a
continuity correction factor, implicitly assuming time was discretely measured to the
nearest second rather than continuously so. Interesting idea, but over complicated.

The second part concerned a contingency table and a chi-squared test looking to see
whether there was a relationship between which hotel guests stayed in (No. 16. 17 or
18), and their likelihood or tendency to make a complaint. The null and alternative
were generally well set out with most people recognising that the null always includes
the word no and relates to the status quo so guests are equally likely to complain
regardless of which hotel they stay in. Part (c) required the calculation of expected
frequencies denoting the number of guests who would (13.33) and wouldnt complain
(136.67) if the null was true the two variables are not related / independent of each
other. However, many students discussed the link between the expected frequencies
and observed frequencies that forms the basis of the chi-squared statistic itself. And a
few others rounded the expected frequencies to 13 and 137 which was not correct.
Finally, the mechanics of the statistical significance test were well handled with most
people correctly identified the degrees of freedom and testing at the 5% significance
level the default in the social science. However, calculation of Cramers V looking
at the strength of the relationship was unnecessary.

PB / JD 01/2016

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Additional Detail

MCQ: q1=D, q2=B, q3=C, q4=B, q5=A, q6=C, q7=C, q8=B, q9=A, q10=D.

Q11 Public Lending Rights

Part A: Mean = 32.43, SD = 87.59, so with 10 units the typical author
receives royalties of 324.30 with a SD of 875.90. Sum frequency = 1000;
sum freq*midpoint = 32430; sum freq*midpoint2 = 8723650.
Part B: The most popular form of Chebyshevs rule states that at least 75% of
data values lies within the mean +/- 2SD. Upper limit = 207.61. Lower limit
= -142.75 rounded to zero (cant have negative royalties). 207 is within the
fourth class. 93% of authors (740+152+40) / 1000 receive at most 1000 in
royalties members of the first 3 classes thus satisfying Chebyshevs rule.
Part C: The median is a better indicator than the mean of royalties received by
the typical author. Why? The frequency table is highly positively skewed, as
confirmed by Pearsons skewness [3*(324.3 44.30)/875.90)] = 0.96. Thus
robust statistics would paint a truer picture of monies received.
Part D: If the 6600 maximum was removed, then best-selling authors can
receive more money, thus increasing the mean and SD. The frequency table
would now have an open-class interval which requires assumptions.

Q12 Motorway maintenance

Part A: Poisson distribution assumes the event occur at a constant rate (mu)
throughout the interval. So, if there are 35 incidents on a 50 mile section of
motorway over 7 days, there are (i) 7 incidents on a 10 mile section per week
and (ii) 2.5 incidents each day on a 25 mile section. Assumption: each mile
and each day is equally likely to be associated an incident. Realistic?
Part B: P(more than 1 incident on a 50 mile section per day). Mu = 5 incidents
per day. P(X > 1) = 1 - P(X = 0) - P(X = 1) = 1 0.0067 0.0337 = 0.9596.
So about a 96% chance of more than 1 incident per day.
Part C: Number of workers absent is also discrete, but there is a maximum,
namely all 7 could be ill. This is binomial with n = 7 and p = 0.15. P(less
than 2 absent) = P(X = 0) + P(X = 1) = 0.3206 + 0.3960 = 0.7166.

Q13 Regression: Defective parts

Part A: The scatterplot shows a negative association between the speed of the
conveyor belt and number of defective parts correctly identified. There is a
mild bend suggesting that as speed increases it becomes more difficult to spot
the defective parts, and point (20,18) is below where we might expect it to be
a potential outlier requiring further investigation?
Part B: The correlation = A / square root (B x C). A = -3740, B = 15100, C =
1212, correlation = -0.874. So, there is a strong negative correlation using the
textbook or Cohen guidelines. As the speed of the conveyor belt increases, the
number of correctly identified parts decreases.
Part C: Y = 26.23 0.25X. Slope: as line speed increases by 1m per minute,
the number of faulty parts correctly detected falls by one quarter (0.25) of a
part. The intercept shows where the line crosses the vertical axis. When the
line speed is zero, the conveyor belt is stationary, and 26.23 faulty parts will
be correctly identified. (Meaningless).

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 Part D: R-squared is the goodness of fit. It shows the proportion of the
variation in the Y scores that is explained by the variation in the X scores. R-
squared = 0.764 (0.87x0.87), so 76% of the variation is explained, 24% due to
other factors, for instance, the number of parts on the conveyor belt at any one
time, the number of tests already carried out - fatigue.

Q14 Switchboard /Hotel service

Part A: Time is a continuous variable, so this is an application of the Normal
curve with mean = 18, SD = 4. (i) P(more than 30 seconds) = Z = 3.00, p =
0.0014.; (ii) P(15 to 25) = P(-0.75 < Z < +1.75). There is 0.0481% of the area
in the upper tail, 0.2266 in the lower tail. Subtract these from 1 = 0.733 chance
of a call taking 15 to 25 seconds to be answered.
Part B: H0: there is no relationship between which hotel a guest stayed in and
whether or not they made a complaint. H1: There is a relationship between
which hotel they stayed in and whether they complained.
Part C: Expected frequencies (E) = (row total x column total) / sample size.
E(No.17 / complained) = 14.33. E(No. 17 / did not complain) = 135.67.
If chi-squared = 8.35, with two degrees of freedom, at the 5% significant level,
the critical value = 5.991. As the chi-squared > critical value, we reject the
null hypothesis. In the population, it does depend where guests stayed as to
whether they left a complaint; quality of service differs across these hotels.