Significance Test and Confidence Intervals (N 30) : Hlaing Minn Latt

Business Statistics Hlaing Minn Latt (Accountancy Training Centre)
Significance test and confidence intervals (n>30)
Q.1
In a manufacturing process the normal level of scrap is 5% of input. A random sample of output
from the last period was tested and 18 of the 300 units tested needed to be scrapped.
(a) Carry out a suitable test to determine whether there has been an increase in the level of scrap.
( 7 marks)
The records of a company contain the following data on order value for the past two months:
September October
Mean value per order £ 640 625
Standard deviation £ 40 35
Sample size 60 55
(b) Has there been a significant decrease in the mean value per order between September and
October? (7 marks)
(c) Pool the data for September and October to give a best estimate of the mean value and the
standard deviation per order. Using these data, estimate a 95% confidence interval for the mean
value per order. (6 marks)
(Total 20 marks)
Q.2
(a) (i) Explain what is meant by the term sampling distribution of the proportion.
(4 marks)
(ii) Explain the effect on the sampling distribution of the proportion if the sample size is
increased. (2 marks)
The Magenta Marketing Agency has been commissioned to perform a study, in the UK, to
find whether there is a difference in the proportion of men who supervise the household finances
in the North compared to the South. Magenta selected a random sample of 400 households
responded that way.
(b) Test whether the proportion of households in the North where the man supervises family
finances is greater than that of households in the South. (12 marks)
(c) Explain the practical implications of your findings for the Magneta Marketing Agency.
(2 marks)
(Total 20 marks)
1
Q.3
(a) Explain the term “the sampling distribution of the mean.” (4 marks)
The data below was obtained from two random samples of customers visiting two branches of a
company.
Branch X Branch Y
Mean number of customers per day 2516 2634
Standard deviation 258 286
Sample size (days) 78 85
(b) Test whether there is a significant difference between the mean numbers of customers visiting
the two branches per day. (8 marks)
The combined mean number of customers for the two stores per day is 2,578 and the combined
standard deviation is 273.
(c) (i) Use this data estimate the sample size required to be 95% confident of being within 50 of the
true mean number of customers per day for the two stores.
(ii) Explain what would be the effect on the sample size if the confidence level is reduced to 90%
and the acceptable range was decreased to 25 customers per day. (8 marks)
(Total 20 marks)
Q.4
(a) A machine produces steel discs which have a required thickness of 20 mm. A quality control
procedure is in place whereby a random sample of approximately 50 discs is inspected each
day. The results from yesterday’s inspection are given below:
Sample mean 20.2 mm
Sample variance 1.69 mm2
Sample defective rate 4%
Sample size 49
(i) Carry out a test to determine whether the machine is producing discs which have a mean
thickness in excess of 20 mm. (6 marks)
(ii) Calculate the sample size needed to ensure that the population mean thickness is estimated to
within +/- 0.3mm at the 95% confidence level. (3 marks)
(iii) Calculate a 95% confidence interval for that the population mean thickness based upon
yesterday’s sample results. (3 marks)
(b) In a manufacturing process the normal level of scrap is 7% of input. A random sample of output
from the last period was tested and 18 of the 300 units tested needed to be scrapped.
Carry out a suitable test to determine whether there has been an decrease in the level of scrap.
(8 marks)
(Total 20 marks)
2
Q.5
An investigation was carried out into the number of orders achieved per month by a company’s sales
force in Asia and in Asia and in Europe. Random samples were taken in both Asia and Europe. A
summary of the results is given below.
Asia Europe
Arithmetic Mean 125 121
Standard Deviation 27 24
Median 118 127
Sample Size 50 45
(a) By combining the data for the two continents find the 95% confidence interval for mean orders
per month. (6 marks)
(b) Write a brief memo to the Sales Manager of the company highlighting the main features in the
order statistic between the two continents. (6 marks)
(c) Test whether the average number of orders achieved in Asia is different from the average
number of orders in Europe. (8 marks)
(Total 20 marks)
3
Significance test and confidence intervals (n<30)
Q.6
(a) Explain the maeaning of the term the sampling distribution of the mean. (4 marks)
Random samples were taken of the price of three bedroom apartments in a given town in 2008 and
2012.
Prices
2008 ( £000) 2012 (£000)
249 229
185 177
161 162
185 178
239 212
195 234
179 224
237 218
186 230
153
(b) Test whether the price of three bedroomed apartments increased significantly between 2008
and 2012? (12 marks)
(c) Explain what is meant by a type 1 error. Could such an error have occurred in your conclusions
to part (b) above? (4 marks)
(Total 20 marks)
Q.7
(a) Describe two advantages and two disadvantages of using the arithmetic mean as a measure of
average. (4 marks)
A popular view expressed in the financial pages of the newspapers in Britain is that the
closing price of the London Stock Market increases in the opening days of the western New Year
compared with the final days of the previous year.
London Stock Exchange price index closing value for the eight days before the New Year ( modified)
365 420 390 455 510 505 565 570

London Stock Exchange price index closing value for the eight days after the New Year (modified)
570 700 670 625 650 610 700 670

4
(The initial 5 has been omitted from the data to simplify the calculations ie 5365 has become 365)
(b) Test whether the average closing price of the stock exchange is higher for the eight days after
the New Year compared with the eight days before the New Year. (12 marks)
When the London Stock Exchange price index closing value for the eight days after the New
Year is plotted against time the Coefficient of Determination is 0.1226(12.26%).
(c) Explain what the Coefficient of Determination measures. Does this value suggest a strong trend
in the data? (4 marks)
(Total 20 marks)
Q.8
Briefly explain the difference between an independent test and a matched paired test.(4 marks)
A company has introduced a flexible working programme aimed at improving the
productivity of its workforce. A random sample of employees had their output levels measured
before and after the implementation of the new working programme. The results are shown
below.
Output levels per period
Employee Before New After New

Working Working
Programme Programme
Implemented Implemented
1 100 101
2 112 108
3 118 120
4 130 130
5 124 132
6 138 140
7 102 98
8 108 110
9 102 104
(b) Carry out a suitable test to decide whether the new working programme has resulted in an
increase in output. (12 marks)
(c) Briefly explain what type I and type II errors are and state which may have been made in
answer to part (b). (4 marks)
(Total 20 marks)
5
Q.9
(a) Explain the circumstances in which a paired t test would be used in preference to a two sample
mean test for small independent sample. (4 marks)
A consumer protection magazine wishes to compare the cost of repairs between two garages.
They send a sample of 8 cars to both of the garages and ask for estimates of the cost of repairs.
Car Garage X Garage Y

Esitimated cost of repairs Esitimated cost of repairs
£ £
A 1,500 1,750
B 1,625 1,725
C 3,560 3,720
D 4,960 4,958
E 2,500 2,750
F 10,650 10,990
G 2,456 2,458
H 3,750 3,860
(b) Test whether the stimated cost of repairs differs between the two garages. (12 marks)
(c) What practical reasons may the two garages have for giving different estimated of repair costs?
(3 marks)
(Total 20 marks)
Q.10
A random sample of stations operate by a rapid transit rail company shows the following number
of tickets sold between 10.00 am and 11.00 am over a sixteen day period.
Number of tickets 27 35 43 20 39 45 53 28
Sold 32 26 33 28 19 23 51 44
(a) Find the arithmetic mean and standard deviation for the above data. (6 marks)
(b) Estimate the 99% confidence inerval for the mean number of tickets sold at a station between
10.00 am and 11.00 am. (5 marks)
The company has introduced a new on-line system of buying tickets. In the previous year the
average sales of tickets between 10.00 am and 11.00 am was 41.
(c) Test whether the new system has significantly reduced the number of tickets bought between
10.00 am and 11.00 am. (9 marks)
(Total 20 marks)
6
Chi-Square tests
Q.11
A survey was carried out by an estate agent to investigate the level of family income and value of the
house bought.
Family Income Level (per annum)
House Value Under £ 35,000 £35,000 and under £ 60,000 and over
£ 60,000
Under £ 150,000 40 30 10
£ 150,000 and under 100 120 40

£300,000
£300,000 and over 20 30 40
(a) Test whether there in an association between family income level and house value.
(12 marks)
(b) By combining the data for house values, test to see if the proportion of families with incomes £
60,000 and over purchasing houses from this estate agent is significantly less than the national
proportion of £0.25. (8 marks)
(Total 20 marks)
Q. 12
In 2012 a random sample of workers in the three regions of a country showed the number of
employees by employment sector and the region of the country where they lived.
Employment Region
sector Central Plains Mountains
Agriculture 120 247 113
Manufacturing 193 213 104
Administration 97 117 126
Commerce 50 63 77
(a) Test whether there in an association between the number of employees in each type of
employment sector and the region. (12 marks)
In 2000 a survey was carried out which showed the proportions employed in each sector.
Employment sector
7
Agriculture Manufacturing Administration Commerce
33% 37% 19% 11%
(b) By combining the data for the three regions test whether there has been a change in the
distribution of employees between 2000 and 2012. (8 marks)
(Total 20 marks)
Q.13
(a) Explain the role of the chi-squared test for data given in table form. (2 marks)
The companies which form part of an insurance company’s portfolio are classified as small,
medium and large. Investment returns are either above aver45age, average or below average. Data
collected from a random sample of 160 companies in 2000 are given below:
Investment
Company size Above average Average Below average
Small 15 15 10
Medium 27 51 12
large 8 14 8
(b) Examine whether a association exists between company size and the return of the investment.
(8 marks)
In 1999 38% of the investment returns were above average, 41% of investment returns were average
and 21% of investment returns were below average.
(c) By combining small, medium and large companies test whether there is any evidence that
investment returns in 2000 were significantly different from those in 1999. (6 marks)
(d) By combining the data for company size, find the 95% confidence interval for the proportion of
investment returns is average. (4 marks)
(Total 20 marks)
Q.14
A random sample is taken of workers in different sectors of the economy and the number of days
they are absent on sick leave in 2012 are recorded in the table below.
Sector of the Economy
Public Sector Domestic Owned Foreign Owned

Sick Leave Taken Private Private
Less than 5 days sick
35 45 20
leave
5 days and less than
95 102 35
10 days sick leave
10 or more days sick
70 53 45
leave
8
(a) Test whether there is any association between the sector of the economy and the amount of
sick leave taken. (12 marks)
In a similar survey carried out 5 years earlier the proportions of people taking sick leave were as
follows:
Less than 5 5 days and less than 10 10 or more days
days sick leave days sick leave sick leave
17% 54% 29%
(b) Test whether the pattern of sick leave taken has changed over the period. (8 marks)
(Total 20 marks)
Q.15
(a) The Personal Manager of a company investigated a random sample 200 staff accident / illness
reports. The accidents / illnesses were analysed by the departments in which the staff were
employed. The results were as follows:
Department
No absence 5 days or less More than 5 days
Accounting 5 14 6
Marketing 10 20 20
General office 35 56 34
Test whether there is any relationship between absence and department. (10 marks)
(b) In the case of accidents, the reports were analysed by the day of the week on which the
accident occurred. The results were as follows:
Days Monday Tuesday Wednesday Thursday Friday

Number of Accident 24 14 10 20 32
Test whether the number of accidents is independent of the day of the week. (8 marks)
(c) When might a X2 test be used? (2 marks)
(Total 20 marks)
9
Normal Distribution
Q.16
(a) Describe the characteristics of the normal distribution. (4 marks)
A printing company employs a team of technicians to repair its machines. The time taken to
repair a machine follows a normal distribution with a mean time of 25 minutes and a standard
deviation of 5 minutes. When the machine is not working it is taken out of service.
(b) Calculate the probability that the time taken to repair a machine is:
(i) Less than 19 minutes (3 marks)
(ii) Between 19 minutes and 28 minutes. (3 marks)
(c) The technicians wish to establish a benchmark time within which they can guarantee a 95%
completion time for a repair. What is that benchmark time? (4 marks)
On some occasions when a machine needs repairing a technicians is not available. The mean time
taken for a technician to become available is 123 minutes with a standard deviation of 4 minutes. The
time taken for a technician to become available is normally distributed and independent of the repair
time.
(d) If a technician is not available when a breakdown occurs, what is the probability that the time
taken for a technician to become available and for the repair to be completed is more then 50
minutes? 6 marks)
(Total 20 marks)
Q.17
(a) State two business uses of the Normal Distribution. (4 marks)
Evidence of changes in the size and shape of consumers only becomes available from time to
time following a national survey of the population’s measurements. Manufacturers of clothing use this
evidence to determine the proportion of clothes to manufacture in different sizes.
Last year the results of a new survey became available. This showed the average waist
measurement of women had increased to 88 cm with the standard deviation equal to 14 am. It can be
assumed that waist sizes of women follow a normal distribution.
(b) Find the proportion of skirts the manufacturers should make with waist measurements between:
(i) 80 cm and 84 cm (5 marks)
(ii) 84 cm and 88 cm (3 marks)
The manufacturer had, on the basis of a previous survey, produced 16% of output in the size 80
cm – 84 cm and 10% of output in the 84cm -88 cm size.
(c) Comment upon the impact of the changes in your results in (b) for the skirt manufacturer.
(4 marks)
(d) The manufacturer decides to manufacture skirts for the largest 75% of the population. Estimate,
to the nearest centimeter, the minimum waist size that should be manufactured. (4 marks)
(Total 20 marks)
10
Q.18
The average weight of a paperback book is 650 grams with a standard deviation of 50 grams. An
internet bookshop usually receives orders for three books at a time. Assume the weight of the books
is normally distributed.
(a) Find the probability that an order for three books weights:
(i) Under 1900 grams
(ii) Over 1975 grams
(iii) Between 1900 and 1975 grams (13 marks)
The weight of the packaging for three books is normally distributed with mean 200 grams and
standard deviation of 20 grams.
(b) Find the probability that an order for three books and its packaging weights more than 2250
grams. (4 marks)
The company’s delivery contract charges £2.75 for all deliveries which weigh 2250 grams and below
and £ 3.50 for deliveries which weigh more than 2250 grams.
(c) Estimate the expected cost for the delivery of 3 books. (3 marks)
(Total 20 marks)
Q.19
(1) A company’s largest selling product has average weekly sales of 2500 units with standard
deviation 250 units. Assume that weekly sales are normally distributed.
(a) Find the probability that weekly sales:
(i) Exceed 3050 units
(ii) Lie between 3100 units and 2200 units (8 marks)
(b) Find the level of sales which will be exceeded on90% of occasions. (4 marks)
(2)
(a) A previous sample of 4000 customers showed that 37% of the customers held a positive view
of the company. How large a sample should be taken to be 95% certain that the estimated
results arte within 3% of the views held by all customers? (4 marks)
A survey using the sample size calculated in part (b) produces a result that 33% of customers hold a
positive view of the company.
(b) By pooling the results of the two samples what p0ercentage of customers hold a positive view
of the company? (4 marks)
(Total 20 marks)
11
Q.20
A company employs a team of mechanics to maintain its machines. The time taken for repairing
a machine follows a normal distribution with a mean time of 25 minutes and a standard deviation of 5
minutes.
(a) Calculate the probability that the time taken to repair a machine is
(i) Less than 20 minutes
(ii) Between 20 minutes and 32 minutes (7 marks)
The costs to the company of a machine breadown are:
£200 if the breakdown is less than 20 minutes
£300 if the breakdown is less than 20 minutes and 25 minutes
£500 if the breakdown is less than 25 minutes and 32 minutes
£1000 if the breakdown is over 32 minutes
(b) Calculate the expected cost of a machine breakdown. (5 marks)
The maintenance team operates a mean call-out of 10 minutes with standard deviation of 3 minutes.
The call-out times are normally distributed.
(c) What is the probability that the combined call-out and repair time for a job exceeds 45 minutes?
(8 marks)
(Total 20 marks)
12
Quality Control
Q.21
(a) Explain the benefits to a business of using quality control systems? (4 marks)
(b) 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.
The steel bars used in manufacturing wash9ing machines are cut to a length set at 40cm with a
standard deviation of 0.5cm. Samples of 9 items at a time are taken from the production line to check
the accuracy of the manufacturing process.
(i) Draw a control chart to monitor the process. (8 marks)
(ii) The first 6 samples taken had the following mean lengths (in cm):
40.3 39.6 40.2 40.7 39.9 40.1
Plot these data on your control chart and comment appropriately (4 marks)
(iii) If the mean length of the steel bars had been wrongly set at 39.9 cm, with standard deviation
remaining at 0.5 cm, what is the probability that a sample mean lies outside the lower warning
limit? (4 marks)
(Total 20 marks)
Q.22
(a) Explain how the mean and range chart are used in quality control. (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. the weight of a packet of biscuits is
set at 150 grams with a standard deviation of 8 grams. 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. (8 marks)
(ii) The results for 7 samples are given below. Plot these on your quality control chart and
comment on the results. (4 marks)
Sample number 1 2 3 4 5 6 7
Sample mean (grams) 150.0 156.4 143.9 152.9 148.13 159.5 157.6
(c) Find the probability that a single item taken from the production line lies outside the action
limits. You may assume that the control chart was correctly set up with mean 150 grams and
deviation 8 grams. (4 marks)
(Total 20 marks)
13
Q.23
(a) Explain the impact of a business setting its quality control limits too narrowly. (4 marks)
(b) A company manufactures food products. Quality control procedure4s 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 mean
exceeding the limit is 0.001.
The average fat content in a product is set at 30 grams with a standard deviation of 2 grams.
Samples of 9 items at a time are taken from the production line to check the accuracy of the
manufacturing process.

(ii) Six samples taken from the production line had the following mean fat content (in grams):
Amount of Fat (grams) 30.6 31.5 28.7 28.1 27.7 30.5
Plot these data on your control chart and comment appropriately. (3 marks)
(iii) If the mean had been wrongly set at 31 gm, assuming the standard deviation remains the same
and the sample size is 9, what is the probability that the sample mean lies outside the upper
action limit? (5 marks)
(Total 20 marks)
Q.24
Quality control procedures are used which set the warning limits at the 0.025 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.
A car breakdown assistance company operating from Garage A quotes that it takes on average
38 minutes to arrive at a breakdown with standard deviation 24 minutes. Each week the garage
manager selects 9 call outs at random to monitor the time taken to arrive at a breakdown. You may
assume the arrival times are normally distributed.
(a) Use the information above to determine the warning and action limits for the sample mean
arrival time at a breakdown and construct a quality control chart to monitor the sample mean
arrival times, on the graph paper provide within the answer book. (8 marks)
The mean arrival times for a random selection of six weekly samples are given below.
(b) Plot these on your graph and make two comments on the results. (6 marks)
Sample 1 6
Mean arrival times (mins) 58 69 45 32 44 43
14
The average repair time at a breakdown is 23 minutes with standard deviation of 6 minutes.
You may assume the times are normally distributed. The total service time can be considered to be
the total of the to time and the repair time.
(c) Estimate the time the company may quote as the total service time achieved on 90% if
occasions. (6 marks)
(Total 20 marks)
Q.25
(a) Explain the benefits to a business of using quality control system? (4 marks)
(b) 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.
The steel bars used in manufacturing washing machines are cut to a length set at 40 cm with a
standard deviation of 0.5 cm. Samples of 9 items at a time are taken from the production line to check
the accuracy of the manufacturing process.
(ii) The first 6 samples taken had the following mean lengths (in cm):
40.3 39.6 40.2 40.7 39.9 40.1
Plot these data on your control chart and comment appropriately (4 marks)
(iii) If the mean length of the steel bars had been wrongly set at 39.9 cm, with standard deviation
remaining at 0.5 cm, what is the probability that a sample mean lies outside the lower warning
limit? (4 marks)
(Total 20 marks)
15
Regression, Correlation and Rank

Q.26
The table below shows information about the ages and annual salaries for a random sample of 10
workers in the music industry.
Worker Age (years) Salary £ 000

x y
a 43 26.3
b 45 31.3
c 55 24.9
d 36 35.2
e 48 35.9
f 48 35.2
g 50 36.1
h 34 24.9
i 37 35.8
j 31 46.9
(a) Draw a scatter graph, using the graph paper provided in the answer book. (3 marks)
(b) (i) Calculate the product-moment correlation coefficient (9 marks)
(ii) Explain your answer to b (i), in the context of the data. (2 marks)
(c) Test whether the correlation coefficient differs significantly from zero. (6 marks)
(Total 20 marks)
Q.27
The most recent report for annual Gross Domestic Product (GDP) and house prices gave the
following date.
Year GDP Index, House Price

X Index, y
1 90 67
2 93 78
3 95 87
4 97 92
5 100 100
6 103 107
7 103 91
8 98 94
9 99 95
Year 5 = 100 (base year)
16
(a) Calculate the regression equation of the House Price Index on GDP Index. (9 marks)
The correlation coefficient fort the GDP Index and House Price Index is 0.89.
(b) Estimate the value of the House Price Index when the GDP Index equals 105. (3 marks)
(c) How confident would you be in the prediction made in part (b)? (2 marks)
(d) Test whether the correlation coefficient differs significantly from zero. (2 marks)
(Total 20 marks)
Q.28
The table below shows information about the ages and annual salaries for a random sample of 10
workers in the music industry.
Worker Age (years) Salary £000
x y
a 43 26.3
b 45 31.3
c 55 24.9
d 36 35.2
e 48 35.9
f 48 35.2
g 50 36.1
h 34 24.9
i 37 35.8
j 31 46.9
(a) Draw a scatter graph, using the graph paper provided in the answer book. (3 marks)
(b) (i) Calculate the product-moment correlation coefficient (9 marks)
(ii) Explain your answer to b (i), in the context of the data. (2 marks)
(c) Test whether the correlation coefficient differs significantly from zero. (6 marks)
(Total 20 marks)
Q.29
A company wishes to estimate a regression line for the relationship between salesand
advertising. To arrive at its decision regarding the best model to use the company calculates three
correlation coefficients.
(a) (i) The sales in any month depend on 50% of the previous month’s advertising and 50% of the
month’s advertising with r = 0.15
(ii) The sales in any month depend on 50% of the previous month’s advertising and 50% of the
month’s advertising with r = 0.66
(iii) The sales in any month depend on the previous month’s advertising with r = 0.94
Interpret each of the above correlation coefficients and state which of the suggested models you
would chose as the basis for predicting sales. Justify your answer. (5 marks)
The advertising and sales figures for the least twelve months are shown in the following table.
17
Month Mar Apr MayJun Jul Aug Sep Oct Nov Dec Jan Feb
Advertising 20 22 36 45 26 35 80 65 36 72 29 35
£ 000
Sales 33 45 47 65 89 37 55 117 85 49 105 38
£ 000
(b) Using your conclusions from part (a) estimate the least squares regression line for the above
data. (10 marks)
(c) Estimate the level of sales in May 2012 when advertising in April 2012 is £ 85,000 and May
2012 £ 90,000. Comment on the likely accuracy of your answer. (5 marks)
(Total 20 marks)
Q.30
Over the past 9 years a company has achieved the following market share
Year Market Share%

2004 22.3
2005 21.6
2006 22.0
2007 21.1
2008 20.8
2009 19.9
2010 19.5
2011 18.4
2012 17.6
(a) Plot the data on a graph and comment on the pattern shown. (4 marks)
(b) Calculate and state the least squares regression line for Market Share dependent on Year.
(10 marks)
(c) Use the regression line found in (b) to estimate the year in which market share is likely to fall to
12% and comment upon the accuracy of your estimate. (6 marks)
(Total 20 marks)
18
Time Series
Q.31
(a) Explain the terms “trend” and “random” (irregular) variation used in time series analysis. In each
case illustrate your answer with a business example. (4 marks)
The table below shows the quarterly import figures for a country in £ billions.
Year Quarter 1 Quarter 2 Quarter 3 Quarter 4
2009 34 44 58 42
2010 40 50 62 48
2011 46 54 68 52
(b) Calculate the centred moving average for the quarterly imports and estimate the average
seasonal variations. (10 marks)
(c) Forecast the level of imports for the first and second quarters of 2012 and comment on the
likely accuracy of your answer. (6 marks)
(Total 20 marks)
Q.32
(a) Compare the circumstances in the analysis of time series data in which the additive model
should be used in preference to the multiplicative model for the determination of the average
seasonal variations. (4 marks)
The table below shows the closing price, in London, of gold per ounce for the first fourteen
working days of January 2012.
Day Gold Price $

per ounce
1 1598.0
2 1613.0
3 1599.0
4 1616.5
5 1615.0
6 1637.0
7 1634.5
8 1661.0
9 1635.5
10 1641.0
11 1656.0
12 1647.0
13 1655.0
14 1653.0
19
(b) Plot the data in the table above on graph paper and comment on the pattern shown. (4 marks)
(c) From the above data calculate the three period moving average. (4 marks)
From the data a four period centred moving average was also calculated. The results for the
centred moving averages and daily differences are shown in the table below.
Day
4 period 3 4 5 6 7 8 9 10 11 12
CMA 1608. 1613. 1621. 1631. 1639. 1642. 1645. 1646. 1647. 1651.
8 9 3 3 4 5 7 6 3 3
Difference -9.75 2.63 -6.31 5.69 -4.94 18.50 -10.19 -5.63 8.69 -4.25
s
(d) Calculate the standard deviation of the daily differences for the four period centred moving
averages. (4 marks)
The standard deviation for the daily differences using the three period moving averages found
in part (b) equals 9.5.
(e) Compare your results in (d) with the standard deviation given for the three period moving
averages and recommend which model is preferable. (4 marks)
(Total 20 marks)
Q.33
(a) Explain the circumstance in which it is preferable to find the trend of a time series by the
method of moving averages rather then by using the method of least squares regression.
The following table gives the total miles travelled by all vehicles in a country, for each quarter of
the years 2010-2012.
Year Quarter Billion Vehicle
Miles
2010 1 57.7
2 62.8
3 64.2
4 60.1
2011 1 56.3
2 62.2
3 63.3
4 57.9
2012 1 56.9
2 61.3
3 62.9
20
4 59.8
(b) (i) Find the centred four quarter moving average for vehicles miles. (6 marks)
(ii) Find the four quarterly seasonal variations. (4 marks)
(iii) There was heavy snow in quarter 1 of 2010 and quarter 4 of 2011.
Explain the impact that this could have on your results. (2 marks)
(c) Estimate the number of vehicle miles in quarter 2 of 2013. (4 marks)
(Total 20 marks)
Q.34
A doctor’s surgery records the number of patients who attend per quarter over a three year period.
Patients (000)
Year / Quarter 1 2 3 4
2009 36 28 48 68
2010 44 36 56 76
2011 44 36 64 76
(a) Graph the data and comment on the pattern shown. (4 marks)
(b) Find the four quarter centred moving average and the average quarterly variations for the time
series. (10 marks)
(c) (i) Estimate the number of patients in quarter 1 and quarter 2 of 2012.
(ii) If a basic payment of £10.50 is made for each attendance at the surgery what is the total
expected income of the surgery for the estimated number of patients over the first two quarter of
2012? (6 marks)
(Total 20 marks)
Q.35
(a) State the circumstances, in time series analysis, in which finding the average seasonal variation
by the additive method is to be preferred to finding the average seasonal by the multiplicative
method. (4 marks)
A traffic survey, on a busy road into the main business area of town, for a three week period showed
the following data (thousands of vehicles) over a three week period.
Sunday Monday Tuesday Wednesda Thursday Friday Saturday

y
Week 1 12 25 28 30 35 40 30
Week 2 13 27 30 33 38 42 31
Week 3 14 28 32 35 40 44 33
(b) Calculate a trend for this data using an appropriate moving average. (4 marks)
(c) Estimate the average daily variations. (4 marks)
(d) Forecast the number of vehicles for Monday and Tuesday of the fourth week. (6 marks)
(e) If it is known that the fourth week is a holiday week how might this affect your result in part (d).
21
(2 marks)
(Total 20 marks)
Measures of Location
Q.36
An auditing practice, that had kept records for many years, knows that the probability of and error in
transferring figures from one ledger to another is 0.048.
(a) If a large random sample of 1,000 transfers was taken, estimate the proportion of errors that
should not be exceeded on 99% of occasions. (4 marks)
(b) If the auditors wished to improve the accuracy of their work, estimate the sample size which is
required to be 95% confident of being within 0.01 of the true proportion. (4 marks)
The auditors calculate the mean and standard deviation of the salaries of the employees for a
cleaning products firm. The results are that the mean is £ 29,450 pa and the standard deviation
is £ 4,560.
The coefficient of variation for comparable firms in that industry is 25%.
(c) (i) Explain what is meant by the coefficient of variation. (2 marks)
(ii) Calculate the coefficient of variation for the cleaning products firm and comment on your
answer compared with that of other cleaning firms. (4 marks)
A random sample of 40 financial carried out in 2012 and an average value of £ 160 eith a
standard deviation of £ 25. In the previous year the average value was £ 152.
(d) Test at the 5 % significance level whether the average value of a financial transaction has
changed? (6 marks)
(Total 20 marks)
Q.37
A daily farmer is considering selling his herd of cows as he cannot make sufficient profits from
selling the milk the cows produced. Before he did so, he visited the local cattle auction and recording
the following prices for the cows that were sold.
Auction Price Number of
£ Cows Sold
1600-1700 23
1700-1800 35
1800-1900 48
1900-2000 55
2000-2100 63
2100-2200 24
2200-2300 19
2300-2400 7
(a)
(i) Estimate the arithmetic mean and the standard deviation price of cows sold. (8 marks)
22
(ii) Estimate the coefficient of variation for the price of cows at the auction. (2 marks)
At the previous auction the coefficient of variation had been calculated as 14.7%.
(b) Explain what the coefficient of variation measures. Than comment upon the difference in the
coefficient of variation between the two auctions. (4 marks)
(c) The farmer has a herd of 189 cows. Use your results from part (a) to find 99% confidence
intervals for:
(i) the mean price of a cow, (4 marks)
(ii) the total price for a herd of 189 cows. (2 marks)
(Total 20 marks)
Q.38
The average customer sales transaction last year at Retail Outlet A was £310. This year a
random sample of 200 customers has been taken and the following recorded.
Sales Value (£) Number of Customers

0 less than 50 14
50 less than 100 30
100 less than 250 60
250 less than 500 70
500 less than 1,000 20
1,000 less than 2,000 6
(a) Calculate the arithmetic mean and the standard deviation of the sales value. (8 marks)
(b) Carry out a suitable test to determine whether this year’s average customer transaction value is
greater than last year’s. (8 marks)
A similar survey involving 250 customers was undertaken for Retail Outlet B where it was found that
50% sales were in the range £250 to £2,000.
(c) Carry out a suitable test to determine whether there is a significant difference in the percentage
of sales transactions in the range £250 to £2,000 between the two retail outlets. (10 marks)
(d) What is meant by a 95% confidence interval? (2 marks)
(Total 20 marks)
Q.39
A local authority conducts a survey to find the number of dustbins emptied per day by its refuse
collectors. This survey is conducted over a random sample of 165 days during 2011. The data are
shown below:
Number of dustbins emptied Number of Days
500 and under 750 53

75 and under 1,000 48
1,000 and under 1,250 27
23
1,250 and under 1,500 22
1,500 and under 1,750 15
(a) Calculate the mean and standard deviation for the number of dustbins emptied per day.
(9 marks)
(b) Calculate the 95% confidence interval for the mean. (5 marks)
The government has set a standard of 1,000 dustbins to be emptied per day.
(c) Test whether the local authority reaches the government standard. (6 marks)
(Total 20 marks)
Q.40
A partnership takes a random sample of the businesses it audits and records the size of the fee it
charges.
Fee charged £ 000 Frequency

600 and under 1000 10
(a) Estimate the arithmetic mean and the standard deviation of fee charged. (9 marks)
The median for the above data is £ 370.55.
(b) Estimate the coefficient of skew. (3 marks)
Three years previously a sample of 150 audit fees showed the arithmetic mean was 340.1 (£ 000)
with a standard deviation of 159.8 (£ 000).
(c) Test whether the mean fee has changed over the three year period. (8 marks)
(Total 20 marks)
24

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Business Statistics Hlaing Minn Latt (Accountancy Training Centre)

Significance test and confidence intervals (n>30)

Significance test and confidence intervals (n<30)

365 420 390 455 510 505 565 570

570 700 670 625 650 610 700 670

Output levels per period

Employee Before New After New

Car Garage X Garage Y

Family Income Level (per annum)

£ 150,000 and under 100 120 40

Sector of the Economy

Public Sector Domestic Owned Foreign Owned

Days Monday Tuesday Wednesday Thursday Friday

(i) Draw a control chart to monitor the process. (8 marks)

Amount of Fat (grams) 30.6 31.5 28.7 28.1 27.7 30.5

Regression, Correlation and Rank

Worker Age (years) Salary £ 000

Year GDP Index, House Price

Year Market Share%

Day Gold Price $

Sunday Monday Tuesday Wednesda Thursday Friday Saturday

Sales Value (£) Number of Customers

500 and under 750 53

Fee charged £ 000 Frequency

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