Quantitative Methods End Term Exam Class of 2016

PART - A (65 marks)

1. A survey of a sample of business students resulted in the following information regarding the genders
of the individuals and their selected major.
Selected Major
Gender Management Marketing Others Total
Male 40 10 30 80

Female 30 20 70 120

Total 70 30 100 200

a. What is the probability of selecting an individual who is majoring in Marketing?

b. What is the probability of selecting an individual who is majoring in Management, given
that the person is female?
c. Given that a person is male, what is the probability that he is majoring in Management?
d. What is the probability of selecting a male individual?

(0.5x4=2)
ANS:
a. 0.15
b. 0.25
c. 0.50
d. 0.40
 

2. The average number of calls received by a switchboard in a 30-minute period is 15.

a. What is the probability that between 10:00 and 10:30 the switchboard will receive exactly 10
calls?
b. What is the probability that between 10:00 and 10:30 the switchboard will receive 3 or 4 calls?

(1+2=3)
ANS:
a. 0.0486
b. 0.0008

3. Twenty percent of the employees of a large company are female. Use the normal approximation of
the binomial probabilities to answer the following questions. What is the probability that in a random
sample of 80 employees
a. exactly 16 will be female?
b. 14 or more will be female?
(2.5x2=5)

ANS:
a. 0.1114
 b. 0.7580
 

4. Based on last year’s records of the savings bank accounts’ balances of its customers, a bank
determined that the standard deviation of daily balance of its customers is $48. A random
sample of 144 accounts gave an average daily balance of $300.

a. What is the probability that the sample mean will be between $302 and $308?
b. Provide a 95% confidence interval for the population mean.
c. If it is desired to estimate the population mean with 95% confidence and a margin of
error of $5, what should be the sample size?

(2+4+4=10)

ANS:
a. 0.2857
b. (292.16 , 307.84)
c. 355 (Calculation comes to 354.04)

5. A producer of various kinds of batteries has been producing "D" size batteries with a life expectancy 
of 87 hours. Due to an improved production process, management believes that there has been an 
increase  in  the  life  expectancy  of  their  "D"  size  batteries.  A  sample  of  36  batteries  showed  an 
average life of 88.5 hours, with the standard deviation as 9 hours.           
 
(a).  At  99%  confidence,  can  the  producer  conclude  that  the  improved  production  process  has 
resulted  in  higher  life  expectancy?  Justify  with  appropriate  hypotheses,  test  statistic  and  other 
relevant indicators. 
(b)  Provide  a  99%  interval  estimate  for  the  population  mean  of  life  expectancy  of  the  "D"  size 
batteries.                                                                                                                                           
                                                                                                                                       (8+2 = 10 marks) 
 

Answer 

(A)  Ho:  µ < 87                                                                   (2 marks) 
a.  Ha:  µ > 87 
b.  Test statistic t = 1.00                                              (2 marks) 
c.  Since, the test statistic t = 1 < 2.438 (critical value at df 35); do not reject Ho and conclude 
that there is insufficient evidence to support the corporation's claim.                                    
OR 
 
d.  p‐value > 0.1587; therefore do not reject Ho                       
                                                                                                                       (4 marks) 
  
(B)    99% interval estimate   =  (84.414 , 92.586)                                (2 marks) 
 
Note: Since t‐crit was not provided for  df = 35, some people used, t‐crit with df = 31 
(highest available df). Some others solved using Normal approximation with z‐statistic as 
sample size > 30.  Others used the announced correction on sample size from 36 to 30. All 
such answers have been treated as correct. 
 

6(a).The following shows the quarterly sales ( in Rs. Lakhs) of six salespersons of Kinetic Energy Co.
before and after a bonus plan was introduced. At 5% level of significance, determine whether the
bonus plan has increased sales significantly.

(5 marks)

Monthly Sales (in Rs. Lakhs)

Salesperson After Before

1 94 90

2 82 84

3 90 84

4 76 70

5 79 80

6 85 80

Answer:

1. H0:  0 and Ha:  0 
2. Test Statistic t5 =  = (3 – 0) / (3.5777/Sqrt(6)) = 2.0540
/√

Critical Value Approach

3. CV = 2.015
4. The Test Statistic falls in the Rejection Region
5. Reject H0

p-value Approach

3. 0.01 < p-value < .05

4. Reject H0
6(b) . The office of records at a university has stated that the proportion of incoming female students
who major in business has increased in the last 5 years. A sample of female students taken 5
years ago is compared with a sample of female students this year. Results are summarized below.
Has the proportion of female students increased significantly? Test at 10% level of
significance.

No. of female students Sampled No. of female students

Majoring in Business

Previous Sample (5 years ago) 250 50

Present Sample 300 69

(5 marks)

Answer:

H0: P1 - P2 ≤ 0

Ha: P1 - P2 > 0 ; Z = 0.85; do not reject H0

6( c ) .          Zip Inc. manufactures Zip drives on two different manufacturing processes (A and B). Because
the management of this company is interested in determining which process takes less
manufacturing time, they select separate samples from each process. The results of the samples are
shown below.

Process A Process B

Sample Size 17 12

Sample Mean (in minutes) 10 14

Sample Variance 16 25

At 5% level of significance, test to determine if there is sufficient evidence to indicate that the
process A takes a significantly shorter time than process B to manufacture the Zip drives.

(Note: Under usual meanings, (n1 + n2 – 2) may be used as an approximation to the required
degrees of freedom.)

(5 marks)

Answer:

H0 : µA >= µB H1 : µA < µB

The test statistic t = -2.39 < -1.703, thus, reject Ho and conclude process A takes shorter time.
 7(a). Media Research Inc. is interested in understanding the relation between education level and the
preference of television stations. A poll of 80 television viewers gave the following data:

High School Bachelor Graduate

Public Broadcasting 5 15 8
Commercial Stations 15 25 12

What can Media Research Inc. conclude at 5% level of significance? Justify  with  appropriate 
hypotheses, test statistic and other relevant indicators.   

(10 Marks)
ANS:
a. Ho: Selection of TV station is independent of level of education
Ha :Selection of TV station is not independent of level of education
b. High School Bachelor Graduate TOTAL

Public Broadcasting 7 14 7 28
Commercial Stations 13 26 13 52

TOTAL 20 40 20 80
c. Chi Square = 1.2088
d.Critical Chi-Square = 5.991, accept Ho and conclude selection of TV station is independent
of level of education
a. p-value > 0.005, accept Ho. (actual p-value using Excel is 0.00237)
 

7(b). Student Advisors believe that evening students are less consistent (i.e., have more
variance) as compared to the regular (day) students as seen through the grades. The following
samples are drawn:

Evening Day
n1 = 31 n2 = 25
s1 = 14.7 s2 = 9.8

At 5% level of significance, comment on the belief of the Student Advisors. Justify  with 
appropriate hypotheses, test statistic and other relevant indicators. 

( 5 marks)
ANS:
Since F = 2.25 > 1.94, reject H0
p-value is between .02 and .05

7( c ). The weekly gasoline sales data for a distributor in Hyderabad was recorded for the
past seven days. You are given the information below:

Week Sales (in 000s gallons)
 1 17
2 21
3 19
4 23
5 18
6 16
7 20

It is proposed to predict the weekly sales for the eighth week. Which method would be
preferable - using a 3-day moving average method or exponential smoothing with
smoothing constant as 0.2?
(5 marks)
ANS:
Week Sales (in 
000s  3‐Wk  Forecast  Exp.Sm.  Forecast 
gallons)  MA  Err  Sq. FE  Forecast  Err  Sq. FE 
1 17
2 21 17.00 4.00  16.00
3 19 17.80 1.20  1.44
4 23 19 4 16 18.04 4.96  24.60
5 18 21 ‐3 9 19.03 ‐1.03  1.07
6 16 20 ‐4 16 18.83 ‐2.83  7.98
7 20 19 1 1 18.26 1.74  3.03
TOTAL 
42 TOTAL  54.12
                          
MSE  10.5  MSE           9.02 
Conclusion: Based on MSE,  Exponential Smoothing Forecast is preferred for the 8th 
week sales forecast. 

PART - B (35 marks)

8. Famous Dry Fruit Products Co. supplies its specialty Dry Fruit Burfi to many supermarkets in Hyderabad. The company wishes to 
study the effect of the shelf display height employed by the supermarkets on monthly sales for this product. Shelf display height has 
three levels – bottom (B), middle (M) and top (T). The company randomly selected six supermarkets (of equal sales potential) for 
each shelf height and each of them displayed the specialty Burfi for a month using its assigned shelf height. The sales (in boxes of 10 
units each) at the end of the month were observed to be as follows: 

Observation  Shelf Display Height   
No.  Bottom Middle (M)  Top(T)   
(B) 
1  58  73  52   
2  54  78  50   
3  56  75  51   
4  56  76  54   
 5  52  78  52   
6  59  82  50   
         
         
         
         
         
         
  

Which display height should the company follow as a long run strategy?  

(Hint: Start by examining if all the display strategies are equally effective.) 

ANSWER:          Marks allocation:  12 marks for conducting ANOVA & concluding.  3 marks for computing LSD and concluding. 

Bottom(B)  Middle (M)  Top(T)

58  73  52

54  78  50

56  75  51

56  76  54

52  78  52

59  82  50

Anova: Single Factor 
SUMMARY 

Groups  Count  Sum  Average  Variance 

Bottom(B)  6  335  55.83333333  6.566667 
Middle (M)  6  462  77  9.6 
Top(T)  6  309  51.5  2.3 

ANOVA 
Source of Variation  SS  df  MS  F  P‐value  F crit 
Between Groups  2234.111111  2  1117.055556  181.4711  3.09E‐11  3.68232 
Within Groups  92.33333333  15  6.155555556 

Total  2326.444444  17             

 
LSD=  3.052505464                             

9. The following data represent the number of flash drives sold per day at a local computer
shop and their prices.

Price (x) (in $) Units Sold (y)

34 3
36 4
 32 6
35 5
30 9
38 2
40 1

a. Develop a least-squares regression line and explain what the slope of the line indicates.
b. Compute the coefficient of determination and comment on the strength of relationship
between x and y.
c. Using the results from (b), compute the sample correlation coefficient between the price
and the number of flash drives sold.
(5+4+1=10)
ANS:

a. = 29.7857 - 0.7286x
The slope indicates that as the price goes up by $1, the number of units sold goes down
by 0.7286 units.
b. R 2 = 0.8556; the regression equation has accounted for 85.56% of the total sum of
squares
c. rxy = -0.92 (To justify negative sign)

10. Over a period of 12 days, a researcher observed the prices of ABC Inc. stock (y), the number of
shares (in 100s) of company's stocks sold (x1), and the volume of exchange (in millions) on the
Bombay Stock Exchange (x2). Excel was used to determine the least-squares regression equation
of price on number of shares of company's stocks sold, and the volume of exchange on the
Bombay Stock Exchange. Part of the computer output is shown below:

ANOVA
df SS MS F Significance F
Regression A 118.8474 D F 0.0000
Residual B 13.0692 E
Total C 131.9167
Coefficients Standard Error t Stat P-value
Intercept 118.5059 33.5753 3.5296 0.0064
(x1) -0.0163 0.0315 -0.5171 0.6176
(x2) -1.5726 0.3590 -4.3807 0.0018

a. Obtain the values represented by alphabets in the table.

b. Write down the regression equation and interpret the coefficients of the estimated regression
equation.
c. At 5% level of significance, test if the estimated regression equation represents a significant
relationship.

d. At 5% level of significance, determine which variables are significant and which are not.
Justify your answer.

e. Based on your conclusion on Part (d), what would be your recommendation to the
researcher?

f. If on a given day, the number of shares of the company that were sold was 94,500 and the
volume of exchange on the Bombay Stock Exchange was 16 million, what would you expect
the price of the stock to be?

                                                                                                                                           (3+2+1+2+1+1=10) 

Answer:  

a. 

ANOVA
df SS MS F Significance F
Regression 2 118.8474 59.4237 40.9216 0.0000
Residual 9 13.0692 1.4521
Total 11 131.9167

Coefficients Standard Error t Stat P-value

Intercept 118.5059 33.5753 3.5296 0.0064
(x1) -0.0163 0.0315 -0.5171 0.6176
(x2) -1.5726 0.3590 -4.3807 0.0018
 

b As the number of shares of the stock sold goes up by 1 unit, the stock price goes down by
$0.0163 (holding the volume of exchange on the NYSE constant). As the volume of
exchange on the Bombay Stock Exchange goes up by 1 unit, the stock price goes down by
Rs.1.5726 (holding the number of shares of the stock sold constant).

C Based on F value, the relationship is significant.

d x1 is not significant; the p-value = 0.6176 >α = 0.05.

x2 is significant; the p-value = 0.0018 <α = 0.05.

e. It would be appropriate to regress y on x2 only.

f Rs.77.94