Q5. a. What is the analysis of variance? What are the assumptions of the technique?

Give a few
examples where the techniques could be used.
b. The following data represents the number of units produced by four operators during three
different shifts:

Perform a two-way analysis of variance and interpret the result.

Answer.
a) Meaning of analysis of variance
Suppose we know that the sales of a product is influenced by the price level. In this case, sales are a
dependent variable and the price is the independent variable. Let there be three levels of price, namely,
low, medium and high. We wish to determine the most effective price level i.e. at which price level the
sale is highest. Here, the test units are the stores which are randomly assigned to the three treatment level.
The average sales for each price level is computed and examined to see whether there is any significant
difference in the sale at various price levels. The statistical technique to test for such a difference is called
analysis of variance (ANOVA).
Assumptions of the technique
This design is used when a researcher is investigating the effect of one independent variable on the
dependent variable. The independent variable is required to be measured in nominal scale i.e. it should
have a number of categories. Each of the categories of the independent variable is considered as the
treatment. The basic assumption of this design is that there are no differences in the test units. All the test
units are treated alike and randomly assigned to the test groups. This means that there are no extraneous
variables that could influence the outcome.