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Business Statistics
THIRD LEVEL
Series 2 (Code 3609) 2001
Malaysia
Examiners’ Reports and Model Answers have been developed by LCCIEB to offer additional
information and guidance to Centres, teachers and candidates as they prepare for LCCIEB
examinations. The contents of this booklet are divided into 5 elements:
(3) Model Answers – summary of the main points that the Chief Examiner expected to
see in the answers to each question in the examination paper
(4) Examiner’s Report – constructive analysis of candidate error, areas of weakness and
other comments that apply to each question in the examination
paper
Teachers and candidates should find this booklet an invaluable teaching tool and an aid to success.
The London Chamber of Commerce and Industry Examinations Board provides Model Answers to
help candidates gain a general understanding of the standard required. The Board accepts that
candidates may offer other answers that could be equally valid.
Note
LCCIEB reserves the right not to produce an Examiner’s Report, either for an examination paper as a
whole or for individual questions, if too few candidates were involved to make an Examiner’s Report
meaningful.
All rights reserved; no part of this publication may be reproduced, stored in a retrieval system or
transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise
without prior written permission of the Publisher. The book may not be lent, resold, hired out or
otherwise disposed of by way of trade in any form of binding or cover, other than that in which it is
published, without the prior consent of the Publisher.
Typeset, printed and bound by the London Chamber of Commerce and Industry Examinations Board.
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Business Statistics Third Level (Malaysia)
Series 2 2001
GENERAL COMMENTS
The paper followed the usual format and presented a fair examination of candidates’ knowledge of
Third Level Business Statistics. Most candidates were well prepared and so scored high marks. As
ever, there were a small number of candidates who had clearly not prepared to the Third Level
standard. Candidates who rely on Second Level knowledge only will not pass this Third Level paper.
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4
Business Statistics Third Level (Malaysia)
Series 2 2001
QUESTION 1
A company which specialises in selling electronic products advertises its goods on a monthly basis in
a series of specialist magazines. The company’s head of marketing believes that monthly sales are
linked to monthly advertising expenditure. The table below contains information relating to monthly
sales and monthly advertising expenditure over a twelve month period:
Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales 120 110 130 120 140 160 160 150 140 180 190 200
(RM 000)
Advertising 6 6 7 5 7 8 8 8 8 9 10 10
Expenditure
(RM 000)
(a) Produce a scatter graph which represents the relationship between monthly sales and monthly
advertising expenditure and comment on the relationship.
(4 marks)
(b) Calculate the product moment correlation coefficient between monthly sales and monthly
advertising expenditure.
(10 marks)
(c) Carry out a suitable test to ascertain whether the correlation coefficient is significantly different
from zero.
(6 marks)
(Total 20 marks)
5
Model Answer to Question 1
(a)
Correlation Coefficient
n ∑ xy – ∑ x ∑ y
r=
(n ∑ x 2 – ( ∑ x )2 ) (n ∑ y 2 – ( ∑ y )2 )
5,640
r=
((320) (110,400))
r = 0.9489
(c) H0: ρ = 0, H1 ρ ≠ 0
r n–2
t=
1 – r2
0.9489 12 – 2
t=
1 – 0.9004
3.0007
t= = 9.508
0.3156
A relatively straightforward question on correlation which most candidates attempted and scored well
on. Some marks were lost due to poor presentation of graphs.
HELPFUL HINTS
Ensure that you identify which variable is x and which is y. This will help you to set up your graph
axes correctly.
7
QUESTION 2
A study of sickness absence amongst hospital nursing staff was carried out. A random sample of 200
nurses was taken and the number of days of sickness absence per year was recorded. The grade of
each nurse was also recorded.
(a) Carry out an appropriate statistical test to investigate whether there is a relationship between the
grade of a nurse and the number of days of sickness absence per year.
(12 marks)
A previous study of sickness absence amongst nurses showed that the percentage of all nurses
taking less than 5 days absence per year was 15, the percentage taking between 5 and 15 days
absence was 50 and the percentage taking more than 15 days absence was 35.
(b) Combining the grades of nurses from part (a), test whether there has been a change in the
distribution of days of sickness absence per year.
(8 marks)
(Total 20 marks)
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Model Answer to Question 2
(a)
Observed 10 30 10 50
10 40 50 100
5 25 20 50
25 95 80 200
χ 2 = 13.3947
Null Hypothesis: There is no relationship between the grade of nurse and the number of
days of sickness absence pa
Alternative Hypothesis: There is a relationship between the grade of nurse and the number of
days of sickness absence pa
Significance Level 5% or 1%
Degrees of Freedom (3 – 1) (3 – 1) = 4
Critical χ 2 Value 9.49 or 13.28
The calculated χ 2 value is greater than both critical values, there is strong evidence to reject the
null hypothesis. There does appear to be a strong relationship between the grade of nurse and
the number of days of sickness absence taken each year.
(b) Observed 25 95 80
Expected (% of 200) 30 100 70
2
Contribution to χ 0.8333 0.25 1.4286
2
Calculated χ Value = 2.5119
Significance Level 5% or 1%
Degrees of Freedom n–1=3–1=2
2
Critical χ Value 5.99 or 9.21
The calculated χ 2 value is less than both critical values, there is no evidence to reject the null
hypothesis. There does not appear to be any change in the distribution of days of sickness
absence since the last study.
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Examiner’s Report on Question 2
Most candidates scored well on part (a) of this chi squared question. Many seemed confused as to
what was required in part (b). This is a common second part to a chi squared question and candidates
need to be prepared for it.
HELPFUL HINTS
Where the null hypothesis is rejected at 5%, candidates should go on to test at 1%.
Look back at past examination papers to see the different part (b) elements of a chi squared
question.
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QUESTION 3
(a) Explain the difference between a Laspeyres price index and a Paasche price index. Include in
your answer, an advantage and disadvantage of using one of the methods.
(4 marks)
A manufacturing company regularly holds five items in stock. The company measures material price
inflation by constructing an all items Paasche price index. The table below contains the latest data
regarding the quantity and total cost of materials purchased. Similar information is provided in respect
of 1999.
(b) Calculate an all material items Paasche price index for 2000 based upon 1999 and comment on
the result.
(8 marks)
The product costs RM 2 per unit and sells for RM 4.50 per unit. Any items left unsold at the end of the
day are resold back to the supplier for RM 1.25.
(d) Assuming that the retailer regularly buys in 250 units per day, calculate the expected daily profit.
(5 marks)
(Total 20 marks)
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Model Answer to Question 3
Advantages
Laspeyres – less time consuming and less costly
– comparisons can be made between periods
Paasche – more up to date
Disadvantages
Laspeyres – may be out of date
– overstates price inflation
Paasche – more time consuming and costly
– understates price inflation
∑ p1q1
Paasche Price Index = x 100
∑ p0q1
∑ p1q1 22,950
x 100 = x 100 = 111.0 (125.3)
∑ p0q1 20,675
Expected daily demand = (100 x 0.1) + (200 x 0.6) + (250 x 0.2) + (300 x 0.1)
= 10 + 120 + 50 + 30
= 210 units
(d)
Daily Demand Prob Conditional Expected
Profit (RM) Profit (RM)
100 0.1 137.50 13.75
200 0.6 462.50 277.50
250 0.2 625.00 125.00
300 0.1 625.00 62.50
478.75
The explanation in part (a) was done well by many but very poorly by some. A lack of knowledge was
responsible for the poor explanation in most cases. However, in some cases answers were jumbled
up and it became difficult to interpret what was actually being said. Candidates need to express
themselves more clearly. A table headed Laspeyres and Paasche might help some candidates to
focus their thoughts.
The usual mistake was made of not separating out the price and quantities from the total cost figures
given. This resulted in a substantial loss of marks in part (b).
Parts (c) and (d) involved the use of expectation. Whilst most candidates scored well on part (c),
almost all failed to answer part (d) correctly. The main problem appeared to be that candidates
ignored the uncertain demand when calculating the expected daily profit.
HELPFUL HINTS
The calculation of a Laspeyres or Paasche Index is likely to involve initial separation of prices and
quantities (see past examinations).
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QUESTION 4
The table below shows the amount spent by a company on energy over the past three and a half
years:
(a) Plot a graph of the time series data and comment upon the movement within the data.
(4 marks)
(b) Using a suitable model, calculate a four-quarter moving average trend and the quarterly seasonal
variations.
(12 marks)
(c) Using the results from your analysis in part (b), forecast energy costs for the first two quarters of
2001.
(4 marks)
(Total 20 marks)
(a)
1997 1
3 56
4 70
216
1998 1 60 426 53.250 6.750 1.127
210
2 30 418 52.250 –22.250 0.574
208
3 50 414 51.750 –1.750 0.966
206
4 68 414 51.750 16.250 1.314
208
1999 1 58 414 51.750 6.250 1.121
206
2 32 410 51.250 –19.250 0.624
204
3 48 406 50.750 –2.750 0.946
202
4 66 402 50.250 15.750 1.313
200
2000 1 56 400 50.000 6.000 1.120
200
2 30 398 49.750 –19.750 0.603
198
3 48
4 64
Additive
Quarter
Year 1 2 3 4
Multiplicative
Quarter
Year 1 2 3 4
49.75 – 53.25
= –0.389
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Additive
2001 1 49.75 + 3(–0.389) + 6.333 = 54.916 (RM5491.6)
2 49.75 + 4(–0.389) + (–20.417) = 27.777 (RM2777.7)
Multiplicative
2001 1 49.75 + 3(–0.389) x 1.123 = 54.559 (RM5455.9)
2 49.75 + 4(–0.389) x 0.6 = 28.916 (RM2891.6)
A time series question on which most candidates scored well. The omission of data for the first two
quarters caused some confusion with a number of candidates assuming that these figures were both
zero. This is clearly wrong. Many failed to offer any comment regarding the movement of data.
HELPFUL HINTS
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QUESTION 5
A company has recently introduced a revised remuneration scheme for its manual workers. The
management believe that the revised scheme will increase productivity. A random sample of nine
employees was taken just prior to the introduction of the revised scheme and their productivity was
measured.
A second random sample of nine different employees was taken after the introduction of the new
scheme and again their productivity was measured. Both sets of results are shown in the following
table:
Productivity
(Output per week in units)
Old Scheme Revised Scheme
48 49
48 50
52 54
46 44
40 40
50 52
54 52
58 56
52 54
(a) Briefly explain how you would decide whether to use a paired comparison t test or an
independent t test.
(4 marks)
(b) Carry out an appropriate test to ascertain whether the revised scheme has indeed improved
productivity.
(12 marks)
(c) Calculate a 99% confidence interval for the mean output per week per employee under the
revised remuneration schemes.
(4 marks)
(Total 20 marks)
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Model Answer to Question 5
Independent t test
no evidence of pairing
samples independent
eg Production from two different factories
Old New
x y x2 y2 ( x – x )2 ( y – y )2
old
448
mean x= = 49.78
9
new
451
mean y= = 50.11
9
∑( x – x )2 + ∑( y – y )2
Pooled st dev s=
n+m–2
211.5556 + 212.8889
s=
9+9–2
s= 26.5278
s= 26.5278 s = 5.15
Null µx = µy
Alt µx < µy
Sig level 5% 0r 1%
degrees of freedom (n + m – 2) = 9 + 9 – 2 = 16
Critical value t = –2.12 or –2.92
x–y
Calculated value t=
1 1
s +
n m
49.78 – 50.11
t=
1 1
5.15 +
9 9
–0.33
t= = –0.1359 alt (-0.1373)
2.4277
The calculated t value is greater than both critical values, there is no evidence to reject the null
hypothesis. The revised scheme does not appear to have improved productivity.
451
(c) mean y= = 50.11
9
∑( y – y )2 212.8889
St dev sd = sd = sd = 5.16
n–1 8
s
Confidence Interval y±t
n
5.16
50.11 ± 3.36
9
50.11 +/ –5.7776
This question was not well done. Most candidates were unable to offer a valid explanation in part (a)
and many chose the wrong test to apply in part (b). At this level candidates are expected to be able to
identify the appropriate test to use for the information given. This type of question is very likely to
appear on future papers.
HELPFUL HINTS
If two samples of individuals are used it is most likely that an independent t test is appropriate.
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QUESTION 6
Company X employs three salespersons A, B and C. These salespersons visit any new customer
contacts that the company receives. The number of visits made to new customer contacts and the
number of new orders received in the last year, are shown in the table below.
(The new customer contacts are allocated to the salespersons at random and salespersons do not
visit other salesperson’s contacts).
A 400 35
B 200 25
C 400 60
(iii) salesperson C made the initial visit given that no new order was received by any
salesperson.
(9 marks)
The best selling product of Company X is a general high protein animal feed (HPAF) which is sold in
bags with a stated weight of 25 kg. Because of the variability that exists in packaging the product, the
packaging process is set to fill each bag with on average 26.5 kg of the animal feed. (You may
assume that the packaging process follows a normal distribution with a standard deviation of 1.25 kg).
Industry quality regulations require that no more than one in 15 bags contain less than the stated
weight.
(b) Advise the company as to whether they are conforming to industry quality regulations in respect
of the packaging of this product.
(6 marks)
The company has decided to buy a new packaging machine which will reduce the variability relating to
the packaging process. The new packaging process continues to follow a normal distribution but now
with a standard deviation of 400 g.
(c) How much feed on average should each bag now be filled with in order to satisfy the industry
quality regulations?
(5 marks)
(Total 20 marks)
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Model Answer to Question 6
A B C Total
Order 35 25 60 120
No Order 365 175 340 880
400 200 400 1,000
200
(i) p(B) = = 0.2
1,000
35
(ii) p(order | A) = = 0.0875
400
340
(iii) p(C | no order) = = 0.3864
880
Tree diagram
order or no order
A(0.4) (0.9125) no
o
(0.125) 0.2 x 0.125 = 0.0250
0.2 x 0.875 = 0.1750
B(0.2) (0.875) no
C(0.4) o
(0.15)
0.4 x 0.15 = 0.0600
(0.85) 0.4 x 0.85 = 0.3400
no 1.0000
200
(i) p(B) = = 0.2
1,000
35 .4 x .0875
(ii) p(order | A) = = 0.0875
400 .4
0.34 .4 x .85
(iii) p(Cno order) = = 0.3864
0.88 .3650 + .1750 + .3400
x – µ 25 – 26.5
Z= = = –1.2
σ 1.25
Since this is greater than 1 in 15 (0.067) so it appears that the packaging process does not
conform to industry quality regulations.
x–µ 25 – µ
Z= –1.5 =
σ 0.4
µ = 25 + (1.5 x 0.4)
µ = 25.6 kg
Very few candidates attempted this question. Those who did, scored badly. Part (a) involved the
application of some basic probability rules, and part (b) required the use of the normal distribution.
These areas are fundamental to this paper and candidates must work to ensure that they understand
and can apply them. By ignoring these areas candidates are reducing their chances of success as
they reduce the choice to 5 from 7 questions.
HELPFUL HINTS
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QUESTION 7
A building contractor has been working for 25 days and is part way through a building project. In order
to complete the project he has to start and complete three independent tasks A, B and C which have
to be done in the order ABC. The times taken to complete these tasks follow normal distributions as
detailed below:
(b) Find the probability that the time taken to complete task A is:
(c) Find the probability of completing tasks A and B in less than a total of 16 days.
(5 marks)
If the project takes longer than 60 days the contractor will incur a penalty payment.
(d) Find the probability that the contractor will have to pay the penalty payment.
(5 marks)
(Total 20 marks)
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Model Answer to Question 7
x–µ 12 – 14
(b) (i) Z= Z= = –1
σ 2
area = 0.841
17 – 14
(ii) Z= = 1.5
2
area = 0.933
(c) mean = 14 + 7 = 21
st dev = 22 + 3 2 = 3.61
16 – 21
= –1.39 (say –1.4)
3.61
area = 0.919
st dev = 2 2 + 3 2 + 12 = 3.74
If remaining 3 tasks take longer than 35 days then the penalty will need to be paid.
35 – 31
= 1.07 (say 1.1)
3.74
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Examiner’s Report on Question 7
Another question on the normal distribution. This time many more candidates attempted the question
and most scored well. There was some confusion shown in dealing with part (d) with many candidates
forgetting that 25 days had already elapsed.
A number of candidates confused the term ‘uses’ with the term ‘features’ in answering part (a).
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QUESTION 8
A random sample of 50 retail outlets reported their weekly sales figures for the year 2000 for a
particular product. The data has been set out in the following table:
(a) Using the data above, calculate the mean, the variance, the median and a measure of skewness.
Comment upon what the measure of skewness indicates.
(12 marks)
(b) In year 1999 the proportion of all retail outlets reporting weekly sales of 10,000 units or more was
0.57. Test whether there has been a significant increase in the proportion of outlets reporting
weekly sales in year 2000, of 10,000 units or more.
(8 marks)
(Total 20 marks)
26
Model Answer to Question 8
(a)
x f fx fx2
∑ fx 610
mean = = 12.2 (12,200 units)
∑f 50
2
∑ fx 2 ∑ fx
variance var = –
∑f ∑f
94,625
var = – (122)2
50
cm n
median = lm + – Fm – 1
fm 2
5 50
= 10 + – 19
14 2
(b) Proportion of weeks where demand was 10,000 or more = 31/50 = 0.62
Z = 0.7141
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Examiner’s Report on Question 8
A relatively simple question which was generally well done. Many candidates stated the standard
deviation as a measure rather than the variance, and most failed to include units in their answers.
In answering part (b), some candidates attempted to test the mean value or included a combination of
mean and proportion in their test.
HELPFUL HINTS
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