UNIVERSITY EXAMINATIONS: 2019/2020

FINAL EXAMINATION FOR THE DEGREE OF BACHELOR OF

COMMERCE
CMS 301-F: ADVANCED BUSINESS STATISTICS [PART TIME]
DATE: AUGUST 2019 TIME: 2 HOURS

INSTRUCTIONS: Answer Question ONE and Any other TWO Questions

QUESTION ONE [30 Marks]

(a) Define the following terms as used in statistical estimation.
(i) Sampling error. [1 mark]
(ii) Level of significance. [1 mark]
(iii) Critical value. [1 mark]
(iv) Type II error. [1 mark]
(b) Briefly explain the difference between census and sample study. [3 marks]
(c) A sample of 21 minivan electrical warranty repairs for “loose, not attached” wires (one
of several electrical failure categories the dealership mechanic can select) showed a
mean repair cost of Sh.45.66 with a standard deviation of Sh27.79. Construct a 95
percent confidence interval for the true mean repair cost.
[3 marks]
(d) How large a sample should be selected to provide a 95% confidence interval with a
margin of error of 10? Assume that the population standard deviation is 40. [3
marks]
(e) Annual per capita consumption of milk is 21.6 gallons. Being from the Nakuru, you
believe milk consumption is higher there and wish to support your opinion. A sample of
16 individuals from Nakuru showed a sample mean annual consumption of 24.1 gallons
with a standard deviation of 4.8. Develop a hypothesis test that can be used to determine

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 whether the mean annual consumption in Nakuru is higher than the national mean. Use α
= 0.05 level of significance. [5 marks]

(f) A process sampled 18 times with a sample of size 8 resulted in =32.3 and =4.8.

Compute the upper and lower control limits for the chart for this process. [4
marks]
(g) Differentiate between maximax and maximin criterion in decision making. [4 marks]
(h) Speaking to a group of analysts in January 2018, a brokerage firm executive claimed
that at least 70% of investors are currently confident of meeting their investment
objectives. A Investor Optimism Survey, conducted over the period January 2 to
January 15, found that 67% of investors were confident of meeting their investment
objectives. Formulate the hypotheses that should be test the validity of the brokerage
firm executive’s claim and test it at 5% level of significance.
[4 marks]

QUESTION TWO [20 MARKS]

Set on binomial distribution, Poisson distribution and normal distribution
QUESTION THREE [20 MARKS]
a) Briefly the difference between the R-chart and a p-chart as used in statistical quality
control. [3 marks]
b) Distinguish between assignable variation and chance variation. [2 marks]
c) Optimax Software Ltd. offers a toll-free number where customers can call with problems
involving the use of their products from 7 am until 2 pm. daily. It is impossible to have
every call answered immediately by a technical representative, but it is important
customers do not wait too long for a person to come on the line. Customers become upset
when they hear the message, “Your call is important to us. The next available
representative will be with you shortly” too many times. To understand its process,
Optimax Software decides to develop a control chart describing the total time from when
a call is received until the representative answers the call and resolves the issue raised by
the caller. Yesterday, for the 8 hours of operation, five calls were sampled each hour.
This information is reported below, in minutes, until the issue was resolved.

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 Sample Number
Time A B C D E
7 am 8 9 15 4 11
8 am 7 10 7 6 8
9 am 11 12 10 9 10
10 am 12 8 6 9 12
11 am 11 10 6 14 11
12 am 7 7 10 4 11
1 pm 10 7 4 10 10
2 pm 8 11 11 7 7

Draw the R-chart and comment on it. In particular, is this process in control? [15
marks]

QUESTION FOUR [20 MARKS]

(a) List the assumptions behind ordinary least squares method. [4 marks]
(b) The chair of the finance department at a state university undertakes a study to relate
starting salary (y) after graduation for finance majors to GMAT (x) in major courses. To
do this, records of seven recent finance graduates are randomly selected, and the data
shown below.
GMAT (x) 3.2 2.6 3.3 2.8 3.8 3.4 3.1
Salary Sh.( “000”) 33 29 33 30 36 35 32

Find the regression equation of Salary on GMAT and hence determine the starting salary
of a graduate with a GMAT of 2.9. [6 marks]
(c) The following table show the data on three variables x1, x2 and y

y 2 3 4 3 4
x1 2 5 3 4 1
x2 4 6 1 2 2

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 Given that y is a function of x 1 and x2, find the multiple regression equation, hence find
the value of y when x 1 and x2 are 4 and 3 respectively. [10
marks]

QUESTION FIVE [20 MARKS]

(a) The research department at the home office of Jubilee Insurance
conducts ongoing research on the causes of automobile accidents,
the characteristics of the drivers, and so on. A random sample of 400
policies written on single persons revealed 120 had at least one
accident in the previous three-year period. Similarly, a sample of 600
policies written on married persons revealed that 150 had been in at
least one accident. At the 0.01 significance level, is there a
significant difference in the proportions of single and married persons
having an accident during a three-year period? [10 marks]
(b) Four brands of lightbulbs are being considered for use in the final
assembly area of the Kenya Bulbs Ltd. The director of purchasing
asked for samples of 100 from each manufacturer. The numbers of
acceptable and unacceptable bulbs from each manufacturer are
shown below. At the 0.05 significance level, is there a difference in
the quality of the bulbs? [Note χ2 critical value = 7.81].
[10 marks]

Manufacturer
Redemption Level A B C D
Unacceptable 12 8 5 11
Acceptable 88 92 95 89

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 t - Table with right tail probabilities
f\p 0.40 0.25 0.10 0.05 0.025 0.01 0.005 0.0005

1 0.324920 1.000000 3.077684 6.313752 12.70620 31.82052 63.65674 636.6192

2 0.288675 0.816497 1.885618 2.919986 4.30265 6.96456 9.92484 31.5991

3 0.276671 0.764892 1.637744 2.353363 3.18245 4.54070 5.84091 12.9240

4 0.270722 0.740697 1.533206 2.131847 2.77645 3.74695 4.60409 8.6103

5 0.267181 0.726687 1.475884 2.015048 2.57058 3.36493 4.03214 6.8688

6 0.264835 0.717558 1.439756 1.943180 2.44691 3.14267 3.70743 5.9588

7 0.263167 0.711142 1.414924 1.894579 2.36462 2.99795 3.49948 5.4079

8 0.261921 0.706387 1.396815 1.859548 2.30600 2.89646 3.35539 5.0413

9 0.260955 0.702722 1.383029 1.833113 2.26216 2.82144 3.24984 4.7809

10 0.260185 0.699812 1.372184 1.812461 2.22814 2.76377 3.16927 4.5869

11 0.259556 0.697445 1.363430 1.795885 2.20099 2.71808 3.10581 4.4370

12 0.259033 0.695483 1.356217 1.782288 2.17881 2.68100 3.05454 4.3178

13 0.258591 0.693829 1.350171 1.770933 2.16037 2.65031 3.01228 4.2208

14 0.258213 0.692417 1.345030 1.761310 2.14479 2.62449 2.97684 4.1405

15 0.257885 0.691197 1.340606 1.753050 2.13145 2.60248 2.94671 4.0728

16 0.257599 0.690132 1.336757 1.745884 2.11991 2.58349 2.92078 4.0150

17 0.257347 0.689195 1.333379 1.739607 2.10982 2.56693 2.89823 3.9651

18 0.257123 0.688364 1.330391 1.734064 2.10092 2.55238 2.87844 3.9216

19 0.256923 0.687621 1.327728 1.729133 2.09302 2.53948 2.86093 3.8834

20 0.256743 0.686954 1.325341 1.724718 2.08596 2.52798 2.84534 3.8495

21 0.256580 0.686352 1.323188 1.720743 2.07961 2.51765 2.83136 3.8193

22 0.256432 0.685805 1.321237 1.717144 2.07387 2.50832 2.81876 3.7921

23 0.256297 0.685306 1.319460 1.713872 2.06866 2.49987 2.80734 3.7676

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 24 0.256173 0.684850 1.317836 1.710882 2.06390 2.49216 2.79694 3.7454

25 0.256060 0.684430 1.316345 1.708141 2.05954 2.48511 2.78744 3.7251

Control Chart Factors

26 0.255955 n 0.684043d2 1.314972 A21.705618 d3 2.05553 D3 2.47863 D4 2.77871 3.7066

27 0.255858 2 1.128
0.683685 1.313703 1.8801.703288 0.853 2.051830.000 2.472663.267 2.77068 3.6896

28 0.255768 3
0.683353 1.6931.312527 1.0231.701131 0.888 2.048410.000 2.467142.575 2.76326 3.6739

29 0.255684 0.683044 2.059

4 1.311434 0.7291.699127 0.880 2.045230.000 2.46202 2.282 2.75639 3.6594

30 0.255605
5
0.682756
2.3261.310415
0.577 1.697261
0.864 2.04227
0.000 2.114
2.45726 2.75000 3.6460
6 2.534 0.483 0.848 0.000 2.004
7 2.704 0.419 0.833 0.076 1.924
inf 0.253347 0.674490 1.281552 1.644854 1.95996 2.32635 2.57583 3.2905
8 2.847 0.373 0.820 0.136 1.864
9 2.970 0.337 0.808 0.184 1.816
10 3.078 0.308 0.797 0.223 1.777
11 3.173 0.285 0.787 0.256 1.744
12 3.258 0.266 0.778 0.283 1.717
13 3.336
Area between0.249
0 and z 0.770 0.307 1.693
14 3.407 0.235 0.763 0.328 1.672
15 3.472 0.223 0.756 0.347 1.653
0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
16 3.532 0.212 0.750 0.363 1.637
0.0 0.0000 0.0040 0.008017 0.01203.588 0.0160 0.0199
0.203 0.0239 0.7440.0279 0.378
0.0319 0.03591.622
0.1 0.0398 0.0438 0.047818 0.05173.640 0.194 0.0636
0.0557 0.0596 0.7390.0675 0.391
0.0714 0.07531.609
19 3.689 0.187 0.733 0.404 1.596
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
20 3.735 0.180 0.729 0.415 1.585
0.3 0.1179 0.1217 0.125521 0.12933.778 0.1331 0.1368
0.173 0.1406 0.7240.1443 0.425
0.1480 0.15171.575
0.4 0.1554 0.1591 0.162822 0.16643.819 0.167
0.1700 0.1736 0.720
0.1772 0.1808 0.435
0.1844 1.565
0.1879
0.5 0.1915 23 3.858 0.162 0.716
0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224 0.443 1.557
24 3.895 0.157 0.712 0.452 1.548
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
25 3.931 0.153 0.708 0.459 1.541
0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389
1.0 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621
1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830
1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015
1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319
1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441
1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545
1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633
1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706
1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767
2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817
2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4842 0.4846 0.4850 0.4854 0.4857
2.2 0.4861 0.4864 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4887 0.4890
2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916
2.4 0.4918 0.4920 0.4922 0.4925 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936
2.5 0.4938 0.4940 0.4941 0.4943 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952
2.6 0.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
62.7| P0.4965
age 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974
2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981
2.9 0.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986
3.0 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990