SCHULICH SCHOOL OF BUSINESS

YORK UNIVERSITY

SESSION: FALL 2008 Mid-Term Exam NAME:

COURSE NO: OMIS1000 I.D. # :
COURSE TITLE: Statistics for Management SECTION:
PROFESSORS: Olga Kaminer, Alan Marshall

NUMBER OF PAGES: 14 pages (NOT including cover)

LENGTH OF EXAMINATION: 150 minutes
EXAMINATION AIDS ALLOWED: Calculator; Formula and Tables Booklet

INSTRUCTIONS:

Please place your I.D. card on your desk.

You are not allowed to leave the examination room until one hour after the start of the
exam and you must sign the sign-in sheet before leaving.

Your examination paper must be handed in before you leave. When you are finished
please leave the exam room quietly.

Cheating on an examination will result in an “F” grade in the course concerned and
possible suspension from the University.

All notes, briefcases, and books must be deposited at the front of the room.

You are not allowed to use your own paper for rough work. You may only use the space
provided or the back of the pages for rough work.

Answer the Multiple Choice and True/False Questions on the bubble sheet supplied. Be
sure to put your name and student number on the bubble sheet. In Part III, place your
answers in the answer boxes, where supplied.

Count the pages to be certain that there are no pages missing.

Do not remove the staple from the exam.

Do not begin this examination until you are instructed to do so.

Do not write in the mark summary table below.

Part I – Multiple Choice 20 marks

Part II – True/False 10 marks
Part III – Problems Question 1 20 marks
Question 2 20 marks
Question 3 8 marks
Question 4 12 marks
Question 5 10 marks
Sub-total 70 marks
TOTAL 100 marks
OMIS1000 MIDTERM EXAMINATION

PART I – MULTIPLE CHOICE QUESTIONS (20 MARKS, 1 marks each)

Answer each question below on the Scantron Sheet provided. There is only one correct
answer. There is no penalty for guessing.

1) Which of the following is an example of a continuous random variable?

A) The number of cars in a parking lot.
B) The number of repairs at a computer shop over the course of the week.
C) The weight of a bag of potatoes.
D) The total points scored in a basketball game.

2) Which of the following statements is incorrect?

A) A categorical variable may produce ordinal data.
B) Ordinal data may be described as qualitative.
C) Nominal data may be described as quantitative.
D) A discrete numerical variable may produce interval scale data.

3) The length of time it takes to assemble a particular electronic component varies from an
employee to another. Management has collected the time (in minutes) it took 20 different
employees to assemble the component. The information is summarized in the following
frequency distributions generated by Excel.

Bin Frequency Cumulative

10 1 5.00%
15 9 50.00%
20 1 55.00%
25 7 90.00%
More 2 100.00%

Which of the following statements is true?

A) Eleven workers assembled the component in 20 minutes or less.
B) It took 100% of all workers longer than 25 minutes to assemble the component.
C) It took 50% of all workers exactly 15 minutes to assemble the component.
D) Seven workers took 25 minutes or longer to assemble the component.

4) Which of the following statements is not correct?

A) The empirical rule applies to any distributions.
B) The most useful measures of variability are based on deviations from the mean.
C) The sum of the deviations from the mean will always be zero.
D) For distributions that are bell-shaped and symmetric, approximately 68% of the observations
will fall within one standard deviation of the mean.

5) Suppose you are told that over the past four years, sales have increased at rates of 10%,
8%, 6% and 4%. What has been the average annual increase in sales over the past four years?
A) 6.5%
B) 6.7%
C) 6.98%
D) 7.0%

6) Suppose you are told that the mean sample of numbers is below the median. This
information suggests which of the following?
A) The distribution is symmetric.
B) There is insufficient information to determine the shape of the distribution.
C) The distribution is skewed to the right or positively skewed.
D) The distribution is skewed to the left or negatively skewed.

7) Which type of error occurs because we do not obtain complete information about a
population?
A) Non-sampling error
B) Lurking variable error
C) Sampling error
D) Human error

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OMIS1000 MIDTERM EXAMINATION

8) The average IQ of students in a particular calculus class is 110, with a standard deviation of
5. The distribution is roughly bell shaped. Use the Empirical Rule to find the percentage of
students with an IQ above 120.
A) 97.5%
B) 2.5%
C) 95%
D) 5%

9) A random sample from an unknown population had a sample standard deviation of zero.
Which one of the following is a reasonable conclusion?
A) The sample range must be zero.
B) It must always be greater than zero.
C) An error was made in computing the sample standard deviation.
D) The population standard deviation must be zero.

10) Which of the following cannot generate a Poisson distribution?

A) The number of customers arriving at a gas station in Christmas day.
B) The number of telephone calls received by a switchboard in a specified time period.
C) The number of bacteria found in a cubic yard of soil.
D) The number of children in a family.

11) If X and Y are random variables with E(X) = 5 and E(Y) = 8, then E(2X + 3Y) is:
A) 18.
B) 13.
C) 34.
D) 40.

12) Which of the following statements regarding a binomial experiment is false, where n is the
number of trials, and p is the probability of success in each trial?
A) The mean is np.
B) There are only two possible outcomes.
C) The n trials are independent.
D) The standard deviation is np(1 - p).

13) Which of the following is not true for an exponential distribution with parameter λ?
A) The distribution is symmetric around the mean.
B) The distribution is completely determined once the value of λ is known.
C) Standard deviation = 1/λ.
D) Mean = 1/λ

14) Let the random variable X follow a normal distribution with a mean μ and a standard
deviation σ. Let X be the mean of a sample of n randomly chosen observations from this
population. Which of the following statements is true?

 σ   σ 
A) P X < µ +  = P X < µ − 
 n  n
 σ  σ
B) P X < µ −  < P X < µ − 
 2n   n
 σ   σ
C) P X < µ +  < P X < µ +  (correct)
 2n   n
 σ   σ 
D) P X < µ +  < P X < µ − 
 n  n

15) The standard deviation of the sampling distribution of the sample mean is also called the:
A) finite population correction factor.
B) population standard deviation.
C) central limit theorem.
D) standard error of the mean.

16) As the size of the sample increases, what happens to the shape of the sampling distribution
of sample means?
A) Becomes approximately normal
B) Becomes negatively skewed
C) Becomes uniformly distributed
D) Becomes positively skewed

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OMIS1000 MIDTERM EXAMINATION

17) The amount of time you have to wait at a particular stoplight is uniformly distributed
between zero and two minutes. Eighty percent of the time, the light will change before you have
to wait how long?
A) 30 seconds
B) 24 seconds
C) 90 seconds
D) 96 seconds

18) Which of the following statements is false?

A) The simplest method of data collection is by direct observation
B) A self-administered questionnaire, which is usually mailed to a sample of people, is an
expensive method of conducting a survey as is therefore less attractive when the
number of people to be surveyed is large
C) A personal interview has the advantage of having a higher expected response rate than
other methods of data collection
D) Whatever method is used to collect primary data, we need to know something about
sampling

19) Possible methods of creating distorted impressions with bar charts include:
A) stretching the vertical axis.
B) shrinking the horizontal axis.
C) constructing the bars so that their widths are proportional to their heights.
D) All of the above

20) Which of the following statements is true?

A) Graphical techniques should be used where there is a small amount of data.
B) In general, large data sets can be presented in tabular form.
C) Graphical techniques merely create a visual impression, which is easy to distort.
D) In general, a graph without a scale on only one axis is not a problem since statisticians will
be able to evaluate critically the information presented by the graph.

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OMIS1000 MIDTERM EXAMINATION

PART II – TRUE/FALSE QUESTIONS (10 MARKS, 1 mark each)

Indicate whether the following are true or false on the Scantron Sheet provided, using
answer spaces 21 through 30. Use "A" for True and use "B" for False. There will be no
deductions for each incorrect answer.

21) The proportion of the total area under the normal curve that lies within one standard
deviation of the mean is approximately 0.75 F

22) Consider two possible investments with the same expected rate of return. Over the past
several months, investment A has had an average closing price of $14.00 and a standard
deviation of $4.00. Investment B has had an average closing price of $58.00 and a standard
deviation of $15.00. The market value of investment A fluctuates relatively more than
investment B. T

23) The Poisson probability distribution is an example of a continuous probability distribution. F

24) The sum of all the relative frequencies of a distribution will always add up to 1. T

25) Flipping a coin is an example of a random variable. F

26) The mean is generally the preferred measure of central tendency to describe numerical
data, but not categorical data. T

27) Estimating characteristics of the population is the main goal of descriptive statistics. F

28) Quantitative variables usually represent membership in groups or categories. T

29) If the sample size increases, the standard error of the mean remains unchanged. F

30) The mean and variance of any normal distribution are always zero and one, respectively. F

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 OMIS1000 MIDTERM EXAMINATION

PART III – NUMERICAL PROBLEMS

Question 1 (20 marks)

In the book “Modern Statistical Quality Control and Improvement”, Farnum presents data
concerning the elapsed times from the completion of medical lad tests until the results are
recorded on patient’s charts. Table below provides the times it took (in hours) to deliver and
chart the results of 25 lab tests over one week.

1.2 1.2 1.3 1.3 1.7

2.1 2.1 3.4 3.5 3.9
3.9 4.7 4.8 5.0 5.3
5.7 6.1 7.1 8.4 8.7
9.1 15.7 17.5 17.8 24.0

∑X i = 165 .5 ∑X 2
i = 1965 .17

(a) Compute the arithmetic mean, median, mode, variance, standard deviation, 70th
Percentile and coefficient of variation of this data. (7 marks)

Place your answers in the appropriate boxes. (NOTE: if there is no answer inserted
into the box, the mark = 0)

Standard Coefficient of
Mean Median Mode Variance 70th Percentile
Deviation Variation
1.2; 1.3;
6.62 4.8 36.2317 6.0193 7.36 90.93%
2.1; 3.9

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OMIS1000 MIDTERM EXAMINATION

Question 1 (Continued)

(b) Are these data symmetric/right-skewed/left-skewed? Explain. (2 marks)

Mean is larger than the median => right-skewed

(c) Create a relative frequency distribution for these data. (6 marks)

number of classes = 1+ln25/ln2 5.643856 ->6

width of classes = (24-1.2)/6 3.8 ->4

class frequency relative frequency

1 to <5 13 0.52
5 to < 9 7 0.28
9 to < 13 1 0.04
13 to < 17 1 0.04
17 to < 21 2 0.08
>=21 1 0.04
25 1

(d) What two graphs can be used to describe these data? (2 marks)

Ogive, histogram, pie chart

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OMIS1000 MIDTERM EXAMINATION

Question 1 (Continued)

(e) Create one of the graphs you mentioned in part (d). (3 marks)

14

12

10

0
1 to <5 5 to < 9 9 to < 13 13 to < 17 17 to < 21 >=21

1.2

0.8

0.6

0.4

0.2

0
1 to <5 5 to < 9 9 to < 13 13 to < 17 17 to < 21 >=21

1 to <5
5 to < 9
9 to < 13
13 to < 17
17 to < 21
>=21

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OMIS1000 MIDTERM EXAMINATION

Question 2 (20 marks)

A chain of audio/video equipment discount stores employs 36 salespeople. Daily dollar sales for
individual sellers employed by the chain have a bell-shaped distribution with a mean of $2,000
and a standard deviation of $300.

Answer the following Questions and insert your final answers into the Answer Boxes.
(NOTE: if there is no answer inserted into the Box, the mark = 0)

(a) Suppose that the chain’s management decides to implement Answer:

an incentive program that awards a daily bonus to any
salesperson who achieves daily sales over $2,150. Calculate .3085
the probability that an individual salesperson will earn the
bonus on any particular day. (4 marks)

P(x>2,150)=P(z>(2,150-2,000)/300)=P(z>.5)=1-P(z<.5)=1-.6915=.3085

(b) Suppose that (as an alternative) the chain’s management decides to award a daily
bonus to the entire sales force if the 36 salespersons average a daily sales figure that
exceeds $2,150. Is it more difficult for an individual salesperson to achieve a daily sales
figure that exceeds $2,150 or for the entire sales force of 36 to achieve an average
sales figure that exceeds $2,150? (Place your answer in the box below)
(2 marks)

It is harder for the entire sales force to achieve an average sales figure that exceeds
2,150, since the distribution of the mean is tighter around the mean and therefore the
probability of x-bar>2,150 is smaller than the probability of x>2,150

i. Support your answer with appropriate calculations. (4 marks)

P(x-bar>2,150)=P(z>(2,150-2,000)/(300/sqrt(36))=P(z>3)=1-P(z<3)=1-.9987=.0013

ii. Sketch a graph of the appropriate probability distributions. (2 marks)

X-bar

2,150

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OMIS1000 MIDTERM EXAMINATION

Question 2 (Continued)

(c) What is the probability that exactly 2 out of 36 salespeople Answer:

achieve daily sales over $2,150 on any particular day? (4 marks)
.00021
P(2 of 36)=36!/(2!*34!)*(.3085^2)*(.6915^34)=.00021

(d) What is the probability that less than 8 out of 36 salespeople Answer:
achieve daily sales over $2,150 on any particular day? (4 marks)
0.0931 (Binom)
Binomial: 0.0968 (NAB w CFC)
P(x=0)+P(X=1)+P(x=2)+P(x=3)+P(x=4)+P(X=5)+P(x=6)+P(x=7)= 0.1314 (w/o CFC)
=.0931

Normal approximation:
np=36*.3085>5
n(1-p)=36*.6915>5

P(x<8)=P(p-hat<8/36)=P(z<(.2222-.3085)/(sqrt(.3085*.6915/36))
=P(z<-1.12)=.1314

P(x<7.5)=.0968

Binomial

0.000000 0.000000 0 36 0.3085 0

0.000000 0.000000 1 36 0.3085 0
0.000200 0.000200 2 36 0.3085 0
0.001100 0.001300 3 36 0.3085 0
0.004000 0.005300 4 36 0.3085 0
0.011400 0.016700 5 36 0.3085 0
0.026200 0.042900 6 36 0.3085 0
0.050200 0.093100 7 36 0.3085 0
0.081100 0.174200 8 36 0.3085 0

Normal
EV Sd z Prob
7.5 11.106 2.771245 -1.30122 0.096592
8 11.106 2.771245 -1.120796 0.131187

Samp Dist of Proportion

EV Sd z
7.5 0.208333 0.3085 0.076979 -1.30122 0.096592
8 0.222222 0.3085 0.076979 -1.120796 0.131187

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OMIS1000 MIDTERM EXAMINATION

Question 3 (8 marks)

The small island nation of Sinitmon is considering an import duty on gasoline to discourage it’s
use. Over the past few years, price of gasoline imported has averaged $1.20/litre, but the price
varies from month-to-month with a standard deviation of $0.30/litre. Two versions of the tax are
being debated: the first proposal is a tax of $0.50/litre, while the second proposal is a tax of
50%.

Answer the following Questions and insert your final answer into the Answer Box.
(NOTE: if there is no answer inserted into the Box, the mark = 0)

(a) For each tax proposal, determine the expected price and variance of the price after
the tax. (4 marks)

Proposal #1 – Tax of $0.50/litre Proposal #2 – Tax of 50%

EV(X+.5)=EV(X)+.5=1.2+.5=1.7 EV(1.5*X)=1.5*EV(X)=1.5*1.2=1.8
EV

Var(X+.5)=Var(X)=.30^2=.09 Var(1.5X)=1.5^2*Var(X)=1.5^2*.30^2=
Var =.2025

(b) At what pre-tax price of gasoline would the two tax

proposals result on the same post-tax price? (2 marks)
$1/litre
X+.5=1.5X => X=1

(c) At what pre-tax price of gasoline would the two tax Never, the SDs will
proposals result on the same post-tax standard deviation of never be the same
price? (2 marks) (0.30 before, 0.45
after)

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OMIS1000 MIDTERM EXAMINATION

Question 4 (12 marks)

The time between calls received at a call centre follows an exponential probability distribution
with a mean of 12 seconds.

Answer the following Questions and insert your final answer into the Answer Box.
(NOTE: if there is no answer inserted into the Box, the mark = 0)

Your answers:

(a) Find the probability that the time between two calls is 12 seconds or
less. (2 marks) .6321

P(x<12)=1-exp(-1/12*12)=1-exp(-1)=.6321
(b) Find the probability that the time between two calls is between 6 and
12 seconds. (2 marks) .2387

P(6<x<12)=exp(-1/12*12)-exp(-1/12*6)=.2387

(c) Find the probability that the time between two calls is 30 seconds or
more. (2 marks) .0821

P(x>30sec)=exp(-1/12*30)=.0821

(d) What is the probability that six (6) or more calls arrive in the first
minute of a shift? (2 marks) .3840

Poisson with lambda=5calls/minute

P(x>=6)=1-P(x<=5)=1-.6160=.3840

(e) What is the probability that four (4) or fewer calls arrive in the first
minute of a shift? (2 marks) .4405

Poisson with lambda=5calls/minute

P(x<=4)=.4405

(f) What is the probability that between four (4) and six (6) calls,
inclusive, arrive in the first minute of a shift? (2 marks) .4972

P(4<=x<=6)=P(x<=6)-P(x<=3)=.7622-.2650=.4972

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OMIS1000 MIDTERM EXAMINATION

Question 5 (10 marks)

The distance driven by UPS vans from the Jane and Steeles Distribution Centre is distributed
approximately normally with a mean of 250 km per day with a coefficient of variation of 30%

Answer the following Questions and insert your final answer into the Answer Box.
(NOTE: if there is no answer inserted into the Box, the mark = 0)

Your Answers:

(a) What is the probability that a randomly selected van will have .0228
travelled 100 km or less on Friday? (3 marks)

CV=sigma/mu=.3 => sigma=.3*mu=.3*250=75

P(X<100)=P(z<(100-250)/75)=P(z<-2)=.0228

(b) What is the probability that out of 132 vans at the depot, 2 or
fewer travelled 100 km or less on Friday? (4 marks) .4184
or .4232

Binomial: P(x=0)+P(X=1)+P(x=2)=.4184

Binomia
l 0.0228 0.9772
0 1 0.047623 1 0.047623
1 0.0228 0.048734 132 0.14667
2 0.00052 0.049871 8646 0.224148
0.418441

Poisson Approximation of Binomial:

n > 25, p < 0.05 → PAB is appropriate,
m = 0.228x132 = 3.0096 ≈ 3

Using table, P(x≤2), 0.4232

Cannot use normal approximation since np<5

(c) What is the probability that the total distance travelled by all
132 vans at the distribution centre is 32000 km or less on .1230
Friday? (3 marks)

P(x<32000)=P(x-bar<32000/132)=P(x-bar<242.4242)=P(z<(242.4242-250)/(75/sqrt(132)))=
=P(z<-1.16)=.1230

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OMIS1000 MIDTERM EXAMINATION

Additional formulae

Geometric mean

rg = n (1 + r1 ) × (1 + r2 ) ×... × (1 + rn ) −1

Location

p
L p = (1 + n)
100

Coefficient of variation

σ s
CV = × 100% CV = × 100%
µ X

Shortcut formula for the variance of discrete probability distribution

V ( X ) = σ 2 = ∑x 2 P ( x) − µ2
all x

Finite population correction factor

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