UNIVERSITY EXAMINATIONS: 2016/2017
EXAMINATION FOR THE DEGREE OF BACHELOR OF BUSINESS IN
INFORMATION TECHNOLOGY
BUSS 305 STATISTICAL DECISION MAKING
FULL TIME/PART TIME/DISTANCE LEARNING
DATE: DECEMBER, 2016 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One & ANY OTHER TWO questions.
QUESTION ONE (30 MARKS)
a) Differentiate the following terms: (6 Marks)
i) Null and alternative hypothesis
ii) Type I and Type II error.
iii) Correlation and regression
b) State the characteristics of a normal distribution curve. (4 Marks)
c) Briefly discuss forecasting as a technique used by business leaders in keeping track of changes
in business and economic conditions. (5 Marks)
d) With the aid of clearly labelled normal curves, find the area under the normal curve between
Z = -1.42 and Z = 1.43 (3Marks)
e) State the characteristics of a binomial distribution. (2 Marks)
QUESTION TWO (20 MARKS)
a) Define the term “Decision Making”, hence state and briefly discuss the managerial decision
making process. (10 Marks)
b) A group of redundant employees accepted for a re-training scheme are given an aptitude test,
and six months after completion of their training period they are ranked according to the quality
of their output. The following are the rankings.
You are required to use an appropriate statistical technique to determine whether the aptitude test is a
reliable predictor of a worker’s ability to perform quality work. (10 Marks)
QUESTION THREE (20 MARKS)
a) Define time series, hence discuss the utility of time series analysis. (10 Marks)
b) State and briefly discuss the components of a time series, giving some illustrations of the use of
time series in business analysis. (10 Marks)
QUESTION FOUR (20 MARKS)
a) State the properties of Chi- square Tests, hence briefly explain when they are applied. (4 Marks)
b) The following information relates to past sales of radios by certain firm in Nairobi in 1999 and
2000.
Prepare a forecast produced by a 3-monthly moving average. (6 Marks)
c) A Business Analyst claims that the mean period taken by business to start making considerable
profit is 12.5 months. A Manager wants to check if this claim is true. He took a random sample
of 20 businesses in Nairobi, and found that the mean period taken by a business to start making
considerable profit was 12.9 months with a standard deviation of 0.80 months. Using a 1%
significant level, can you conclude that the mean period taken by a business to start making
considerable profit is different from 12.5 moths? Assume that the mean period taken by a business
to start making considerable profit have an approximately normal distribution.
(10Marks)
QUESTION FIVE (20 MARKS)
a) In a recent survey conducted for Business Magazine, 80% of the women (Married or Single)
surveyed said that they are more knowledgeable about investing now than they were just five
years ago. Suppose this result is true for the current population of all women. What is the
probability that in a random sample of 100 women, 72 to 76 will say that they know more about
investing now that just five years ago. (5 Marks)
b) The following table shows 10 years’ data on local newspaper annual advertising volume and its
annual profits before taxes.
i. Plot the information on a scatter diagram (4 Marks)
ii. Find the equation of the least squares line which will enable us to predict the
annual profit of the newspaper from its annual advertising volume. (6 Marks)
iii. Predict the annual profit of the newspaper for a year in which its advertising volume
is 80.5 units and 89.3 units respectively. (4Marks)
iv. Which of the two predictions are likely to be accurate? Comment. (2 Marks)
