FRIDAY: 17 December 2021.                                                                                                Time Allowed: 3 hours.

Answer any FIVE questions. ALL questions carry equal marks. Show ALL your workings.


1.         Explain the following terms as used in time series analysis:

Cyclical variations.                                                                                                                                        (2 marks)

Random variations.                                                                                                                                       (2 marks)

Seasonal variations.                                                                                                                                      (2 marks)

Trend.                                                                                                                                                                (2 marks)

2.         The following data relates to the profits reported by XYZ Ltd. in each of the months in the year 2020:


Month                                                Profit (Sh.”million”)

January                                                            40

February                                                         38

March                                                              39

April                                                                 41

May                                                                  36

June                                                                  41

July                                                                   34

August                                                             37

September                                                      35

October                                                            37

November                                                       40

December                                                       41



Estimate the trend line using the ordinary least squares method.                                                   (9 marks)

Estimate the profit reported in March of the year 2021.                                                                    (3 marks)

(Total: 20 marks)



1.          State five advantages of the arithmetic mean as a measure of central tendency.                                        (5 marks)

2.         The following data shows the distribution of profits of 150 manufacturing companies in a given year:

Profit (“Sh.”million”)                          Number of companies

10-20                                                                  15

20-30                                                                  13

30-40                                                                  25

40-50                                                                  30

50-60                                                                  16

60-70                                                                  10

70-80                                                                 22

80-90                                                                  12

90-100                                                                7



The arithmetic mean of the profits and interpret the results.                                                           (4 marks)

The standard deviation of the profits and interpret the results.                                                       (8 marks)

The coefficient of variation of the profits and interpret the results.                                              (3 marks)

(Total: 20 marks)



1.          Explain the following terms as used in Markov analysis:

Markov process.                                                                                                                                            (2 marks)

Equilibrium state.                                                                                                                                          (2 marks)

Absorbing state.                                                                                                                                             (2 marks)

Closed state.                                                                                                                                                    (2 marks)

2.          The marketing department of Jacuzi Ltd. estimates the daily demand function of one of its products to be linear in nature. If the price was fixed at Sh.570, the daily demand would be 400 units. If the price was increased to Sh.820, the daily sales would drop to 200 units.

The production department has indicated that the marginal cost of producing Q units of the product is given by the

following equation:             MC = 2Q – 570

Where: MC is the marginal cost and

Q is the number of units produced.

The daily fixed cost is Sh.1,100.



The revenue function of Jacuzi Ltd.                                                                                                         (4 marks)

The total cost function of Jacuzi Ltd.                                                                                                      (3 marks)

The maximum profit that Jacuzi Ltd. could make.                                                                              (5 marks)

(Total: 20 marks)



1.          In the context of hypothesis testing, distinguish between a “type I error” and a “type II error”.          (4 marks)

2.         The sales before and after a promotional campaign in ten different regions for a certain commodity were recorded as follows:


Region                Sales before promotional                   Sales after promotional

campaign               “Sh.million”                    campaign “Sh.million”


1                                           53                                                          58

2                                            28                                                          29

3                                            31                                                          30

4                                            48                                                          50

5                                            50                                                          50

6                                           42                                                          45

7                                            63                                                          59

8                                           40                                                          36

9                                            25                                                          22

10                                         30                                                          28



Using a 5% level of significance, determine whether the promotional campaign was a success or not.                                                                                                                                                                                           (16 marks)

(Total: 20 marks)



Bantu Limited makes two types of pudding: vanilla and chocolate. Each serving of vanilla pudding requires 2 teaspoons of sugar and 25 fluid measures of water, and each serving of chocolate pudding requires 3 teaspoons of sugar and 15 fluid measures of water. Bantu Limited has available each day 3,600 teaspoons of sugar and 22,500 fluid measures of water. Bantu Limited makes no more than 600 servings of vanilla pudding because that is all that it can sell each day. Bantu Limited makes a profit of Sh.10 on each serving of vanilla pudding and Sh.7 on each serving of chocolate pudding.



Formulate a linear programming model to solve the above problem.                                                          (4 marks)

Construct an initial simplex tableau.                                                                                                                      (4 marks)

Using the simplex method, determine how many servings of each type of pudding Bantu Limited should make in order to maximise profit.                                                                                                                                        (12 marks)

(Total: 20 marks)



1.            State four applications of matrices in business.                                                                                                 (4 marks)

2.          A global conference on “the blue economy” was recently held in Kenya and was attended by 280 delegates from America, Europe and Africa.

The following information relates to the delegates who attended the conference:


70         delegates represented Europe

96         delegates represented Africa

128       delegates represented America

20          delegates represented all the three continents.

25          delegates represented America and Africa

22          delegates represented America and Europe

26          delegates represented Europe and Africa



Present the above information in the form of a Venn diagram.                                                       (4 marks)

The number of delegates who represented at least two continents.                                                 (2 marks)

The number of delegates who represented only one continent.                                                        (2 marks)

The number of delegates who represented none of the three continents.                                      (2 marks)


3.             During the manufacture of a product, 0.002 of the product turns out to be defective. The product is supplied in packets of 10. A consignment of 100,000 packets is produced in a certain period.


Using the Poisson distribution, calculate the approximate number of packets containing:

No defectives.                                                                                                                                                 (2 marks)

1 defective.                                                                                                                                                     (2 marks)

2 defectives.                                                                                                                                                    (2 marks)

(Total: 20 marks)



1.            A random sample of 15 employees of a call centre was taken and each employee took a competency test. The mean of the scores achieved by these employees was 56.3% with a standard deviation of 7.1%. The results of this test have been found to be normally distributed in the past.


Construct a 95% confidence interval for the mean of the test score of the call centre employees.     (6 marks)

2.           Distinguish between the “coefficient of correlation” and the “coefficient of determination”. (4 marks)

The following data was obtained during a social survey conducted in a given urban area regarding the monthly income of households and their corresponding expenditure:



Household                              Monthly                                   Monthly

income                                     expenditure

Sh.”000″                                  Sh.”000″

A                                          150                                            120

B                                          130                                            135

C                                          200                                             195

D                                         245                                             190

E                                          140                                            120

F                                          100                                              85

G                                            80                                              65

H                                          145                                            130

I                                           130                                              60

J                                             90                                              75



The Pearson’s coefficient of correlation between monthly income and monthly expenditure and interpret the result.           (10 marks)

(Total: 20 marks)

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