COMPREHENSIVE ASSIGNMENT 2

QUESTION ONE
(a)

Mean =[1,600,000) + 2(1,800,000) + 2,000,000]/4 = 1.8 million

Median is (35,000 + 35,000)/2 = Shs. 1,800,000
Mode is Shs. 1,800,000
The claim is not correct, the mean, median or mode earnings are all
below Shs. 3,000,000.

(b)

Mean = (1,600,000 + 1,800,000 + 2,000,000 + 5,300,000)/5

= Shs. 2,500,000
Median = Shs. 1,800,000
Mode = Shs. 1,800,000
The colleges claim is not correct the amounts are all below, on the
average Shs. 3,000,000.

(c)

(i)
Mean = (1,600,000 + 2(1,800,000) + 2,000,000 + 5,300,000 +
6,700,000)/6
= 3,200,000
Median = (1,800,000 + 2,000,000)/2 = Shs. 1,900,000
Mode = Shs. 1,800,000
Using the mean, colleges claim is correct, however using the
median or the mode, the colleges claim is not correct.
(ii)
(iii)
(iv)

(a)

Each time, the mean was affected by the new values. Median
was marginally affected whereas mode was not affected.
Mean is easily affected by extreme values while the mode and
the median are not affected.
The claim is far fetched. Median which is a better measure in
this case is about Shs. 1,900,000 even with the one earning
Shs. 6,700,000. The college is giving the wrong impression of
its graduates.
Weights
10
kilogram

0.013
0.1048
0.124

plate

(10

10.013)/0.124

- 0.1048
plate.

= - 0.1048 is same as 0.0398 area or 3.98% variability 50kg

= (50 50.032)/0.465 =

0.032
0.0688
0.465

For = - 0.688 area is 0.0279 or 2.79%

In terms of weight, the 50 kilogram plate had less variability
diameters.
10kg

= (1 1.22)/0.187 =

0.22
1.17647
0.187

= - 1.17647 the area is 0.3810 or 38.10%

50kg

= (1 1.20)/0.183 =

0.20

= - 1.092896

0.0183

= - 1.092896 the area is 0.3621 or 36.21%

In terms of diameter the 50kg plate had a less variability.
QUESTION TWO
(a)

(i)

Industrial production Index

Sector
Mining & quarying
Manufacturing:
Food, Drink & Tobacco
Chemicals
Metal
Engineering
Textiles
Other manufacturing
Construction
Gas; electricity
And waters

July
Index
(I)
361

Weig
ht
(W)
41

106
109
72
86
70
91
84

77
66
47
298
67
142
182

115
Sum

80
1,000

IxW
14,80
1
8,162
7,179
3,384
25,62
8
4,690
12,92
2
15,28
8
9,200
101,2
69

The index for industrial index

=

101,269
101.269
1,000

Production index for manufacturing sector

Sector

Weight
(W)

Food, drink etc.

77

July
2001
Index (s)
106

Chemical

66

109

7,194

47
298
67
142
697

72
86
70
91

3,384
25,628
4,690
12,922
61,980

Metal
Engineering
Textiles
Other manufacturing

Index =
(ii)

I&W
8,162

61,980
88.92
697

The Index of industrial production for all industries in 2001 is

101.27 with the Base year being 1994. This means that the
industrial production for 2001 is 101.27% of that in 1994. On
the other hand, the index from manufacturing industries of
2001is 88.92. This means the manufacturing production for
2001 is less than that of 1994. The 2001 manufacturing
production is 88.92% that of 1994.

(b) Index numbers are used in comparing production, sales, employment or

population changes over a certain period. They can also be used in
comparing differences between regions or differences between
comparable categories such as persons or commodities.
(c)

The Limitations of Index Numbers

(i)
Scope The scope of index number must be ascertained
carefully for correct interpretation.
(ii)
Reliability of index number must be carefully ascertained.
(iii)
Determination of weights and the collection of relevant data is
very difficult.

QUESTION THREE
(a)

= 15.7588 6.25485X 1 + 0.0851136X2 +

Regression equation, y
5.86599X3

(b)

The regression analysis provide useful information

R2 = 0.85
r = 0.921265
- The regression equation explains about 85% of the variation in
sales.
- There is a high positive linear relationship between the sales and
the independent variables.

(c)

Generally the bigger the value of F, the better the predictor readers
rating have a small value of F compared with the other decision
variables. Curves have a bigger F value. This implies that curves are
important for sales prediction.

(d)

5%

0.025
2
dif = 20 4 = 16

t Critical = 2.12

95% confidence interval = - 6.25485 2.12 0.961897

= - 6.25485 2.03922
= - 8.29407 < B1 < - 4.21563
We are 95% confident that a cover by artist B instead of artist A
reduces sales by between 4216 and 8294 copies.
(e)

95% confidence interval = 5.86599 2112

= 5.86599 1.95513
= 3.911 < B3 < 7.821

0.922233

We are 95% confident that using short descriptions by Editor D

instead of Editor C will increase sales by 3911 and 7821 copies.
QUESTION FOUR
(a)

Regression is used to determine the nature of the association between

two or more variables in the form of an equation. The relationship
can be linear or non linear.
Correlation attempts to express the degree of association between 2
variables e.g.
r1r1
r = +1 Perfect direct relationship
r = - 1 Perfect inverse relationship
r = 0 No association between two variables.
(b)

Slope b =

n xy x y
n x 2 x

Intercept, a =

where n is the sample size

y b x The calculations for our sample of size n =

n
n
10 are given below. The linear model is: y a bx

No. of cakes (000 Total cost (Shs.

units)
000)
x
y
22.5
23.0

xy

x2

y2

517.5

506.2
5

529

21.0

21.6

453.6

441

27.5

23.3

21.5

24.0

640.7
5
516

30.0

28.2

846

756.2
5
462.2
5
900

20.0

22.4

448

400

24.0

23.1

554.4

576

26.5

25.3

18.3

20.1

17.0

16.5

670.4
5
367.8
3
280.5

702.2
5
334.8
9
289

228.3

227.5

5,295.
03

5367.
89

The slope, b =

759.2
4
501.7
6
533.6
1
640.0
9
404.0
1
272.2
5
5225.
41

10 5295.03
228.3
227.5 1012.05
0.6496
=
10 5367.89
228.3
2
1558.01

and the intercept, a =

227.5 0.6496
228.3

22.75
14.8299
10
10

0.6496x
7.92
This gives y

(ii)

466.5
6
542.8
9
576

Break even = TC = TR
7.92 + 0.6496x = 10
0.6496x = 2.0798
x = 3.2
3 cakes

= 7.920
Fixed cost = 7.92 and unit cost
= 0.6496

QUESTION FIVE
a)

Additive model;
This is expressed as = T + S + C +R
Where: T =Long trend
S =Seasonal variation
C =Cyclonical variations
R = Random variation.
In additive model S, C, and R are expressed as absolute values; it is
suitably applied where components are independent e.g. where seasonal
variations is unaffected by the value of trends.

Multiplicative model on the other hand is expressed as = TSCR

and S, C, R are expressed as absolute values, it is best applied when
components are interdependent e.g. when the trend affects seasonal
variation.
X
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
136
X=136

Y
40
64
2001
124
58
42
84
2002
150
62
46
78
2003
154
96
54
78
184
2004
106
1,420
Y=1,420

XY
40
128

X2
1
4

372
232
210
504

9
16
25
36

1,050
496
414
780

49
64
81
100

1,694
1,152
702
1,092
2,760

121
144
169
196
225

1,696
13,322

256
1,496

XY=13,322

Now the trend is given as Y = a + bx

x

X2=1,496

y = an + b

xy = nx + bx2
;

1420= 16a+136b
13322=(16 136)+1496b

Giving the trend as

Estimates for the year 2004
1st quarter = + (13)
2nd quarter = + (14)
3rd quarter = + (15)
4th quarter = + (16)
Percentage variation for each quarters actual sale for the year 2004.
= Actual Sale/Estimated Sale 100
27

1st quarter =
2nd quarter =
rd

3 quarter =
4th quarter =

100
39
100
92
100
53
100

QUESTION SIX
(a)
(i)
Price index measure the change in price in one time point
(current period time
point) with respect to the base time point e.g.
Price index =
(ii)

Price
forthe given
period
100
Price
forthebase
period

Quantity index measures the change in quantity in one time

point (current period time point) with respect to the base time
point.
Quantity index =

(iii)

Quantity
forthegiven
period
100
Quantity
forthebase
period

Composite index number is an index that considers a group or

set of items or commodities in one time point with respect to
another. It is constructed from a combination of figures relative
to several variables, price and quantity.

w 100
w
pn

E.g. weighted composite index =

(iv)

(b)

(i)

po

Where W = Weight for each component

Pn = price for the given period
Po = price for the base period
Value index is an index that measures changes in the value of
commodities and activities.
Price relative =

P1

P0

100

For oranges = 25 100= 166.67%

15

For milk = 35

100= 116.67%
30
For bread = 40 100= 133.33%
30
For eggs = 26 100= 130.00%
50
(ii)

Laspeyres Price Index =

Item
Orange
Milk
Bread
Eggs

Pq
p q
1

P1q0
30
70
120
65
305

100
P0q0
30
60
90
50
230

Laspeyres price index = 305

100= 132.61%
230

(iii)

Paasche price index =

p1q1
100= 280 100= 130.23%
215
p0q1

Item
Orange
Milk
Bread
Eggs

P1q1
25
70
120
65
280

P0q0
15
60
90
50
215

QUESTION SEVEN
(a)

Additive model: - it is a decomposed model where the forecast for the

desired period is given by:
F=T+S
Where T Estimated trend for forecast period.
S Seasonal factors for respective forecast
period.
Multiplicative model is a decomposed model where the forecast for
the desired period is given by F = T X
There is the Delphi technique, which uses experts to guess what
might happen.

Yea
r

Quart
er

Period
(t)

Sales (Shs.
Million) Yt

tYt

T2

T=
57.47
+
3.68t

Y-7

20
01

20
02

20
03

20
04

40

40

61.15

64

128

64.83

124

372

68.51

58

232

16

72.91

42

210

25

75.87

2
3

6
7

84
150

504
1050

36
49

79.55
83.23

62

496

64

86.91

46

414

81

90.59

2
3
4
1

10
11
12
13

78
154
96
54

780
1694
1152
702

100
121
144
169

2
3
4

14
15
16

78
184
106

1092
2760
1696

196
225
256

t 136 yt 1420 yt 13,322 t

Yt = a + bt
b=

b=

n tYt t yt
n t t
2

a= 1

b=

1496

1613,322 1361420
161496 136

20032
= 3.68
5440

Yt b t

T = a + bt
T = 57.47 + 3.68t
First = T + S
Determine S Seasonal Factors

a= 1

1420 3.68 1.36 57.47

16

21.1
5
0.83
55.4
9
14.1
9
33.8
7
4.45
66.7
7
24.9
1
44.5
9

Year
2001

Q1
21.15
33.87
44.59

2002
2003

Q2
0.83
4.45

Q3
55.4
9
66.7
7

Q4
14.19
24.91

2004
QUESTION EIGHT
(a)

To determine whether the customer is getting reasonable value, given

the advertised diameter of the bolts, we must compute the average of
the grouped data using class mid-points. Thus table below shows the
calculation.
Table: Computation of mean diameter of bolts
Class
Mid Points
Frequenc
y
x
f
fx
0.9748
2
1.9496
0.9751
6
5.8506
0.9754
8
7.8032
0.9757
15
14.6355
0.9760
42
40.9920
0.9763
68
66.3884
0.9766
49
47.8534
0.9769
25
24.4225
0.9772
18
17.5896
0.9775
12
11.7300
0.9778
4
3.9112
0.9781
0.9
781
1
244.104
250
1

The mean X

fx
f

= 244.1041
250
= 0.9762 cm.
Since the average calculated is the same as the advertised average diameter
the customer is getting reasonable value.

(b) (i) A weighted average is useful where data values are not of equal
importance, where data items are of equal importance we weight each
data item according to its importance or significance.
(ii)

The median on a grouped frequency distribution can be approximated

graphically by drawing a percentage cumulative frequency curve
also known as an ogive curve and reading the value as the variable
that corresponds to the 50%.

(iii)

The process of statistical analysis, more specifically inferential

statistics, requires the use of a measure of central tendency that is a
dual purpose and can measure dispersion. The mean, for instance, is
used extensively in statistical analysis because it has a natural
measure of dispersion to twin with where further analysis is required.
Due to this reason, mode is not used extensively in statistical analysis.

(iv)

That the standard deviation is a natural partner of the mean is implied

in its very definition. The standard deviation is defined in terms of the
mean. Also to make statistical inferences, we must pair up the
standard deviation and the mean to describe and use the
characteristic of the normal distribution. Indeed, we can only specify
the properties of the normal distribution using the mean and the
standard deviation. Thus they are natural partners which when
paired help in making statistical inferences.