Assignment-ME06

Problem:1) Nike shoes come with an average price of $ 150 a piece, at their factory
outlet with a std. deviation of $ 25. But at the Puma outlets of these shoes, it was also
drawing good crowds where the average price, after discount, was $ 110 and std
deviation of $ 15. (Assume the distributions are both Normal).

Three specific segments of customers can be expected to form, as a result. One below
the lowest price tag of the Nike (segment-I), one above the uppermost price level of the
Puma (segment-II) and the third (segment-III) in between.

If the market size of this brand Nike was decided at 25,000 pieces and another 30,000
pieces for Puma Sale, how many pieces of shoes (out of this total of 55,000 pieces) can
be ascertained for each of the above three market segments? Hint: Some pieces will be
picked by consumers only at Nike outlets. Some by customers only at Puma. The
remaining can be picked up by customers in both outlets. Draw appropriate diagrams
and clearly illustrate decision-making zones

a) Draw a neat diagram.

b) What percentage of Puma dealers are pricing their Model at less than the
price for Nike? And what is the size of this segment.
c) What percentage of Nike dealers are pricing their model higher than the price
of Puma? Also give size.
d) What is percentage of customers who wish to buy Nike may shift their
preference to Puma, if Puma is able to pull those customers with some special
deal.
Problem:2) In a manufacturing plant, machine A produces 10% of a certain product,
machine B produces 40% of this product, and machine C produces 50% of this product.
Five percent of machine A products are defective, 12% of machine B products are
defective, and 8% of machine C products are defective. The company inspector has just
sampled a product from this plant and has found 1000 to be defective. Determine the
revised probabilities that the sampled product was produced by machine A, machine B,
or machine C and specify the number of defectives to be allocated to each machine.

Problem:3) The following table shows the annual returns (in percent) for Fidelity’s
Electronic and Utilities funds.

Year Electronic Utilities

2005 13.23 9.36
2006 1.97 32.33
2007 2.77 21.03
2008 –50.00 –35.21
2009 81.65 14.71

a.) Calculate the sample mean, the sample variance, and the sample standard deviation
for each fund.

b.) Which fund had the higher average return?

c.) Which fund was riskier over this time period? Use both the standard deviation and
the coefficient of variation in your explanation.

d.) Given a risk-free rate of 4%, which fund has the higher Sharpe ratio? What does this
ratio imply?
Problem:4) The Federal Correction Agency is investigating the last question cited above:
Does a male released from federal prison make a different adjustment to civilian life if
he returns to his hometown or if he goes elsewhere to live? To put it another way, is
there a relationship between adjustment to civilian life and place of residence after
release from prison? Use the .01 significance level.

Adjustment to Civilian Life and Place of Residence

Explain in detail with all the Six steps involved in Hypothesis testing.
Problem:5) The following is part of the results of a regression analysis involving sales (Y
in millions of dollars), advertising expenditures (X1 in thousands of dollars), and number
of salespeople (X2) for a corporation. The regression was performed on a sample of 10
observations.

Coefficient Standard Error t value p value

Constant -11.340 20.412

X1 0.798 0.332 2.404 0.0345

X2 0.141 0.278 0.507 0.2305

a. Write the regression equation.

b. Interpret the coefficients of the estimated regression equation found in

Part (a).

c. At  =0.05, test for the significance of the coefficient of advertising.

d. At  =0.05, test for the significance of the coefficient of number of

salespeople.

e. If the company uses $50,000 in advertisement and has 800 salespersons,

what are the expected sales? Give your answer in dollars.
Problem:6) A machine that is programmed to package 1.20 pounds of cereal in each cereal box is being
tested for its accuracy. In a sample of 36 cereal boxes, the mean and standard deviation are calculated
as 1.22 pounds and 0.06 pound, respectively.

a. Set up the null and the alternative hypotheses to determine if the machine is working
improperly—that is, it is either underfilling or overfilling the cereal boxes.
b. Calculate the value of the test statistic.
c. At a 5% level of significance, can you conclude that the machine is working improperly?
Explain.

Problem:7) A local brewery wishes to ensure that an average of 12 ounces of beer is used to fill each
bottle. In order to analyse the accuracy of the bottling process, the bottler takes a random sample of
48 bottles. The sample mean weight and the sample standard deviation of the bottles are 11.80 ounces
and 0.8 ounce, respectively.

a. State the null and the alternative hypotheses for the test.
b. Do you need to make any assumption regarding the population for testing?
c. At α = 0.05, specify the critical value(s). What is the decision rule?
d. Make a recommendation to the bottler.

Problem:8) A recent study of gender preferences among car shoppers found that men and women
equally favour economy cars. A marketing analyst doubts these results. He believes that gender
differences exist with respect to the purchase of an economy car. He collects data on 400 recent car
purchases cross-classified by Gender and Car Type (economy car versus non-economy car). The results
are shown in Table At the 10% significance level, determine whether the sample data support the
marketing analyst’s claim.
Problem:1) The contingency table below summarizes a survey of 1,000 bottled beverage consumers. Find the
following probabilities or percentages:

a. Probability that a consumer recycles beverage bottles.

b. Probability that a consumer who lives in a state with a deposit law does not recycle.

c. Percentage of consumers who recycle and live in a state with a deposit law.

d. Percentage of consumers in states with a deposit law who recycle.

Lives in a state with a Lives in a state with Row

deposit law no deposit law Total

Recycles beverage 154 186 340

bottles

Does not recycle 66 594 660

beverage bottles

Column Total 220 780 1000

Problem:2) Analysis of annualized returns over a 10-year period showed that prepaid tuition plans had a mean
return of 6.3 percent with a standard deviation of 2.7 percent, while the Standard & Poor's 500 stock index had a
mean return of 12.9 percent with a standard deviation of 15.8 percent. (a) Calculate and compare the coefficients
of variation. (b) Why would we use a coefficient of variation? Why not just compare the standard deviations?

Problem:3) Dolon Web Security Consultants requires all job applicants to submit to a test for illegal drugs. If the
applicant has used illegal drugs, the test has a 90 percent chance of a positive result. If the applicant has not used
illegal drugs, the test has an 85 percent chance of a negative result. Actually, 4 percent of the job applicants have
used illegal drugs. If an applicant has a positive test, what is the probability that he or she has actually used illegal
drugs? Assuming 500 job applicants.
Problem:4a) In a manufacturing plant, machine A produces 10% of a certain product, machine B
produces 40% of this product, and machine C produces 50% of this product. Five percent of machine A
products are defective, 12% of machine B products are defective, and 8% of machine C products are
defective. The company inspector has just sampled a product from this plant and has found 1000 to be
defective. Determine the revised probabilities that the sampled product was produced by machine A,
machine B, or machine C and specify the number of defectives to be allocated to each machine.

Problem:4b) A survey conducted by the S P Jain School of Global Management Report asked 320
companies about the procedures they use in hiring. Only 54% of the responding companies review the
applicant’s college transcript as part of the hiring process, and only 44% consider faculty references.
Assume that these percentages are true for the population of companies in the MENA region and that
35% of all companies use both the applicant’s college transcript and faculty references.

a. Construct a contingency matrix for this problem and indicate the locations of your
answers for parts (b), (c), and (d) on the matrix.

b. What is the probability that a randomly selected company uses either faculty references or college
transcripts as part of the hiring process?

c. What is the probability that a randomly selected company uses either faculty references or college
transcript but not both as part of the hiring process?

d. What is the probability that a randomly selected company uses neither faculty references nor college
transcript as part of the hiring process?

Question: 5
 a) Romi, a production manager, is trying to improve the efficiency of his assembly line. He knows
that the machine is set up correctly only 60% of the time. He also knows that if the machine is
set up correctly, it will produce good parts 80% of the time, but if set up incorrectly, it will
produce good parts only 20% of the time. Romi starts the machine and produces one part before
he begins the production run. He finds the first part to be good. What is the revised probability
that the machine was set up correctly?

5b)
Mark the correct one
a) Which of the following represents an appropriate set of hypotheses?
A) B)
C) D)

b) If the p-value for a hypothesis test is 0.027 and the chosen level of significance is α = 0.05, then
the correct conclusion is to

A) not reject the null hypothesis

B) reject the null hypothesis
C) reject the null hypothesis if σ = 10
D) not reject the null hypothesis if σ = 10

c) The owner of a large car dealership believes that the financial crisis decreased the number of
customers visiting her dealership. The dealership has historically had 800 customers per day.
The owner takes a sample of 100 days and finds the average number of customers visiting the
dealership per day was 750. Assume that the population standard deviation is 350.To determine
whether there has been a decrease in the average number of customers visiting the dealership
daily, the appropriate hypotheses are

A) B)
C) D)

d) You want to test if more than 20% of homes in a neighbourhood have recently been sold
through a short sale, at a foreclosure auction, or by the bank following an unsuccessful
foreclosure auction. You take a sample of 60 homes from this neighbourhood and find that 14 fit
your criteria. The appropriate null and alternative hypotheses are

A) B)
C) D)