Applied Statistics in Business and Economics
= = = = =
7th Edition by David Doane
= = = =
, ASBE=7e=Solutions=for=Instructors
Chapter 1 Overvie = =
w of Statistics
= =
1.1 a.=Statistics=can=be=used=to=1)=determine=what=a=typical=commission=is=and=then=2)=use=that=
value=to=identify=commissions=that=appear=to=be=unusually=high.
b. She=could=use=statistics=to=show=the=average=energy=use=compared=to=previous=models.=
She=could=also=use=statistics=to=show=how=durable=the=monitor=would=be=in=the=field.
c. He=could=use=statistics=to=calculate=the=average=absenteeism=at=each=plant=and=then=
compare=across=the=three=plants.
d. He=could=calculate=average=number=of=defects=in=each=shipment.=He=could=determine=
variation=in=number=of=defects=between=the=three=shipments.
Learning= Objective:= 01-1
1.2 a.=He=could=calculate=the=job=turnover=for=each=gender=for=each=restaurant.=He=could=then=l
ook=at=the=difference=between=the=various=restaurants=as=well=as=the=difference=between=
genders.
b. He=could=calculate=the=average=number=of=emails=received=and=sent=for=employees=in=
different=job=classifications=and=make=comparisons.
c. The=portfolio=manager=could=calculate=both=the=average=return=and=the=variation=on=return=
for=the=six=different=investments=and=make=comparisons.
d. By=studying=the=busiest=times=of=day=for=surgery,=the=administrator=could=work=with=su
rgeons=to=spread=their=surgeries=out=to=better=use=the=facilities.=He=might=also=look=at=w
hich=surgeries=take=the=longest=and=which=are=shorter=to=help=with=scheduling.
Learning= Objective:= 01-1
1.3 a.=The=average=business=school=graduate=should=expect=to=use=computers=to=manipulate=the=
data.
b.=Answers=will=vary.=Weak=quantitative=skills=lead=to=poor=decision=making=because=data-
= based= decision = making =is=a= hallmark= of= successful = businesses. = If= one= cannot = analyze = d
ata=or=understand=summary=analyses,=one=will=be=making=decisions=without=full=inform
ation.
Learning= Objective:= 01-2
1.4 a.=Answers=will=vary.= Why=Not=Study:=It=is=difficult=to=become=a=statistical=“expert”=after=t
aking=one=introductory=college=course.=A=business=person=should=hire=statistical=experts=
and=have=faith=that=those=who=are=using=statistics=are=doing=it=correctly.=Why=Study:= In=
fact,=most=college=graduates=will=use=statistics=every=day.=Relying=on=a=consultant=to=pe
rform=simple=or=even=complex=statistical=analyses=means=turning=over=part=of=the=busin
ess=decision-making=to=someone=who=doesn’t=know=your=business=as=well=as=you=do.
b.=Answers=will=vary.=Answers=provided=in=part=a=will=be=similar=for=the=subjects=of=accoun
ting.=Foreign=languages=are=essential=in=this=global=business=environment =of=today.=Whi
le=learning=a=foreign=language=can=take=considerably=more=time=as=an=adult,=the=investme
nt=is=worth=it.=Businesses=are=looking=for=college=graduates=that=have
1
, quantitative=skills=and=speak=a=foreign=language.=Chinese=and=Spanish=are=popular=choice
s.
c.=To=arrive=at=an=absurd=result,=and=then=conclude=the=original=assumption=must=have=been=
wrong,=since=it=gave=us=this=absurd=result.=This=is=also=known=as=proof=by=contradiction.=
It=makes=use=of=the=law=of=excluded=middle=—
=a= statement= which =cannot= be= false, = must=then= be=true.= If= you= state =that = you= will= never= u
se=statistics=in=your=business=profession=then=you=might=conclude=that=you=shouldn’t=stu
dy=statistics.=However,=the=original=assumption=of=never=using=statistics=is=wrong;=theref
ore=the=conclusion=of=not=needing=to=study=statistics=is=also=wrong.
Learning= Objective:= 01-2
1.5 a.=Answers=will=vary.
b.=An=hour=with=an=expert=at=the=beginning=of=a=project=could=be=the=smartest=move=a=mana
ger=can=make.=A=consultant=is=helpful=when=your=team=lacks=certain=critical=skills,=or=w
hen=an=unbiased=or=informed=view=cannot=be=found=inside=your=organization.=Expert=co
nsultants=can=handle=domineering=or=indecisive=team=members,=personality=clashes,=fea
rs=about=adverse=findings,=and=local=politics.=As=in=any=business=decision,=the=costs=of=pa
ying=for=statistical=assistance=must=be=weighed=against=the=benefits.= Costs=are:=statistici
an’s=time,=more=time=invested=in=the=beginning=of=a=project=which=may=mean=results=are
= not =immediate. =Benefits=include: = better= sampling = strategies= which=can= result=in= more =u
seful=data,=a=better=understanding=of=what=information=can=be=extracted=from=the=data,=g
reater=confidence=in=the=results.
Learning= Objective:= 01-2
1.6 a.= The=ethical=issue=is=that=credit=card=companies=are=using=unfair=marketing=practices=to=
entice=students=to=use=credit=cards.=Students=are=a=vulnerable=group=that=has=not=been=
educated=about=personal=finance.=Credit=card=companies=are=also=purchasing=student=l
ists=from=universities=and=various=student=groups.=This=is=also=an=unethical=practice=by=t
he=universities.
b. They=used=an=in-
person=survey=given=to=1500=students.= These=students=were=randomly=solicited=at=popu
lar=places=on=campus.=The=sampling=technique=was=a=convenience=sample.=The=report=
did=not=attempt=to=make=inferences=about=the=population=of=college=students.=The=repor
t=simply=provided=statistics=collected=from=their=sample.=The=naïve=reader=would=most=l
ikely=make=the=inference=that=the=numbers=from=the=sample=apply=to=the=population=as=a=
whole.=This=should=be=made=clearer=in=the=report.
c. The=subjects=surveyed=include=1)=how=students=pay=for=their=education,=2)=how=they=use=
credit=cards,=3)=how=many=of=them=use=credit=cards,=and=4)=attitudes=toward=credit=card=
marketing=on=campus.=It=would=be=interesting=to=see=what=the=questions=were=and=how=
they=were=worded.
d. Because=the=survey=focused=on=students’=opinions=and=did=not=provide=information=about=
credit=card=use=by=the=general=population=it=is=difficult=to=conclude=that=the=marketing=p
ractices=companies=use=on=campuses=are=different=from=those=used=to=market=cards=to=t
he=general=public.=Furthermore,=it=was=not=obvious=that=those=students=who=had=credit=c
ards=obtained=those=cards=as=a=direct=result=of=the=campus=marketing=efforts.=What=was=i
mpressive=was=the=amount=of=research=the=group=did=to=support=their=claims=of=unethica
l=practices.=The=references=to=other=reports=and=court=cases=were=a=better=support=for=the
ir=claims=in=question=1.
2
, e. Answers=vary.=In=general,=because=the=study=was=based=on=a=convenience=sample=the=re
sults=cannot=be=assumed=to=hold=for=the=general=population=of=students.=Also,=it=would=b
e=good=to=know=how=students’=use=of=credit=cards=compares=to=the=general=public.
f. The=list=of=schools=included=in=the=survey=is=focused=in=a=few=states=such=as=Massachuset
ts,=California,=and=Colorado.=There=were=very=few=schools=from=the=southeast=and=virtu
ally=no=private=colleges=or=universities.=Because=it=was=a=convenience=sample=it=is=not=ap
propriate=to=extend=the=results=from=the=survey=to=the=larger=population=of=college=stude
nts.=However,=many=of=the=references=cited=did=suggest=that=the=problem=was=widesprea
d.
g. First,=they=suggest=eliminating="freebies"=or=gifts=that=would=entice=students=to=sign=up=f
or=a=credit=card.= Second,=they=suggest=limiting=posted=marketing=materials=on=campus.=
The=third=solution=is=to=disallow=acquisition=of=students’=lists.=Fourth,=they=suggest=that=
sponsorship=should=be=discontinued.= In=other=words,=credit=card=companies=cannot=pay
=for =student =groups =to=get =them =new=customers. = The =fifth=recommendation =is=to=enhance
= student = awareness =about = credit =card= problems.= Finally, =they= suggest =that= certain=terms
=that=take =advantage = of= students= should = be= discouraged.= For = example, = hidden=fees,= cha
nging=contracts,=and=universal=default=should=be=eliminated.
As=a=follow=up=to=this=report=note=that=the=Credit=Card=Accountability=Responsibility=and=
Disclosure=Act=of=2009=or=Credit=CARD=Act=of=2009=is=a=federal=law=passed=by=the=U
nited=States=Congress=and=signed=by=President=Barack=Obama=on=May=22,=2009.=It=is=co
mprehensive=credit=card=reform=legislation=that=aims="...to=establish=fair=and=transparent
= practices=relating =to=the = extension = of=credit= under =an= open= end= consumer= credit = plan,= a
nd=for=other=purposes."[1]
Learning= Objective:= 01-3
1.7 Answers=will=vary.=Examples=include:=linking=expectations=on=conduct=to=the=company’s
= mission, =explaining = what=is= considered = acceptable = and= unacceptable = behavior, = prov
iding=courses=of=action=for=employees=when=they=have=questions=or=believe=an=ethic
al=guideline=has=been=violated,=documentation=so=that=employees=will=know=the=code
,=addressing=nepotism,=addressing=romantic=relationships,=addressing=customer=relat
ionships=and=vendor=relationships.
Learning= Objective:= 01-3
1.8 Mary=is=falling=for=Pitfall=3:=Conclusions=from=Rare=Events.=Just=because=an=event=is=unlik
ely=doesn’t=mean=it=will=never=happen.=The=probability=may=be=small=but=there=is=a=chan
ce=of=observing=the=same=five=winning=numbers=in=the=same=sequence=on=two=different
= days.
Learning= Objective:= 01-4
1.9 Bob=is=falling=for=Pitfall=5:=Assuming=a=Causal=Link.=Statistical=association=does=not=prove=
causation.=Bob=also=appears=to=be=falling=for=Pitfall=6:=Generalization=to=Individuals.=E
ven=if=there=were=a=link=between=cell=phones=and=binge=drinking,=the=link=would=be=bet
ween=groups=of=cell=phone=users=and=groups=of=binge=drinkers,=not=necessarily=a=one=to=
one=link.
Learning= Objective:= 01-4
3
= = = = =
7th Edition by David Doane
= = = =
, ASBE=7e=Solutions=for=Instructors
Chapter 1 Overvie = =
w of Statistics
= =
1.1 a.=Statistics=can=be=used=to=1)=determine=what=a=typical=commission=is=and=then=2)=use=that=
value=to=identify=commissions=that=appear=to=be=unusually=high.
b. She=could=use=statistics=to=show=the=average=energy=use=compared=to=previous=models.=
She=could=also=use=statistics=to=show=how=durable=the=monitor=would=be=in=the=field.
c. He=could=use=statistics=to=calculate=the=average=absenteeism=at=each=plant=and=then=
compare=across=the=three=plants.
d. He=could=calculate=average=number=of=defects=in=each=shipment.=He=could=determine=
variation=in=number=of=defects=between=the=three=shipments.
Learning= Objective:= 01-1
1.2 a.=He=could=calculate=the=job=turnover=for=each=gender=for=each=restaurant.=He=could=then=l
ook=at=the=difference=between=the=various=restaurants=as=well=as=the=difference=between=
genders.
b. He=could=calculate=the=average=number=of=emails=received=and=sent=for=employees=in=
different=job=classifications=and=make=comparisons.
c. The=portfolio=manager=could=calculate=both=the=average=return=and=the=variation=on=return=
for=the=six=different=investments=and=make=comparisons.
d. By=studying=the=busiest=times=of=day=for=surgery,=the=administrator=could=work=with=su
rgeons=to=spread=their=surgeries=out=to=better=use=the=facilities.=He=might=also=look=at=w
hich=surgeries=take=the=longest=and=which=are=shorter=to=help=with=scheduling.
Learning= Objective:= 01-1
1.3 a.=The=average=business=school=graduate=should=expect=to=use=computers=to=manipulate=the=
data.
b.=Answers=will=vary.=Weak=quantitative=skills=lead=to=poor=decision=making=because=data-
= based= decision = making =is=a= hallmark= of= successful = businesses. = If= one= cannot = analyze = d
ata=or=understand=summary=analyses,=one=will=be=making=decisions=without=full=inform
ation.
Learning= Objective:= 01-2
1.4 a.=Answers=will=vary.= Why=Not=Study:=It=is=difficult=to=become=a=statistical=“expert”=after=t
aking=one=introductory=college=course.=A=business=person=should=hire=statistical=experts=
and=have=faith=that=those=who=are=using=statistics=are=doing=it=correctly.=Why=Study:= In=
fact,=most=college=graduates=will=use=statistics=every=day.=Relying=on=a=consultant=to=pe
rform=simple=or=even=complex=statistical=analyses=means=turning=over=part=of=the=busin
ess=decision-making=to=someone=who=doesn’t=know=your=business=as=well=as=you=do.
b.=Answers=will=vary.=Answers=provided=in=part=a=will=be=similar=for=the=subjects=of=accoun
ting.=Foreign=languages=are=essential=in=this=global=business=environment =of=today.=Whi
le=learning=a=foreign=language=can=take=considerably=more=time=as=an=adult,=the=investme
nt=is=worth=it.=Businesses=are=looking=for=college=graduates=that=have
1
, quantitative=skills=and=speak=a=foreign=language.=Chinese=and=Spanish=are=popular=choice
s.
c.=To=arrive=at=an=absurd=result,=and=then=conclude=the=original=assumption=must=have=been=
wrong,=since=it=gave=us=this=absurd=result.=This=is=also=known=as=proof=by=contradiction.=
It=makes=use=of=the=law=of=excluded=middle=—
=a= statement= which =cannot= be= false, = must=then= be=true.= If= you= state =that = you= will= never= u
se=statistics=in=your=business=profession=then=you=might=conclude=that=you=shouldn’t=stu
dy=statistics.=However,=the=original=assumption=of=never=using=statistics=is=wrong;=theref
ore=the=conclusion=of=not=needing=to=study=statistics=is=also=wrong.
Learning= Objective:= 01-2
1.5 a.=Answers=will=vary.
b.=An=hour=with=an=expert=at=the=beginning=of=a=project=could=be=the=smartest=move=a=mana
ger=can=make.=A=consultant=is=helpful=when=your=team=lacks=certain=critical=skills,=or=w
hen=an=unbiased=or=informed=view=cannot=be=found=inside=your=organization.=Expert=co
nsultants=can=handle=domineering=or=indecisive=team=members,=personality=clashes,=fea
rs=about=adverse=findings,=and=local=politics.=As=in=any=business=decision,=the=costs=of=pa
ying=for=statistical=assistance=must=be=weighed=against=the=benefits.= Costs=are:=statistici
an’s=time,=more=time=invested=in=the=beginning=of=a=project=which=may=mean=results=are
= not =immediate. =Benefits=include: = better= sampling = strategies= which=can= result=in= more =u
seful=data,=a=better=understanding=of=what=information=can=be=extracted=from=the=data,=g
reater=confidence=in=the=results.
Learning= Objective:= 01-2
1.6 a.= The=ethical=issue=is=that=credit=card=companies=are=using=unfair=marketing=practices=to=
entice=students=to=use=credit=cards.=Students=are=a=vulnerable=group=that=has=not=been=
educated=about=personal=finance.=Credit=card=companies=are=also=purchasing=student=l
ists=from=universities=and=various=student=groups.=This=is=also=an=unethical=practice=by=t
he=universities.
b. They=used=an=in-
person=survey=given=to=1500=students.= These=students=were=randomly=solicited=at=popu
lar=places=on=campus.=The=sampling=technique=was=a=convenience=sample.=The=report=
did=not=attempt=to=make=inferences=about=the=population=of=college=students.=The=repor
t=simply=provided=statistics=collected=from=their=sample.=The=naïve=reader=would=most=l
ikely=make=the=inference=that=the=numbers=from=the=sample=apply=to=the=population=as=a=
whole.=This=should=be=made=clearer=in=the=report.
c. The=subjects=surveyed=include=1)=how=students=pay=for=their=education,=2)=how=they=use=
credit=cards,=3)=how=many=of=them=use=credit=cards,=and=4)=attitudes=toward=credit=card=
marketing=on=campus.=It=would=be=interesting=to=see=what=the=questions=were=and=how=
they=were=worded.
d. Because=the=survey=focused=on=students’=opinions=and=did=not=provide=information=about=
credit=card=use=by=the=general=population=it=is=difficult=to=conclude=that=the=marketing=p
ractices=companies=use=on=campuses=are=different=from=those=used=to=market=cards=to=t
he=general=public.=Furthermore,=it=was=not=obvious=that=those=students=who=had=credit=c
ards=obtained=those=cards=as=a=direct=result=of=the=campus=marketing=efforts.=What=was=i
mpressive=was=the=amount=of=research=the=group=did=to=support=their=claims=of=unethica
l=practices.=The=references=to=other=reports=and=court=cases=were=a=better=support=for=the
ir=claims=in=question=1.
2
, e. Answers=vary.=In=general,=because=the=study=was=based=on=a=convenience=sample=the=re
sults=cannot=be=assumed=to=hold=for=the=general=population=of=students.=Also,=it=would=b
e=good=to=know=how=students’=use=of=credit=cards=compares=to=the=general=public.
f. The=list=of=schools=included=in=the=survey=is=focused=in=a=few=states=such=as=Massachuset
ts,=California,=and=Colorado.=There=were=very=few=schools=from=the=southeast=and=virtu
ally=no=private=colleges=or=universities.=Because=it=was=a=convenience=sample=it=is=not=ap
propriate=to=extend=the=results=from=the=survey=to=the=larger=population=of=college=stude
nts.=However,=many=of=the=references=cited=did=suggest=that=the=problem=was=widesprea
d.
g. First,=they=suggest=eliminating="freebies"=or=gifts=that=would=entice=students=to=sign=up=f
or=a=credit=card.= Second,=they=suggest=limiting=posted=marketing=materials=on=campus.=
The=third=solution=is=to=disallow=acquisition=of=students’=lists.=Fourth,=they=suggest=that=
sponsorship=should=be=discontinued.= In=other=words,=credit=card=companies=cannot=pay
=for =student =groups =to=get =them =new=customers. = The =fifth=recommendation =is=to=enhance
= student = awareness =about = credit =card= problems.= Finally, =they= suggest =that= certain=terms
=that=take =advantage = of= students= should = be= discouraged.= For = example, = hidden=fees,= cha
nging=contracts,=and=universal=default=should=be=eliminated.
As=a=follow=up=to=this=report=note=that=the=Credit=Card=Accountability=Responsibility=and=
Disclosure=Act=of=2009=or=Credit=CARD=Act=of=2009=is=a=federal=law=passed=by=the=U
nited=States=Congress=and=signed=by=President=Barack=Obama=on=May=22,=2009.=It=is=co
mprehensive=credit=card=reform=legislation=that=aims="...to=establish=fair=and=transparent
= practices=relating =to=the = extension = of=credit= under =an= open= end= consumer= credit = plan,= a
nd=for=other=purposes."[1]
Learning= Objective:= 01-3
1.7 Answers=will=vary.=Examples=include:=linking=expectations=on=conduct=to=the=company’s
= mission, =explaining = what=is= considered = acceptable = and= unacceptable = behavior, = prov
iding=courses=of=action=for=employees=when=they=have=questions=or=believe=an=ethic
al=guideline=has=been=violated,=documentation=so=that=employees=will=know=the=code
,=addressing=nepotism,=addressing=romantic=relationships,=addressing=customer=relat
ionships=and=vendor=relationships.
Learning= Objective:= 01-3
1.8 Mary=is=falling=for=Pitfall=3:=Conclusions=from=Rare=Events.=Just=because=an=event=is=unlik
ely=doesn’t=mean=it=will=never=happen.=The=probability=may=be=small=but=there=is=a=chan
ce=of=observing=the=same=five=winning=numbers=in=the=same=sequence=on=two=different
= days.
Learning= Objective:= 01-4
1.9 Bob=is=falling=for=Pitfall=5:=Assuming=a=Causal=Link.=Statistical=association=does=not=prove=
causation.=Bob=also=appears=to=be=falling=for=Pitfall=6:=Generalization=to=Individuals.=E
ven=if=there=were=a=link=between=cell=phones=and=binge=drinking,=the=link=would=be=bet
ween=groups=of=cell=phone=users=and=groups=of=binge=drinkers,=not=necessarily=a=one=to=
one=link.
Learning= Objective:= 01-4
3
