Notes:

IMT- 24
QUANTITATIVE TECHNIQUE
SECTION - A
Q1. What are the component of a time series?
Ans Any time series can contain some or all of the following components:
1. Trend (T)
2. Cyclical (C)
3. Seasonal (S)
4. Irregular (I)
These components may be combined in dierent ways. It is usually assumed that they are multiplied
or added, i.e.,
yt = T C S I
yt = T + C + S + I
To correct for the trend in the rst case one divides the rst expression by the trend (T). In the second
case it is subtracted.
Trend component
The trend is the long term pattern of a time series. A trend can be positive or negative depending on
whether the time series exhibits an increasing long term pattern or a decreasing long term pattern.
If a time series does not show an increasing or decreasing pattern then the series is stationary in the
mean.
Cyclical component
Any pattern showing an up and down movement around a given trend is identied as a cyclical
pattern. The duration of a cycle depends on the type of business or industry being analyzed.
Seasonal component
Seasonality occurs when the time series exhibits regular uctuations during the same month (or
months) every year, or during the same quarter every year. For instance, retail sales peak during the
month of December.
Irregular component
This component is unpredictable. Every time series has some unpredictable component that makes it
a random variable. In prediction, the objective is to model all the components to the point that the
only component that remains unexplained is the random component.
Q2. Assume that the factory has two machines. Past records show that Machine 1 produces 30
per cent of the output. 5 percent of the items produced by the Machine 1 were defective and
only 1 per cent produced by Machine 2 were defective .If an item selected at random is found
to be defective, what is the probability that it was produced by Machine 2.
Ans
Value of Input: Labor + Materials + Overhead

Ouput
$300

2.000
Input $30 $70 $50

Productivity
10% productivity improvement

2.00 110
. 2.200

Given productivity
inputs:

2.20

$300,
, and the value of output

we solve for the cost of

Ouput $300

2.20
Input Input

Productivity

$300
$136.36
2.2

Input

or $136

$150 $136 $14

The cost of inputs must decrease by

$14 $70 20.00%

a. A $14 reduction in material costs is

$14 $30 46.67%

b. A $14 reduction in labor costs is

c. A $14 reduction in overhead is $14/$50 = 28.00%
Q3. Gati India Ltd. Maintains Kilometer records on all of its rolling equipment . Here are
weekly kilometer records of its trucks.

810 450 756 789 210 657 589 488 876 689
1450 560 469 890 987 559 788 943 447 775
A) Calculate the median kilometer a truck travelled.
B) Calculate the mean for 20 truck.
C) Compare part (a) and part (b) and explain which one is better measure of central tendency
of the data.
Ans Ans
2010
2011
a)debt equity ratio
debt/equity
90/20=45
90/45=2.25
b)quick ratio
liquid assest/current liabilities =60/20 = 3:1
70/30=2:33:1
c)working capital turnover rato
working capital/net sales 60/300= .2
70/270=.26
d) sales/volume =300/.2*
=390(lakh)
Q4. . Calculate correlation coefficient from the following results:
n=10 ; X=140;Y=150
(X-10)
2

=180; (Y-180)
(X-10)(Y-15)=60 =215
Ans for calculating coefficient need the value of ex2,ey2,exy,which we can determine from the value
given.
E(x-10)2=e(x2+100-20x)=ex2+e100-20e*2
Ex2+n*100-20ex
Ex2+1000-2800=ex2-1800
Ex2-1800=180
Ex2-1980

E(y-15)=e(y1-225-30ey
=ey+n*225-30ey
=ey+2250-30*15
=ey+2250-4500=ey-2250
Ey-2250=215
Q5. ABC Builders is engaged in the construction of a multistory building. It has recently
conducted a cost audit. The manger ( cost accounting) has collected the figures of the total
cost and its major constituents. The information collected as percentage of expenditure is
shown below. Represent the Data with the help of a suitable diagram.

Item
Wages
Bricks
Cement
Steel
Wood
Supervision and music

Expenditure%
25
15
20
15
10
15

Ans
a)balance as per passbook
b)cheque deposited but not presented
c)cheque issued but not presented
d)bnk charged and int charged in cash
book
d)dividend not entered in cash book
e)insurance premium, direct paid by bnk

f)amt deposit by customer directly

g)bill paid by bank
h)bill received dihourned

balance as per cash book

25000
7000
5000
250
450
500
2000
3000
5000
15750

32450

16700
32450

32450

SECTION - B
Q1. . a) Prove: P(A/B) >P(A),
Then P(B/A)>P(B)
Ans p(a/b)=pa

p( anb)
ab

=p(A)
p ( bya ) p(a)
p (b)

=p(a)

Now since p(a)and p(b)are positive

p ( b ) a p( a)
p( A)

=p(B)

P(b/a)=p(b)
It should be noticed this words with all other comparision
operation as well.
Q2. What is the probability of obtaining two heads in two throws of a single coin.
Ans Two

main types of coin tossing games, one based on either a specific sequence
of throws of a single coin, the other on throwing several coins at once and counting
the results. One side of the coin is called heads (on traditional coins, the side
with the face of a person), and the other side is called tails. Coin tosses are
presumed to be mutually independent.
The probability of getting heads in one toss of a coin.
The number of results of any one coin toss is 2 (heads or tails), so the
probability of any single toss resulting in heads is
1/2.
The probability of getting two heads in one toss of two coins, (without regard to the
order in which the coins are tossed).
(Of course the answer is 1/4, but lets try to put in it the form of events).
The event whose probability we want is
(heads on one coin) and (heads on the other coin)
As the coin tosses are independent, we just multiply the probabilities of
successive tosses:
1/21/2
=1/4
Generally, the probability of getting all heads in tossing n coins is 1/2n.
The probability of getting a head and a tail in one toss of two coins.
careful!
Why doesnt this thinking work? The probability of a head and tails.
So multiply the two probabilities to get 1/4.

We have enough tools that more than one method answers the question. A
counting approach with the definition of probability, or counting plus
probability rules.
One right way of thinking is to divide the number of ways to get two heads,
counting order, by the number of different tosses of two coins, counting
order
Counting order, there are two ways to get a head and a tail. Those are: head
and then a tail, or a tail and then a head. There are four possible throws of
two coins, counting order.
Another way of looking at it:
(a head and then a tail) or (a tail and then a head).
Since the two cannot both happen in only one throw, the joint probability is
just the sum of the probabilities:
1/4 + 1/4 = 1/2
Q3. The two regression coefficients byx and bxy are either both be positive or both be
negative. Do you agree with this statement. If so why ?

Ans the property can be proved in the following manner :

Regression coefficient of x on y (bxy)=
Regression coeffient of y on x

(byx)=

r.

Ox
Oy !

r.

Ox
Oy !

Multiplying 1and 2
Ox
Ox
r.
r.
Bxy.byx =
Oy ! .
Oy !
Or r=bxy.byx
Hence,r=

bxybyx

a)both the regression coefficient must have the same algeberic sign.the mean either
both regression coefficient will be either positive or negative.in other words,when we
regression coefficient is negative,the other would be also negative.it is never
possible that one regression coeffivient is negative while the other is positive
b) the coefficoinet of correlation will have the same sign as that of regression
coefficient if both regression coeffient are negative,then the correlation coeffient
would be negative.and if byc nad bxy have positive signs,then r will also take plus
sign

Q4. The equations of two regression lines obtained in a correlation analysis

are given below.
3x + 12y = 19 ; 3y + 9x = 46
obtain (i) the mean values
(ii) the value of correlation coefficient
and (iii) the ratio s x /s y
ans ogarithms are commonly refered to as logs, are the "opposite" of
exponentials, just as subtraction is the
opposite of addition and division is the opposite of multiplication. Logs
"undo" exponentials. Technically
speaking, logs are the inverses of exponentials. The logarithm of a number
x in the base a is defined as the
number n such that a = x.
So, if a = x, then:
l 9a ( x ) = n (1)
Q5. Differentiate between primary data and secondary data. Under what circumstances would
secondary data be more useful than primary data .
Ans Primary marketing research is proprietary, original research that you own. You either
conducted the research yourself or paid someone to do it for you. Primary research
produces "trade secrets" that give you a competitive edge. Secondary marketing
research is research that's available to you and your competition. Government agencies,
trade associations and marketing research firms that sell research reports are common
sources for secondary research data. Primary marketing research is conducted to answer
specific questions you have about your business, your customers or your competition. It
is tailored precisely to your needs. Secondary research typically covers broad areas of
generalized inquiry and may not be timely. Primary research can be costly and timeconsuming to execute. Secondary research is usually available immediately for no cost or
little cost.

Primary Research Methodologies

Surveys, interviews, observation and focus groups are the most common methods of
conducting primary research. Your primary research can be either quantitative or
qualitative. Think of quantitative research as serious number-crunching research that can
be placed on an Excel spreadsheet. Surveys are a common form of quantitative research.
Qualitative research is used for in-depth probing into inherently non-quantifiable
subjects, such as attitudes and opinions people may have about your new advertising
slogan or why they prefer your competitor's frozen lasagna over yours. Interviews,
observations and focus groups are typically used in qualitative research.

The Competitive Edge

As a small-business operator, primary research can be an excellent way to gain
advantage over your competition. You can use primary research to assess the
eectiveness of advertising and promotional campaigns with small groups before you
invest substantial amounts in production and media. You can conduct online surveys of
current customers and use social media to get feedback on a new product or service idea
you may have. You can survey your channel partners to get their reaction to a retail

promotion you're considering. There are countless ways to use primary research to help
grow your business.

Conducting Primary Research

Avoid reinventing the wheel. Explore secondary data sources before you start a primary
research project. You may find what you're looking for and need not go any further.
Consult with the reference librarian at the main branch of your public library. Reference
librarians usually know what data is available and where it's located. The most
challenging part of conducting primary research is figuring out where to start. Many
business owners start by visiting the marketing department of their local college or
university to obtain guidance from one of the marketing professors. Marketing professors
are a gregarious breed. They take delight in helping local business owners with real-world
marketing challenges.

SECTION - C
Q1. Find arithmetic mean, median and mode from the following:
Marks below
10 20 30 40 50 60 70 80
No. of students 15 35 60 84 96 127 198 250
Ans First, we have to convert the cumulative frequencies

respective classes.

Marks Midvalues

Frequencies U = X -A
c.f. f.

fiui

A = 45

xi

0 - 10

15

15

- 40

- 600

10 -20

15

35

20

- 30

- 600

20 30

25

60

25

- 20

- 500

30 40

35

84

24

- 10

- 240

into frequencies of the

40 50

45 A 96

12

31

+10

+310

50 60

55

127

60 70

65

198 71

+20

+1420

70 80

75

250 52

+30

+1560

Total

1. If the total number of observations be 'n' then

A. If 'n' is odd,

The median = size of

B. If 'n' is even, the median

observation

=
Q2. A box contains 4 bad and 6 good transistors. Two are drawn out together. One of them is
tested and found to be good. What is the probability that the other one is also good?On a
midterm exam, the scores were distributed normally with mean of 72 and standard deviation of
10.Student Wright scored in the top 10 percent of the class on the midterm.

D4 2.282
D

0.0
A

0.729
3
2
Ans
,
,
UCLR D4 R 2.282 0.025" 0.057"
LCLR D3 R 0.0 0.025" 0.0"

UCLx x A2 R 0.597" 0.729 0.025" 0.615"

LCLx x A2 R 0.597" 0.729 0.025" 0.579"
Q3. Wirghts midterm score was at least how much?
Ans Professor Wright is a really good guy, like the previous poster wrote, he is in no way out to get you.
That being said, if you don't do the work, you will struggle.
The first midterm was fairly straightforward - if you had done the homework it was not difficult to do well.
The second midterm was not impossible, but required a lot more thinking and "applying what we'd
learned".. basically just doing the homework was not enough to do well on it, and the class average
showed this (I think it was around a 55 or so).
The final was quite long, but was pretty fair. The problems on it were similar to the midterms, with a few
difficult sections thrown in. If you had done the homework and understood most of it (not just plugging and
chugging), it was alright.
The final curve was very nice, Wright really does his best to treat his students well and will give you the
benefit of the doubt, even offering to drop your lower midterm.
A few tips:
-DO THE HOMEWORK! There really isn't too much of it, so try each problem. Also, make sure to look at
the keys he later posts, they aren't just the book solutions and he sort of explains each step in them.
-Going to class isn't always essential, but he's a good lecturer with a lot of energy. He also tends to do
problems very similar to what will appear on the tests on the board.
-Also, I highly suggest learning any new material you have recently covered just before a test. We didn't
have any carnot engines, and only a fairly simple thermodynamics P/V chart on the second midterm, but
these were a BIG part of the final.

Q4. The final exam also had a normal distribution, but with mean of 150 and standard
deviation of 15. At least what score should Wright get in order to keep the same ranking (i.e ,
top 10 percent).

13.066 5.00
0.64
3 4.21

a.

Ans Lower Specification Calculation

25.00 13.066
0.94
3 4.21
Upper Specification Calculation

C pk min 0.64, 0.94 0.64

Cp

25 5
0.79
6 4.21

Q5. What do you mean by trend analysis? Differentiate between secular trend and cyclic
fluctuation.

Ans Trend Analysis is the practice of collecting information and attempting to spot a
pattern, or trend, in the information. In some fields of study, the term "trend analysis" has
more formally defined meanings.
Although trend analysis is often used to predict future events, it could be used to estimate
uncertain events in the past, such as how many ancient kings probably ruled between two
dates, based on data such as the average years which other known kings reigned.
The secular trend and seasonal variation of measles mortality rate in Taiwan from 1959 to 1981 were
analyzed through multiple regression analyses. A significant downward trend with a regular two-year
cyclic fluctuation was observed before and after the implementation of a mass vaccination campaign,
and the difference between odd and even years was greater in later years than in earlier years. There
was a characteristic unimodal pattern of seasonal variation which peaked in the months of late spring
or early summer, and measles deaths were found more clustered in epidemic years than in
nonepidemic years. While 94.3% of the total variation of annual measles mortality rate could be
explained by calendar year, two-year cycle, and their interaction; 87.6% of the total variation of
monthly measles mortality rate could be explained by calendar year, two-year cycle, month, and the
interaction between two-year cycle and month. The implication and application of such multiple
regression analysis of temporal components of measles epidemiology are discussed.

CASE STUDY - 1
Ans cash flow statem,ent as on 31st march 2011

Particular

Amount

Cashflow stamnt is opt

activity
Particular
Amount
To opening stock
25000
Net profit

60000

To purchase 5000
+dep

20000

-return
3400
+dividend paid

46600

To carriage inward
+ tax

2300

4000

(15000)

+o/s
3200
24600
+ insurance in creditor

5000

To coal,gas &water 700

-decrese in o/s exp

4000

Grass pross
9100
-increase in debtor

10000

108300

Cash flow frm rnvtng activity

to salaries 4600
Purchase fixed assest
Cash flow from fincing actity
+o/s
500
5100
Loan repay
Dividend paid
To bank charges
100
Cash generator
Opening cash &bank balance
To rent tax 800
+o/s

200

1000

Particular
By sales 80000

Amount
0

Less return 1700

78300

by closing stock

30000

20000

To wages 21400
(-)tax paid

+decrease in stock

amount

10000

108300
90000

10000 By gain 9100 (-)60000

9100
20000 By net sales

nil 3840
30000

30000

Closing cash &bank balance

To general exp
1900
To fire ins 400
-)prepaid

120

280

To paid bal 2140

-)old paid

1400

740

To dep on building

CASE STUDY
-2

To p&m 2250
To fur

320

3820
12940
12940

25000

46600
2300

24600

Ans