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SID Number

ANGLIA RUSKIN UNIVERSITY

ASHCROFT INTERNATIONAL BUSINESS SCHOOL

JUNE 2010

LEVEL 1

ANALYSIS OF BUSINESS
BC115001S

TIME ALLOWED
ONE HOUR AND THIRTY MINUTES

INSTRUCTIONS:
1 This is a closed book examination. No form of electronic media e.g. floppy disks is to
be taken into the examination.
2 All questions are based on the data in the file titled EXAM
3 Answer THREE of the following FIVE questions.
4 The allocations of marks to questions are indicated in brackets.
5 All answers must be written on the examination paper provided by the invigilators.
6 Foreign language dictionaries for translation purposes only are permitted into the
examination. Additional material must not be incorporated. Other dictionaries are not
permitted.
7 A list of formulae is given.
8 The use of calculators is NOT permitted.
9 The deadline for submission of mitigation in relation to this examination is
Refer to your Student Handbook for details.

Number of questions set: 5

Number of pages: 10 (including cover)

Enter the number First

of each question Examiner
to be marked

Provisional
Mark

1 of 11
1 The production output per day over one year for a company producing bicycles is shown on
the worksheet entitled OUTPUT.

a) Construct a frequency table of the outputs, using a maximum of 10 groups, and enter
your values in the table below.
(30 marks)

Lower class Upper class

boundary boundary frequency
0 4 2
5 9 10
10 14 78
15 19 134
20 24 98
25 29 32
30 34 3
35 39 1
40 44 2
45 49 5

[No overlapping numbers – you were given 0 and 4, so just carry on with the same sequence, i.e. 5
and 9, etc. You can do this without even looking at the spreadsheet!. If you can’t make the
frequency table by typing ‘=frequency etc. (week 2 sheet), put the data in order (A to Z sort)
and count the numbers in each group!]

b) Use the frequency distribution to draw a graph.

Draw the graph by highlighting the frequency table (UCB and frequency) and then going to
‘scatter graph’.

Output per day

2 of 11
 (10 marks)
c) What do you notice about the distribution of data from your graph? How would you expect
the mean and median values to relate to each other?

Skewed to the right i.e. the tail of the distribution is to the right, i.e. the distribution is
positively skewed. The relatively few high values will pull the mean value above the
median value.
................................................................................................................................

................................................................................................................................
[If you can’t draw a graph for part b), in this part you can say ‘Median is bigger than mean’ or
‘Mean is bigger than median’ or whatever! ]

(15 marks)

d) What are the total units of output during the year?

6734

(5 marks)
[=sum]

e) How many days information are included in

this data set? 365

[=count] NB This was given in the question!!

(5 marks)

f) What percentage of days has less than 20

units of output? 224 days = 61%

(10 marks)
[Put the data in order (A – Z). Count the number (here 224) then work it out as a percentage. If
you can’t work it out, put 224 days – you will get some marks!]

g) What is the median value of units of output?

18

(5 marks)
[=median]

h) If in the following year the production process changed and the number of units
produced increased by 4%, what would be:

i) the value of the highest daily output ?

49.92 or 50
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[Find maximum and then increase by 4%]
(10 marks)

ii) the mean output?

19.18729 or 19

Or 19
(10 marks)
[Find average, then increase by 4%]

2 A games teacher starts a 10 week training programme for a health and fitness club. She
times the students over a one kilometre race both before and after they complete the
programme. The table called GAMES shows her results.

[This question is harder! – You need to know the headings to use. Week 3 /4 sheet.

Fi (frequency which you are given) Xi (this is the mid-point) FiXi, FiXi2

a) Find the mean time for the students before they

undertake the programme 351.6 seconds

(5 marks)
b) Find the mean time for the students after they undertake the programme

312 seconds

(5 marks)

c) Find the median time for the students before they undertake the programme

346.9 seconds

(10 marks)

d) Find the median time for the students after they undertake the programme

310 seconds

4 of 11
 (10 marks)

e) Find the upper quartile for the distribution before the

training programme 383.13
seconds

(10 marks)

f) Find the lower quartile for the distribution after the

training programme 333.13
seconds

(10 marks)

g) Find the interquartile range for the distribution before the

training programme
53.48 seconds

(10 marks)
h) Find the interquartile range for the distribution after the training programme

41.88 seconds

(10 marks)

i) How many club members ran the race in less than 360 seconds before the training
programme

[You can work these out simply by adding up from the tables]

36

(5 marks)

j) How many club members ran the race in less than 360 seconds after the training
programme

5 of 11
 47

(5 marks)

k) Comment on your results, comparing and contrasting the two distributions

………The ten week training programme has clearly made an impact on performance. The mean
time for running the kilometre has fallen by 39.6 seconds and the median by around 36.8
seconds. Also the various measures of dispersion have fallen, suggesting that there is less
dispersion around the average time, e.g. the worst runners have made improvements etc.
etc.

…………………………………………………………………………………… (20 marks)

3. A supermarket group have identified that there seems to be a strong relationship between
disposable income and the amount that households spend in retail outlets.

[This question is easy! X with a bar on top is average of the Xs, Y with a bar on the top, average of
Ys.

Highlight your data, make a scatter graph of points, and right click on one point, add the trend line
then display the equation and the regression equation on the graph.]

Using the data from the worksheet entitled SUPERMARKET fill in the boxes below and respond to
the question asked.

a) What is the value of X ?

£12.36379(000) or
£12,363.79
(5 marks)

b) What is the value of Y ?

£6.246552(000) or
£6,246.552

(5 marks)

c) What is the value of the slope of the

regression line (m)? 0.273

(10 marks)

d) What is the value of the intercept of the

regression line (c)? 2.8715
(or £2,871.5)

(10 marks)

y = 0.273x + 2.8715 6 of 11
 e) State the regression equation

(10 marks)

f)What would you expect retail sales to be when

disposable income is £9,900? £5.5742 (000)
or £5,574.20

[Put 9.9 into the equation}

(10 marks)

g) What would you expect retail sales to be when

disposable income is £10,100? £5.6288(000)
or £5,628.80

(10 marks)

h) What would you expect retail sales to be when

disposable income is £11,100? £5.9018(000)
or £5,901.80

(10 marks)

l) Calculate the co-efficient of determination (R2)

R² = 0.9347

(10 marks)

j) Does the coefficient for the independent variable have the sign you expected? Explain your
reasoning.

………………The sign is positive (plus) which is what we might expect, suggesting that spending in
the supermarkets rises directly with the level of disposable income of households. For every
one pound of extra disposable income £0.273 of a pound is spent in the supermarket group.
……………………………………………………………………………….

………………………………………………………………………………… (10 marks)

……….

m) How confident are you in your forecasts?

[Near 1 is confident, near 0 is not confident]

…………………………………………………………………………………….…………….

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We can be reasonably confident in our forecasts since 93.47% of the total variation is explained or
accounted for by our regression line.
……………………………………………………………….………………………………….
………………………………………………………………………………………(10 marks)
………

4. A company has options on three projects. Projects A and B are payroll systems and both involve
an initial capital expenditure of less than £100,000 while project C is a specialized control
system that involves an expenditure of £200,000. The discount rate for all three projects is
set at 5%

Details of the initial capital expenditures and subsequent net revenues are shown in the
worksheet entitled NPV.

[Always start with a discount factor of 10%, then you will know your answers are correct –
see worksheet. Then change to whatever the question asks]

a) What are the discount factors for following years:

Year 1 Year 4
0.952381 0.822702
(10 marks)

b) What are the NPVs of the three projects?

Project A Project B Project C

51.04834 91.25549 929.6392 (15 marks)

c) What is the average rate of return?

Project A Project B Project C

11.11% 133.3% 80.56% (15 marks)

d) What is the internal rate of return?

Project A Project B Project C

16.52954% 147.3557% 28.96007% (15 marks)

[Use your formula sheet]

e) Compare and contrast the projects using the pay-back method of investment appraisal
as compared with the net present value method?
(15 marks)
................................................................................................................................
Project A pays back at the end of year 3; Project B pays back at the end of year 1 and
Project C pays back one sixth of the way (i.e. two months) into year 6. Clearly Project
B is the most attractive on the payback criterion, followed by Project A and last of all
Project C.

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 ................................................................................................................................
The ranking on Net Present Value has Project C as most attractive, followed by Project
B, and last of all Project A.
................................................................................................................................

Clearly the time value of money really does matter. Project C requires a longer wait for
payback, but has more attractive returns over the period as a whole......................

................................................................................................................................

................................................................................................................................

f)If the discount rate changed to 6% what are the discount factors (to 3 decimal places) for
the following years:

Year 2 Year 3

0.907 0.864

(5 marks)

g) What is the NPV at the discount rate of 6%?

Project A Project B Project C

50.86864 91.16565 930.5376

(10 marks)

h) If the discount rate changed to 6%, would this influence your recommendation in e)
above? Explain your reasoning.
(15 marks)

The ranking on Net Present Value is the same, i.e. Project C, then Project B, then Project A.
There is no difference in terms of payback when we change the discount rate, so we do not
change our recommendation. ..........................................................................................

.........................................................................................................................................

5.
Answer both parts (a) and (b)

(a) A consumer has complained to the Weights and Measures department of a Local
Authority, suggesting that the weight of potato snacks is less than the stated 30
grams. A randomly chosen sample of packets of potato snacks was selected by the
authorities, with their weights entered on the worksheet entitled SNACKS.

[Even if you haven’t revised this, you can get 10 marks from each part. Part i. The hypothesis is 30
grams, the alternative hypothesis is less than 30 grams]

9 of 11
Test the hypothesis at the 5% level of significance that the machine fills bags consistently at the
specified weight.

i. State your hypothesis H0 : µ = 30 grams

H1 : µ < 30 grams
α = 0 . 05

(10 marks)

ii. State the critical value

-1.72913

(10 marks)
iii. What is the value of the test statistic?

0.76637

(20 marks)

What are your conclusions? (10 marks)

.............................................................................................................................

We accept H0 There is no evidence at all from the sample to suggest that the weight of potato
snacks is less than the stated 30 grams
.............................................................................................................................

.............................................................................................................................

(b) A steel company produces steel rods with an average diameter of 4.5 mm and standard
deviation of 0.25 mm. A random sample of steel rods was taken to ensure that the
consistency of the manufacturing process had not changed.

The sample data is contained on the worksheet entitled RODS. Analyse the data in order to
answer the following questions:
Is the diameter of steel rods 4.5mm? Test at the 5% level of significance.

[Hypothesis is 4.5mm, alternative Hypothesis is not 4.5mm

i. State your hypothesis.

α = 0 . 05
4.5m
HO equals m
4.5m
H1 does not equal m
10 of 11
 (10 marks)
ii. State the critical value

-1.95996 1.959964

(10 marks)

iii. What is the value of the test statistics?

0.451098

(20 marks)

What are your conclusions?

The evidence suggests that the consistency of the manufacturing process has
not changed – put another way, there is insufficient evidence to suggest that the
consistency has changed.
.............................................................................................................................
.............................................................................................................................
(10 marks)

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