Created By: Irfan Ali
Solution Manual for Applied Statistics in Business and
Economics 7th Edition by David Doane A++
Chapter 1 Overview 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
look 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
surgeons to spread their surgeries out to better use the facilities. He might also look at which
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 data or understand
summary analyses, one will be making decisions without full information.
Learning Objective: 01-2
,Created By: Irfan Ali
1.4 a. Answers will vary. Why Not Study: It is difficult to become a statistical “expert” after
taking 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 perform simple or even
complex statistical analyses means turning over part of the business 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 accounting.
Foreign languages are essential in this global business environment of today. While learning a
foreign language can take considerably more time as an adult, the investment is worth it.
Businesses are looking for college graduates that have
quantitative skills and speak a foreign language. Chinese and Spanish are popular choices.
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 use statistics in your business profession then you might conclude that
you shouldn’t study statistics. However, the original assumption of never using statistics is
wrong; therefore 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 manager can
make. A consultant is helpful when your team lacks certain critical skills, or when an unbiased or
informed view cannot be found inside your organization. Expert consultants can handle
domineering or indecisive team members, personality clashes, fears about adverse findings, and
local politics. As in any business decision, the costs of paying for statistical assistance must be
weighed against the benefits. Costs are: statistician’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 useful data, a better understanding of what information can be
extracted from the data, greater confidence in the results.
Learning Objective: 01-2
,Created By: Irfan Ali
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 lists from universities
and various student groups. This is also an unethical practice by the universities.
b. They used an in-person survey given to 1500 students. These students were randomly
solicited at popular 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 report
simply provided statistics collected from their sample. The naïve reader would most likely 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 practices
companies use on campuses are different from those used to market cards to the general public.
Furthermore, it was not obvious that those students who had credit cards obtained those cards as
a direct result of the campus marketing efforts. What was impressive was the amount of research
the group did to support their claims of unethical practices. The references to other reports and
court cases were a better support for their claims in question 1.
e. Answers vary. In general, because the study was based on a convenience sample the
results cannot be assumed to hold for the general population of students. Also, it would be 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
Massachusetts, California, and Colorado. There were very few schools from the southeast and
virtually no private colleges or universities. Because it was a convenience sample it is not
appropriate to extend the results from the survey to the larger population of college students.
However, many of the references cited did suggest that the problem was widespread.
, Created By: Irfan Ali
g. First, they suggest eliminating "freebies" or gifts that would entice students to sign up for
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, changing 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 United States
Congress and signed by President Barack Obama on May 22, 2009. It is comprehensive 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, and 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, providing courses
of action for employees when they have questions or believe an ethical guideline has been
violated, documentation so that employees will know the code, addressing nepotism, addressing
romantic relationships, addressing customer relationships and vendor relationships.
Learning Objective: 01-3
1.8 Mary is falling for Pitfall 3: Conclusions from Rare Events. Just because an event is
unlikely doesn’t mean it will never happen. The probability may be small but there is a chance 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. Even if there
were a link between cell phones and binge drinking, the link would be between groups of cell
phone users and groups of binge drinkers, not necessarily a one to one link.
Learning Objective: 01-4
Solution Manual for Applied Statistics in Business and
Economics 7th Edition by David Doane A++
Chapter 1 Overview 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
look 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
surgeons to spread their surgeries out to better use the facilities. He might also look at which
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 data or understand
summary analyses, one will be making decisions without full information.
Learning Objective: 01-2
,Created By: Irfan Ali
1.4 a. Answers will vary. Why Not Study: It is difficult to become a statistical “expert” after
taking 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 perform simple or even
complex statistical analyses means turning over part of the business 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 accounting.
Foreign languages are essential in this global business environment of today. While learning a
foreign language can take considerably more time as an adult, the investment is worth it.
Businesses are looking for college graduates that have
quantitative skills and speak a foreign language. Chinese and Spanish are popular choices.
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 use statistics in your business profession then you might conclude that
you shouldn’t study statistics. However, the original assumption of never using statistics is
wrong; therefore 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 manager can
make. A consultant is helpful when your team lacks certain critical skills, or when an unbiased or
informed view cannot be found inside your organization. Expert consultants can handle
domineering or indecisive team members, personality clashes, fears about adverse findings, and
local politics. As in any business decision, the costs of paying for statistical assistance must be
weighed against the benefits. Costs are: statistician’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 useful data, a better understanding of what information can be
extracted from the data, greater confidence in the results.
Learning Objective: 01-2
,Created By: Irfan Ali
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 lists from universities
and various student groups. This is also an unethical practice by the universities.
b. They used an in-person survey given to 1500 students. These students were randomly
solicited at popular 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 report
simply provided statistics collected from their sample. The naïve reader would most likely 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 practices
companies use on campuses are different from those used to market cards to the general public.
Furthermore, it was not obvious that those students who had credit cards obtained those cards as
a direct result of the campus marketing efforts. What was impressive was the amount of research
the group did to support their claims of unethical practices. The references to other reports and
court cases were a better support for their claims in question 1.
e. Answers vary. In general, because the study was based on a convenience sample the
results cannot be assumed to hold for the general population of students. Also, it would be 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
Massachusetts, California, and Colorado. There were very few schools from the southeast and
virtually no private colleges or universities. Because it was a convenience sample it is not
appropriate to extend the results from the survey to the larger population of college students.
However, many of the references cited did suggest that the problem was widespread.
, Created By: Irfan Ali
g. First, they suggest eliminating "freebies" or gifts that would entice students to sign up for
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, changing 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 United States
Congress and signed by President Barack Obama on May 22, 2009. It is comprehensive 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, and 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, providing courses
of action for employees when they have questions or believe an ethical guideline has been
violated, documentation so that employees will know the code, addressing nepotism, addressing
romantic relationships, addressing customer relationships and vendor relationships.
Learning Objective: 01-3
1.8 Mary is falling for Pitfall 3: Conclusions from Rare Events. Just because an event is
unlikely doesn’t mean it will never happen. The probability may be small but there is a chance 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. Even if there
were a link between cell phones and binge drinking, the link would be between groups of cell
phone users and groups of binge drinkers, not necessarily a one to one link.
Learning Objective: 01-4
