Statistical Techniques in

Business &
Economics
Fifteenth Edition

Douglas A. Lind
Coastal Carolina University and The University of Toledo

William G. Marchal
The University of Toledo

Samuel A. Wathen
Coastal Carolina University
STATISTICAL TECHNIQUES IN BUSINESS & ECONOMICS

Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221Avenue

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Companies, Inc., including, but not limited to, in any network or other electronic storage or
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outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 RJE/RJE 1 0 9 8 7 6 5 4 3 2 1

ISBN 978-0-07-340180-5 (student edition)

MHID 0-07-340180-3 (student edition)
ISBN 978-0-07-732701-9 (instructor’s edition)
MHID 0-07-732701-2 (instructor’s edition)

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Library of Congress Cataloging-in-Publication Data

Lind, Douglas A.
Statistical techniques in business & economics / Douglas A. Lind, William G.
Marchal, Samuel A. Wathen. — 15th ed.
p. cm. — (The McGraw-Hill/Irwin series operations and decision sciences)
Includes index.
ISBN-13: 978-0-07-340180-5 (student ed. : alk. paper)
ISBN-10: 0-07-340180-3 (student ed. : alk. paper)
ISBN-13: 978-0-07-732701-9 (instructor’s ed. : alk. paper)
ISBN-10: 0-07-732701-2 (instructor’s ed. : alk. paper)
1. Social sciences—Statistical methods. 2. Economics—Statistical methods. 3.
Commercial statistics. I. Marchal, William G. II. Wathen, Samuel Adam. III. Title. IV. Title:
Statistical techniques in business and economics.
HA29.M268 2012
519.5—dc22
2010045058

www.mhhe.com

Dedication

To Jane, my wife and best friend, and our sons, their wives,
and our grandchildren: Mike and Sue (Steve and Courtney),
Steve and Kathryn (Kennedy and Jake), and Mark and Sarah
(Jared, Drew, and Nate).

Douglas A. Lind

To John Eric Mouser, his siblings, parents, and Granny.

William G.

Marchal

To my wonderful family: Isaac, Hannah, and Barb.

Samuel A. Wathen

A Note from
Over the years, we have received many compliments on this text and
understand that it’s a favorite among students. We accept that as the
high est compliment and continue to work very hard to maintain that
status. The objective of Statistical Techniques in Business and
Economics is
to provide students majoring in management, marketing, finance,
accounting, economics, and other fields of business administration with
an introductory survey of the many applications of descriptive and infer
ential statistics. We focus on business applications, but we also use
 many exercises and examples that relate to the current world of the col
lege student. A previous course in statistics is not necessary, and the
mathematical requirement is first-year algebra.
In this text, we show beginning students every step needed to be suc
cessful in a basic statistics course. This step-by-step approach
enhances performance, accelerates preparedness, and significantly
improves moti vation. Understanding the concepts, seeing and doing
plenty of examples and exercises, and comprehending the application of
statistical methods in business and economics are the focus of this
book.
The first edition of this text was published in 1967. At that time, locat
ing relevant business data was difficult. That has changed! Today, locat
ing data is not a problem. The number of items you purchase at the gro
cery store is automatically recorded at the checkout counter. Phone
companies track the time of our calls, the length of calls, and the iden tity
of the person called. Credit card companies maintain information on the
number, time and date, and amount of our purchases. Medical devices
automatically monitor our heart rate, blood pressure, and tem perature
from remote locations. A large amount of business information is
recorded and reported almost instantly. CNN, USA Today, and MSNBC,
for example, all have websites that track stock prices with a delay of less
than 20 minutes.
Today, skills are needed to deal with a large volume of numerical
information. First, we need to be critical consumers of information pre
sented by others. Second, we need to be able to reduce large amounts
of information into a concise and meaningful form to enable us to make
effective interpretations, judgments, and decisions. All students have cal
culators and most have either personal computers or access to personal
computers in a campus lab. Statistical software, such as Microsoft Excel
and Minitab, is available on these computers. The commands necessary
to achieve the software results are available in a special section at the
end of each chapter. We use screen captures within the chapters, so the
student becomes familiar with the nature of the software output.
Because of the availability of computers and software, it is no Ionger
necessary to dwelI on calculations. We have replaced many of the calcu
lation examples with interpretative ones, to assist the student in under
standing and interpreting the statistical results. In addition, we now place
more emphasis on the conceptual nature of the statistical topics. While
making these changes, we still continue to present, as best we can, the
key concepts, along with supporting interesting and relevant examples.

iv

the Authors
What’s New in This Fifteenth Edition?
We have made changes to this edition that we think you and your stu
dents will find useful and timely.
• We have revised the learning objectives so they are more specific,
added new ones, identified them in the margin, and keyed them
directly to sections within the chapter.
• We have replaced the key example in Chapters 1 to 4. The new
 example includes more variables and more observations. It presents
a realistic business situation. It is also used later in the text in Chap
ter 13.
• We have added or revised several new sections in various chapters:
Chapter 7 now includes a discussion of the exponential distribution.
Chapter 9 has been reorganized to make it more teachable and
improve the flow of the topics.
Chapter 13 has been reorganized and includes a test of hypothe
sis for the slope of the regression coefficient.
Chapter 17 now includes a graphic test for normality and the chi
square test for normality.
• New exercises and examples use Excel 2007 screenshots and the lat
est version of Minitab. We have also increased the size and clarity of
these screenshots.
• There are new Excel 2007 software commands and updated Minitab
commands at the ends of chapters.
• We have carefully reviewed the exercises within the chapters, those
at the ends of chapters, and in the Review Section. We have added
many new or revised exercises throughout. You can still find and
assign your favorites that have worked well, or you can introduce
fresh examples.
• Section numbers have been added to more clearly identify topics and
more easily reference them.
• The exercises that contain data files are identified by an icon for easy
identification.
• The Data Exercises at the end of each chapter have been revised.
The baseball data has been updated to the most current completed
season, 2009. A new business application has been added that refers
to the use and maintenance of the school bus fleet of the Buena
School District.
• There are many new photos throughout, with updated exercises in
the chapter openers.

How Are Chapters Organized to

student should be able to do after content can be applied to a real-world

Chapter Learning completing the chapter. situation.
Objectives
Chapter Opening
Each chapter begins with a set of learning
objectives designed to provide focus for
Exercise
the chapter and motivate student learning. Introduction to the Topic
These objectives, located in the margins A representative exercise opens the
next to the topic, indicate what the chapter and shows how the chapter
 LO4 Determine the median. LO5 Identify the mode.

LO6 Calculate the geometric mean.

Example Solution
LO7 Explain and apply mea sures of dispersion.

LO8 Compute and explain the variance and the standard deviation.

LO9 Explain Chebyshev’s Theorem and the Empirical Rule.

LO10 Compute the mean and standard deviation of grouped data.

The highly competitive automobile retailing industry in the United States has changed
dramatically in recent years. These changes spurred events such as the:

• bankruptcies of General Motors and Chrysler in 2009.

• elimination of well-known brands such as Pontiac and Saturn.
• closing of over 1,500 local dealerships.
• collapse of consumer credit availability.
Each chapter starts with a review of the • consolidation dealership groups.

impor tant concepts of the previous Traditionally, a local family owned and operated the com
munity dealership, which might have included one or two man ufacturers or brands, like
Describing Data: chapter and pro vides a link to the Pontiac and GMC Trucks or Chrysler and the popular Jeep line. Recently, however,
skillfully managed and well-financed companies have been acquiring local dealer
Numerical Measures
material in the current chapter. This step-
by-step approach increases com
prehension by providing continuity across
the concepts.

Example/Solution
After important concepts are introduced, a
solved example is given to provide a how-
to illustration for students and to show a

relevant business or economics-based

application that helps answer the
question, “What will I use this for?” All
examples provide
a realistic scenario
or application and
The Kentucky Derby is held the first Saturday in May at Churchill
make the math
Downs in Louisville, Kentucky. The race track is one and one-quarter
miles. The table in Exercise 82 shows the winners since 1990, their
margin of victory, the winning time, and the payoff on a $2 bet.
Determine the mean and median for the variables winning time and
payoff on a $2 bet. (See Exercise 82 and LO2 and LO4.)

size and scale

reasonable for

introductory students.

2.1
Introduction

3
Learning Objectives When you have completed this chapter, you will be able to:

LO1 Explain the concept of central tendency.

LO2 Identify and compute the arithmetic mean.

LO3 Compute and interpret the weighted mean.

 Layton Tire and Rubber Company wishes to set a mileage so that no more than 4 percent of the tires
minimum mileage guarantee on its new MX100 tire. will have to be replaced. What minimum guaranteed
Tests reveal the mean mileage is 67,900 with a stan mileage should Layton announce?
dard deviation of 2,050 miles and that the distribu
tion of miles follows the normal probability distrib The facets of this case are shown in the following
ution. Layton wants to set the minimum guaranteed diagram, where X represents the minimum guaran
teed mileage.

Self-Review 3–6 The weights of containers being shipped to Ireland are (in thousands of pounds): 95 103 105 110
Self- 104 105 112 90

Reviews (a) What is the range of the weights?

(b) Compute the arithmetic mean weight.
(c) Compute the mean deviation of the weights.

Self-Reviews are interspersed through out each chapter and

closely patterned after the preceding Examples. They help
students monitor their progress and provide

immediate reinforcement for that particular technique.

vi

Engage Students
and Promote Learning?
reference and review.
Variance and standard deviation are based on squared deviations from the mean.

Statistics in Action The equation for the trend line is:

ˆ
Y 8.109 .08991t
Statistics in Action articles are scattered
Formulas
The slope of the trend line is .
08991. This shows that over
through out the text, usually about two per the 24 quarters the
deseasonalized sales
chapter. They provide unique and increased at a rate of 0.08991
($ million) per quarter, or
interesting applications and historical $89,910 per quarter. The value
of 8.109 is the intercept of the
insights in the field of statistics. trend line on the Y-axis (i.e.,
for t 0).

Statistics in Action
Forecasts are not al
ways correct. The re
ality is that a forecast
may just be a best

Margin Notes
guess as to what will
happen. What are
the reasons forecasts
are not correct? One
expert lists eight

There are more than 300 concise notes in common errors:

the margin. Each is aimed at

reemphasizing the key concepts
presented immediately adja cent to it.

Definitions
Definitions of new
terms or terms unique
to the study of
statistics are set apart
from the text and
highlighted for easy
 The variance is non-negative and is zero only if all observations are the same.

STANDARD DEVIATION The square root of the variance.

Population Variance The formulas for the population variance and the sample
variance are slightly different. The population variance is considered first. (Recall that a
population is the totality of all observations being studied.) The population variance is
found by:

text includes many software examples, using Excel,

MegaStat®, and Minitab.
Formulas that are used for the first time POPULATION VARIANCE [3–8] 2 (X )2

are boxed and numbered for reference. In addition, a

formula card is bound into the back of the text,
which lists all the key formulas.

Exercises
Exercises are included after sections within the
chapter and at the end of the chapter. Section
exercises cover the material studied in the section.
N

Exercises
For Exercises 35–38, calculate the (a) range, (b) arithmetic mean, (c) mean deviation, and (d) interpret the values.

35. There were five customer service representatives on duty at the Electronic Super Store during last weekend’s sale. The

Computer Output numbers of HDTVs

these representatives
sold are: 5, 8, 4, 10,
and 3.
36. The Department of
Statistics at Western
State University offers
eight sections of
basic statistics.
Following are the numbers of students enrolled in these sections: 34, 46, 52, 29, 41, 38, 36, and 28.

The
 BY CHAPTER
Chapter Summary
Each chapter contains a brief summary of the chapter
material, including the vocabulary and the critical
formulas.

Pronunciation

Key
This tool lists the mathematical symbol, its mean

How Does This Text

Chapter Summary
I. A dot plot shows the range of values on the horizontal axis and the number of observa tions for each value on the
vertical axis.
A. Dot plots report the details of each observation.
B. They are useful for comparing two or more data sets.
II. A stem-and-leaf display is an alternative to a histogram.
A. The leading digit is the stem and the trailing digit the leaf.
B. The advantages of a stem-and-leaf display over a histogram include:

vii

Pronunciation Key
SYMBOL MEANING PRONUNCIATION
Lp Location of percentile L sub p First quartile Q sub 1

ing, and how to pronounce it. We believe this will Q1

help the student retain the meaning of the symbol and generally based on three large data sets. These data sets are printed in
enhance course communications. Appendix A in the text and are also on the text’s web site.
These data sets present the students with real-world and more
complex applications.
Chapter Exercises
Generally, the end-of-chapter exercises are the most
Q Third quartile Q sub 3
challenging and integrate the chapter con cepts. The answers
and worked-out solutions for all odd-numbered
exercises appear at the end of the text. For 3

exercises with more than 20 observations, the

data can be found on the text’s website. These Chapter
files are in Excel and Minitab formats. Exercises
27. A sample of students attending
Southeast Florida University is asked
the number of social activities in which they participated last week. The chart below was prepared from the

Data Set sample data.

Exercises 03
124
The last several exercises at
the end of each chapter are
Activities

Data Set Exercises

44. Refer to the Real Estate data, which reports
information on homes sold in the Goodyear, Arizona, area
during the last year. Prepare a report on the selling prices
of the homes. Be sure to answer the following questions
in your report. 45. Refer to the Baseball 2009 data, which reports information on the 30 Major League Base ball teams for the 2009 season. Refer to the variable team salary.
a. Develop a box plot. Estimate the first and the third quartiles. Are there any outliers? b. Develop a scatter diagram with price on the vertical axis and the size of the home on a. Select the variable that refers to the year in which the stadium was built. ( Hint: Subtract the year in which the stadium was built from the current year to find the age of the
the horizontal. Does there seem to be a relationship between these variables? Is the relationship direct or inverse? stadium and work this variable.) Develop a box plot. Are there any outliers? Which sta diums are outliers?
c. Develop a scatter diagram with price on the vertical axis and distance from the center of the city on the horizontal axis. Does there seem to be a relationship between these b. Select the variable team salary and draw a box plot. Are there any outliers? What are the quartiles? Write a brief summary of your analysis. How do the salaries of the New
variables? Is the relationship direct or inverse? York Yankees compare with the other teams?

how to input data.

2. The Minitab commands for the descriptive summary on page 84 are:

Software Commands
Software Commands 1. The Excel Commands for the descriptive statistics on page 69 are:

Software examples using Excel,

MegaStat®, and Minitab are included
throughout the text, but the explanations
of the computer input commands for each
program are placed at the end of the
chapter. This allows students to focus on
the sta tistical techniques rather than on
a. From the CD, retrieve the Applewood data. b. From the menu bar,
select Data and then Data Analysis. Select Descriptive Statistics
and then click OK.

viii

Reinforce
Student
Learning?
seven classes.

Answers to Self-Review 2–4 a. 45

b. .250
c. .306, found by .178 .106 .022

2–5 a.
c. Class frequencies.

The worked-out solutions to the Self-

d. The largest concentration of commissions is $1,500 up to $1,600. The smallest commission is about $1,400 and the largest is about 20 20
$1,800. The typical amount earned is $15,500.
2–3 a. 26 64 73 128 27. So seven classes are

Reviews are provided at the end of each recommended.

b. The interval width should be at least (488
320) 7 24. Class intervals of 25 or 30 feet are

chapter. both reasonable.

BY SECTION
c. If we use a class interval of 25 feet and begin
y

Chapter 2 Answers to Self-Review 40

with a lower limit of 300 feet, eight classes
30
c

2–1 a. Qualitative data, because the customers’ response to the taste test is the name of a n

beverage.
b. Frequency table. It shows the 20
number of people who prefer each
beverage.
c. 10

0
would be necessary. A class interval of
e Cola-Plus Coca-Cola Pepsi Beverage
u

30 feet beginning with 300 feet is also

q

Lemon-Lime
reasonable. This alternative requires only
F

Section
Reviews

After selected
groups of
chapters (1–4, 5–
7, 8 and 9, 10–
12, 13 and 14, 15 A Review of Chapters 1–4
and 16, and 17 and 18), a Sec tion Review is included. Much This section is a review of the major concepts and terms introduced in Chapters 1–4. Chapter 1 began by describing the meaning and purpose of statistics. Next we described the different types of
variables and the four levels of measurement. Chapter 2 was concerned with describing a set of observations by organizing it into a frequency distribution and then portraying the frequency distri bution

like a review before an exam, these include a brief overview of

as a histogram or a frequency polygon. Chapter 3 began by describing measures of loca tion, such as the mean, weighted mean, median, geometric mean, and mode. This chapter also included
measures of dispersion, or spread. Discussed in this section were the range, mean devi ation, variance, and standard deviation. Chapter 4 included several graphing techniques such as dot plots, box
plots, and scatter diagrams. We also discussed the coefficient of skewness, which reports the lack of symmetry in a set of data.

the chapters, a glossary of key terms, and problems for

Throughout this section we stressed the importance of statistical software, such as Excel and Minitab. Many computer outputs in these chapters demonstrated how quickly and effectively a large data set
can be organized into a frequency distribution, several of the measures of location or measures or variation calculated, and the information presented in graphical form.

review. Glossary
 Practice Test
Cases Practice Test
Chapter 1
90 degrees is 10 degrees more than a temperature of 80 degrees, and so on.
Nominal measurement The “lowest” level of measure ment. If data are classified into categories and the order of those categories is
not important, it is the nominal level of E l d ( l f l) d

Descriptive statistics The techniques used to describe the important characteristics of a set of data. This includes organizing the data

The review also includes continuing cases values into a frequency distribution, computing measures of location, and computing mea

and several small cases that let students

make decisions using tools and
techniques from a variety of chapters. Cases
median balances for the four branches. Is there a difference among the branches? Be sure to explain the difference between the mean
and the median in your report.
3. Determine the range and the standard deviation of the checking account balances. What do the first and third quartiles show?
A. Century National Bank Determine the coefficient of skewness and indicate what it shows. Because Mr. Selig does not deal with statistics daily, include a brief
The following case will appear in subsequent review sec tions. Assume that you work in the Planning Department of the Century description and interpretation of the standard devia tion and other measures.
National Bank and report to Ms. Lamberg. You will need to do some data analysis and prepare a short written report. Remember, Mr.
Selig is the president of the bank, so you will want to ensure that your report is complete and accurate. A copy of the data appears in
Appendix A.6. B. Wildcat Plumbing Supply Inc.: Do We Have Gender Differences?
Century National Bank has offices in several cities in the Midwest and the southeastern part of the United States. Mr. Dan Selig, Wildcat Plumbing Supply has served the plumbing needs of Southwest Arizona for more than 40 years. The company was founded by
president and CEO, would like to know the characteristics of his checking account cus tomers. What is the balance of a typical Mr. Terrence St. Julian and is run today by his son Cory. The company has grown from a handful of employees to more than 500
customer? today. Cory is concerned about several positions within the company where he has men and women doing essentially the same job but
How many other bank services do the checking ac count customers use? Do the customers use the ATM ser vice and, if so, how at dif ferent pay. To investigate, he collected the information be low. Suppose you are a student intern in the Accounting Department
often? What about debit cards? Who uses them, and how often are they used? and have been given the task to write a report
To better understand the customers, Mr. Selig asked Ms. Wendy Lamberg, director of planning, to se lect a sample of customers and
prepare a report. To be gin, she has appointed a team from her staff. You are the head of the team and responsible for preparing the
report. You select a random sample of 60 customers. In addition to the balance in each account at the end of last month, you
determine: (1) the number of ATM (auto

The Practice Test includes both objective questions and problems covering
Test is intended the material studied in the section.
to give students
There is a practice test at the end of each review section. The tests are in two parts. The first part contains several ob jective questions, usually in a fill-in-the-blank format. The second part is problems. In
most cases, it should take 30 to 45 minutes to complete the test. The problems require a calculator. Check the answers in the Answer Section in the back of the book.

Part 1—Objective
an idea of 1. The science of collecting, organizing, presenting, analyzing, and interpreting data to assist in making effective deci sions is called . 1. 2. Methods of organizing, summarizing, and presenting data in an
informative way is called . 2.
3. The entire set of individuals or objects of interest or the measurements obtained from all individuals or objects of in terest is called the . 3. 4. List the two types of variables. 4.

content that 5. The number of bedrooms in a house is an example of a . (discrete variable, continuous variable, qualitative variable—pick one) 5. 6. The jersey numbers of Major League Baseball players is an example
of what level of measurement? 6.

might appear on 7. The classification of students by eye color is an example of what level of measurement? 7. 8. The sum of the differences between each value and the mean is always equal to what value? 8. 9. A set of
data contained 70 observations. How many classes would you suggest in order to construct a frequency
distribution? 9. 10. What percent of the values in a data set are always larger than the median? 10. 11. The square of the standard deviation is the . 11. 12. The standard deviation assumes a negative

a test and how value when . (All the values are negative, when at least half the
values are negative, or never—pick one.) 12. 13. Which of the following is least affected by an outlier? (mean, median, or range—pick one) 13.

the test might Part 2—Problems 1. The Russell 2000 index of stock prices increased by the following amounts over the last three years.

be structured. 18% 4% 2%

The Practice
What is the geometric mean increase for the three years?

ix

What Technology
Connects
McGraw-Hill Connect™ Business
Statistics

Less

Managing. More Teaching. Greater

Learning. McGraw-Hill Connect Business Statistics is
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McGraw-Hill Connect Business Statistics helps prepare students for their future by enabling faster

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Instructor Library. The
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Student Progress Tracking. Connect Business Statistics keeps instructors informed about how each
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xi
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xii

Students to Business Statistics?

Assurance-of-Learning Ready
Many educational institutions today are focused on the notion of assurance of learn
ing an important element of some accreditation standards. Statistical Techniques in
Business & Economics is designed specifically to support your assurance-of
learning initiatives with a simple, yet powerful solution.
Each test bank question for Statistical Techniques in Business & Economics
maps to a specific chapter learning outcome/objective listed in the text. You can use
our test bank software, EZ Test and EZ Test Online, or Connect Business Sta tistics
to easily query for learning outcomes/objectives that directly relate to the learning
objectives for your course. You can then use the reporting features of EZ Test to
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xiii

What Software Is Available with This

Text?
MegaStat® for Microsoft Excel®
MegaStat® by J. B. Orris of Butler University is a full-featured Excel add-in that is available on CD and on
the MegaStat website at www.mhhe.com/megastat. It works with Excel 2003, 2007, and 2010. On the web
site, students have 10 days to successfully download and install MegaStat on their local computer. Once
installed, MegaStat will remain active in Excel with no expiration date or time limitations. The software per
forms statistical analyses within an Excel workbook. It does basic functions, such as descriptive statistics,
frequency distributions, and probability calculations as well as hypothesis testing, ANOVA, and regression.
MegaStat output is carefully formatted and ease-of-use features include Auto Expand for quick data selec
tion and Auto Label detect. Since MegaStat is easy to use, students can focus on learning statistics with
out being distracted by the software. MegaStat is always available from Excel’s main menu. Selecting a
menu item pops up a dialog box. MegaStat works with all recent versions of Excel, including Excel 2007
and Excel 2010. Screencam tutorials are included that provide a walkthrough of major business statistics
topics. Help files are built in, and an introductory user’s manual is also included.

Minit

ab®/SPSS®/JMP®
Minitab® Student Version 14, SPSS® Student Version 18.0, and JMP® Student Edition Version 8 are
software tools that are available to help students solve the business statistics exercises in the text. Each
can be packaged with any McGraw-Hill business statistics text.
xiv

What Resources Are Available for

Instructors?
Instructor’s Resources CD-ROM
(ISBN: 0077327055)
This resource allows instructors to conveniently access
the Instruc
tor’s Solutions Manual, Test Bank in Word and EZ Test
formats,
Instructor PowerPoint slides, data files, and data sets.

Online Learning Center:

www.mhhe.com/lind15e
The Online Learning Center (OLC) provides the instructor with a com
plete Instructor’s Manual in Word format, the complete Test Bank in
both Word files and computerized EZ Test format, Instructor Power
Point slides, text art files, an introduction to ALEKS ®, an introduction
to McGraw-Hill Connect Business StatisticsTM, access to Visual Statistics, and more.

All test bank questions are available in an EZ Test electronic format. Included are a number of multiple
choice, true/false, and short-answer questions and problems. The answers to all questions are given, along
with a rating of the level of difficulty, chapter goal the question tests, Bloom’s taxonomy question type, and
the AACSB knowledge category.
 WebCT/Blackboard/eCollege
All of the material in the Online Learning Center is
also available in portable WebCT, Blackboard, or
eCollege content “cartridges” provided free to
adopters of this text.

xv

What Resources Are Available for

Students?
CourseSmart
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eTextbooks available anywhere, offering thousands of the most commonly adopted textbooks from a wide
variety of higher-education publishers. Course Smart eTextbooks are available in one standard online
reader with full text search, notes and highlighting, and
e-mail tools for sharing notes between classmates. Visit
www.CourseSmart.com for more information on
ordering.

ALEKS is an assessment and learning program that

provides
individualized instruction in Business Statistics,
Business Math,
and Accounting. Available online in partnership with
McGraw
Hill/lrwin, ALEKS interacts with students much like a
skilled
human tutor, with the ability to assess precisely a student’s
knowledge and provide instruction on the exact topics the stu
dent is most ready to learn. By providing topics to meet indi
 vidual students’ needs, allowing students to move between
explanation and practice, correcting and analyzing errors, and
defining terms, ALEKS helps students to master course con
tent quickly and easily.

ALEKS also includes a new instructor module with powerful, assignment-driven features and extensive con
tent flexibility. ALEKS simplifies course management and allows instructors to spend less time with admin
istrative tasks and more time directing student learning. To learn more about ALEKS, visit www.aleks.com.

Online Learning Center: www.mhhe.com/lind15e

The Online Learning Center (OLC) provides
students with
the following content:
• Quizzes • *Visual Statistics
• PowerPoint • Data sets/files
• *Narrated PowerPoint • Appendixes
• *Screencam tutorials • Chapter 20
• *Guided Examples
*Premium Content

Student Study Guide (ISBN: 007732711X)

This supplement helps students master the course content. It highlights the important ideas in the text and
pro vides opportunities for students to review the worked-out solutions, review terms and concepts, and
practice.

Basic Statistics Using Excel 2007 (ISBN: 0077327020)

This workbook introduces students to Excel and shows how to apply it to introductory statistics. It
presumes no prior familiarity with Excel or statistics and provides step-by-step directions in a how-to style
using Excel 2007 with text examples and problems.

Business Statistics Center (BSC):

www.mhhe.com/bstat/
The BSC contains links to statistical publications and resources, software downloads, learning aids, sta
tistical websites and databases, and McGraw-Hill/Irwin product websites and online courses.

xvi

Acknowledgments
This edition of Statistical Techniques in Business and Economics is the product of many people: students, colleagues,
reviewers, and the staff at McGraw-Hill/Irwin. We thank them all. We wish to express our sincere gratitude to the survey and
focus group participants, and the reviewers:

Reviewers Ohio University–Athens Anne Davey

Emma Bojinova Northeastern State University
Sung K. Ahn Canisius College Neil Desnoyers
Washington State University–Pullman Giorgio Canarella Drexel University
Scott Bailey California State University–Los Angeles Nirmal Devi
Troy University Lee Cannell Embry Riddle Aeronautical University
Douglas Barrett El Paso Community College David Doorn
University of North Alabama James Carden University of Minnesota–Duluth
Arnab Bisi University of Mississippi Ronald Elkins
Purdue University Mary Coe Central Washington University
Pamela A. Boger St. Mary College of California Vickie Fry
Westmoreland County Community
College Alabama State University Daemen College
Clifford B. Hawley Michael Racer Sue Umashankar
West Virginia University University of Memphis University of Arizona
Lloyd R. Jaisingh Darrell Radson Jesus M. Valencia
Morehead State University Drexel University Slippery Rock University
Mark Kesh Steven Ramsier Joseph Van Matre
University of Texas Florida State University University of Alabama at Birmingham
Ken Kelley Christopher W. Rogers Angie Waits
University of Notre Dame Miami Dade College Gadsden State Community College
Melody Kiang Stephen Hays Russell Bin Wang
California State University–Long Beach Weber State University St. Edwards University
Morris Knapp Martin Sabo Kathleen Whitcomb
Miami Dade College Community College of Denver University of South Carolina
Teresa Ling Farhad Saboori Blake Whitten
Seattle University Albright College University of Iowa
John D. McGinnis Amar Sahay Oliver Yu
Pennsylvania State–Altoona Salt Lake Community College and San Jose State University
Mary Ruth J. McRae University of Utah
Zhiwei Zhu
Appalachian State University Abdus Samad
University of Louisiana
Jackie Miller Utah Valley University
Ohio State University Nina Sarkar
Carolyn Monroe Queensborough Community College
Roberta Schini
Survey and Focus Group
Baylor University
Participants
Valerie Muehsam West Chester University of Pennsylvania Robert
Sam Houston State University Smidt
Nawar Al-Shara
Tariq Mughal California Polytechnic State University American University
University of Utah Gary Smith
Charles H. Apigian
Elizabeth J. T. Murff Florida State University
Middle Tennessee State University
Eastern Washington University Stanley D. Stephenson
Nagraj Balakrishnan
Quinton Nottingham Texas State University–San Marcos Debra
Clemson University
Virginia Polytechnic Institute Stiver
Philip Boudreaux
and State University University of Nevada
University of Louisiana at Lafayette
René Ordonez Bedassa Tadesse
Nancy Brooks
Southern Oregon University University of Minnesota–Duluth
University of Vermont
Robert Patterson Stephen Trouard
Qidong Cao
Penn State University Mississippi College Winthrop University
Joseph Petry Elzbieta Trybus
University of Illinois at Urbana-Champaign California State University–Northridge Daniel
xvii
Tammy Prater Tschopp

Acknowledgments
Margaret M. Capen Nicholas R. Farnum Pacific Union College
East Carolina University California State University, Cindy L. Hinz
Robert Carver Fullerton St. Bonaventure University
Stonehill College K. Renee Fister Johnny C. Ho
Jan E. Christopher Murray State University Columbus State University
Delaware State University Gary Franko Shaomin Huang
James Cochran Siena College Lewis-Clark State College
Louisiana Tech University Maurice Gilbert J. Morgan Jones
Farideh Dehkordi-Vakil Troy State University University of North Carolina at Chapel Hill
Western Illinois University Deborah J. Gougeon Michael Kazlow
Brant Deppa University of Scranton Pace University
Winona State University Christine Guenther John Lawrence
Bernard Dickman Pacific University California State University, Fullerton
Hofstra University Charles F. Harrington Sheila M. Lawrence
Casey DiRienzo University of Southern Indiana Rutgers, The State University of New
Elon University Jersey
Craig Heinicke
Erick M. Elder Baldwin-Wallace College Jae Lee
University of Arkansas at Little Rock State University of New York at New Paltz
George Hilton
Rosa Lemel University of Northern Iowa Debra Stiver
Kean University Paul Paschke University of Nevada, Reno
Robert Lemke Oregon State University Ron Stunda
Lake Forest College Srikant Raghavan Birmingham-Southern College
Francis P. Mathur Lawrence Technological University Edward Sullivan
California State Polytechnic University, Surekha K. B. Rao Lebanon Valley College
Pomona Indiana University Northwest Dharma Thiruvaiyaru
Ralph D. May Timothy J. Schibik Augusta State University
Southwestern Oklahoma State University of Southern Indiana Daniel Tschopp
University Carlton Scott Daemen College
Richard N. McGrath University of California, Irvine Bulent Uyar
Bowling Green State University Samuel L. Seaman University of Northern Iowa
Larry T. McRae Baylor University Lee J. Van Scyoc
Appalachian State University Scott J. Seipel University of Wisconsin–Oshkosh
Dragan Miljkovic Middle Tennessee State University Stuart H. Warnock
Southwest Missouri State University Sankara N. Sethuraman Tarleton State University
John M. Miller Augusta State University Mark H. Witkowski
Sam Houston State University Daniel G. Shimshak University of Texas at San Antonio
Cameron Montgomery University of Massachusetts, Boston William F. Younkin
Delta State University Robert K. Smidt University of Miami
Broderick Oluyede California Polytechnic State University Shuo Zhang
Georgia Southern University William Stein State University of New York, Fredonia
Andrew Paizis Texas A&M University Zhiwei Zhu
Queens College Robert E. Stevens University of Louisiana at Lafayette
Andrew L. H. Parkes University of Louisiana at Monroe

Their suggestions and thorough reviews of the previous edition and the manuscript of this edi
tion make this a better text.
Special thanks go to a number of people. Debra K. Stiver, University of Nevada–Reno, reviewed
the manuscript and page proofs, checking text and exercises for accuracy. Joan McGrory, South
west Tennessee Community College, checked the Test Bank for accuracy. Professor Kathleen Whit
comb of the University of South Carolina prepared the study guide. Dr. Samuel Wathen of Coastal
Carolina University prepared the quizzes and the Test Bank. Professor René Ordonez of Southern
Oregon University prepared the PowerPoint presentation, many of the screencam tutorials, and the
guided examples in Connect. Ms. Denise Heban and the authors prepared the Instructor’s Manual.
We also wish to thank the staff at McGraw-Hill. This includes Steve Schuetz, Executive Edi tor;
Wanda Zeman, Senior Development Editor; Diane Nowaczyk, Senior Project Manager; and oth ers
we do not know personally, but who have made valuable contributions.

xviii

Enhancements to Statistical
Techniques in Business &
Economics, 15e
Changes Made in All Chapters and system.

Major Changes to Individual Chapters: • Updated screens for Excel 2007, Minitab, and MegaStat.

• Changed Goals to Learning Objectives and identified the location in • Revised the core example in Chapters 1–4 to reflect the current
the chapter where the learning objective is discussed. economic conditions as it relates to automobile dealers. This
example is also discussed in Chapter 13 and 17.
• Added section numbering to each main heading.
• Added a new section in Chapter 7 describing the expo nential
• Identified exercises where the data file is included on the text website.
distribution.
• Revised the Major League Baseball data set to reflect the latest
• Added a new section in Chapter 13 describing a test to determine
complete season, 2009.
whether the slope of the regression line dif fers from zero.
• Revised the Real Estate data to ensure the outcomes are more
• Added updates and clarifications throughout.
realistic to the current economy.
• Added a new data set regarding school buses in a pub lic school
Chapter 1 What Is Statistics? and 82 (Kentucky Derby payoffs). Exer cises 30 to 34 were revised to
include the most recent data.
• New photo and chapter opening exercise on the “Nook” sold by
Barnes and Nobel.
Chapter 4 Describing Data: Displaying and
• Census updates on U.S. population, sales of Boeing air craft, and Exploring Data
Forbes data in “Statistics in Action” feature.
• New exercise 22 with 2010 salary data for the New York Yankees.
• New chapter exercises 17 (data on 2010 vehicle sales) and 19
• New chapter exercise 36 (American Society of Peri Anesthesia nurses
(ExxonMobil sales prior to Gulf oil spill).
component membership).

Chapter 2 Describing Data: Frequency Tables, Chapter 5 A Survey of Probability Concepts

Frequency Distributions, and Graphic • New exercise 58 (number of hits in a Major League Baseball game),
Presentation 59 (winning a tournament), and 60 (win ning Jeopardy).
• New data on Ohio State Lottery expenses for 2009 with new Excel
2007 screenshot. Chapter 6 Discrete Probability
• New exercises 45 (brides picking their wedding site) and 46 (revenue Distributions • No changes.
in the state of Georgia).
Chapter 7 Continuous Probability Distributions
Chapter 3 Describing Data: Numerical • New Self-Review 7–4 and 7–5 involving coffee temperature.
Measures • New exercise 26 (SAT Reasoning Test).
• New data on averages in the introduction: average num ber of TV sets
• New exercise 29 (Hurdle Rate for economic investment).
per home, average spending on a wed ding, and the average price
of a theater ticket. • New section and corresponding problems on the expo nential
probability distribution.
• A new description of the calculation and interpretation of the
population mean using the distance between exits on I-75 through • Several glossary updates and clarifications.
Kentucky.
• A new description of the median using the time manag ing Facebook
Chapter 8 Sampling Methods and the Central
accounts. Limit Theorem
• Updated example/solution on the population in Las Vegas. • No changes.

• Update “Statistics in Action” on the highest batting aver age in Major

League Baseball for 2009. It was Joe Mauer of the Minnesota Twins,
Chapter 9 Estimation and Confidence Intervals
with an average of .365. • A new Statistics in Action describing EPA fuel economy. • New
separate section on point estimates.
• New chapter exercises 22 (real estate commissions), 67 (laundry
habits), 77 (public universities in Ohio), 72 (blood sugar numbers), • Integration and application of the central limit theorem. xix

Enhancements to Statistical
Techniques in Business &
Economics, 15e
• A revised discussion of determining the confidence interval for the breakfast), and 60 (daily water usage).
population mean.
• Expanded section on calculating sample size.
Chapter 11 Two-Sample Tests of Hypothesis
• New exercise 12 (milk consumption), 33 (cost of apart ments in • New exercises 15 (2010 New York Yankee salaries), 37 (Consumer
Milwaukee), 47 (drug testing in the fashion industry), and 48 (survey Confidence Survey), and 39 (pets as listeners).
of small-business owners regarding healthcare).
Chapter 12 Analysis of Variance
• The discussion of the finite correction factor has been relocated in the
chapter. • Revised the names of airlines in the one-way ANOVA example.
• New exercise 30 (flight times between Los Angeles and San
Chapter 10 One-Sample Tests of Hypothesis Francisco).
• New exercises 17 (daily water consumption), 19 (number of text
messages by teenagers), 35 (household size in the United States), 49 Chapter 13 Correlation and Linear
(Super Bowl coin flip results), 54 (failure of gaming industry slot Regression • Rewrote the introduction section to the chapter.
machines), 57 (study of the percentage of Americans that do not eat
 • Added a new section using the Applewood Auto Group data from • Updated economic data.
chapters 1 to 4.
• Added a section on testing the slope of a regression line.
Chapter 17 Nonparametric Methods:
Goodness-of-Fit Tests
• Added discussion of the regression ANOVA table with Excel
examples. • Reworked the Example/Solution on the chi-square goodness-of-fit
test with equal cell frequencies (favorite meals of adults).
• Rewrote and relocated the section on the coefficient of determination.
• Added a section and corresponding examples describing the
• Updated exercise 60 (movie box office amounts). Chapter goodness-of-fit test for testing whether sample data are from a
normal population.
14 Multiple Regression Analysis • Added a section and corresponding examples using graphical
methods for testing whether sample data are from a normal
• Rewrote the section on evaluating the multiple regression equation. population.
• More emphasis on the regression ANOVA table.
• Enhanced the discussion of the p-value in decision making. Chapter 18 Nonparametric Methods:
• Added a separate section on qualitative variables in regression Analysis of Ranked Data
analysis. • Revised the Example/Solution for the Kruskal-Wallis test (waiting
• Moved the “Stepwise Regression” section to improve the sequence of times in the emergency room).
topics. • Revised the Example/Solution for the Spearman coeffi cient of rank
• Added a summary problem at the end of the chapter to review the correlation (comparison of recruiter and plant scores for trainees).
major concepts.
Chapter 19 Statistical Process Control
Chapter 15 Index Numbers and Quality Management
• Updated census and economic data. • Updated the section on the Malcolm Baldrige National Quality Award.
• Reworked and updated the section on Six Sigma.
Chapter 16 Time Series and Forecasting

xx

Brief Contents

1 What Is Statistics? 1
2 Describing Data: Frequency Tables, Frequency
Distributions, and Graphic Presentation 21
3 Describing Data: Numerical Measures 57
4 Describing Data: Displaying and Exploring 8 Sampling Methods and the Central Limit
Data 102 5 A Survey of Probability Concepts Theorem 265 9 Estimation and Confidence
144 Intervals 297
6 Discrete Probability Distributions 186 10 One-Sample Tests of Hypothesis 333
7 Continuous Probability Distributions 222 11 Two-Sample Tests of Hypothesis 371
12 Analysis of Variance 410 Introduction to Decision Theory On the website:
Review Section
13 Correlation and Linear Regression 461
14 Multiple Regression Analysis 512
15 Index Numbers 573
Review Section Review Section
16 Time Series and Forecasting 604
17 Nonparametric Methods: Goodness-of-Fit
Tests 648 18 Nonparametric Methods: Analysis
Review Section Review Section Review Section Review
of Ranked Data 680 19 Statistical Process
Control and Quality Management 720 20 An
Section

www.mhhe.com/lind15e
Appendixes: Data Sets, Tables, Answers 753
Photo Credits 829
Index 831

xxi

Contents
1.8 Computer Applications 14
Chapter Summary 16
Chapter Exercises 16
Data Set Exercises 19
Answers to Self-Review 20

Chapter

A Note from the Authors iv 2 Describing Data: Frequency

Chapter
Tables, Frequency
1 What Is Statistics? 1 Distributions, and Graphic
1.1 Introduction 2
Presentation 21
2.1 Introduction 22
1.2 Why Study Statistics? 2
2.2 Constructing a Frequency Table 23
1.3 What Is Meant by Statistics? 4
Relative Class Frequencies 23
1.4 Types of Statistics 6
Graphic Presentation of Qualitative Data 24 Exercises 28
Descriptive Statistics 6
2.3 Constructing Frequency Distributions: Quantitative
Inferential Statistics 6
Data 29
1.5 Types of Variables 8
2.4 A Software Example 34
1.6 Levels of Measurement 9
2.5 Relative Frequency Distribution 34
Nominal-Level Data 10
Exercises 35
Ordinal-Level Data 11
Interval-Level Data 11
Ratio-Level Data 12
Exercises 14
1.7 Ethics and Statistics 14
 2.6 Graphic Presentation of a Frequency Distribution 36 Exercises 62
Histogram 36 3.5 The Weighted Mean 63
Frequency Polygon 38
Exercises 64
Exercises 41 3.6 The Median 64
Cumulative Frequency Distributions 42 Exercises 44 3.7 The Mode 65
Chapter Summary 46
Exercises 67
Chapter Exercises 46 3.8 Software Solution 69
Data Set Exercises 53
3.9 The Relative Positions of the Mean, Median, and
Software Commands 54 Mode 69
Answers to Self-Review 55 Exercises 71
3.10 The Geometric Mean 72
Chapter
3 Describing Data: Numerical Exercises 73
3.11 Why Study Dispersion? 74
Measures 57
3.12 Measures of Dispersion 75
3.1 Introduction 58
Range 75
3.2 The Population Mean 58 Mean Deviation 76
3.3 The Sample Mean 60 Exercises 79
3.4 Properties of the Arithmetic Variance and Standard Deviation 79
Mean 61

xxii

Exercises 82 4.2 Dot Plots 103

Contents xxiii A Review of Chapters 1–4 137 4.3 Stem-and-Leaf Displays 105
Exercises 109
4.4 Measures of Position 111
3.13 Software Solution 84
Quartiles, Deciles, and Percentiles 111
Exercises 84 Exercises 115
3.14 Interpretation and Uses of the Standard Deviation 85 Box Plots 116
Chebyshev’s Theorem 85 Exercises 118
The Empirical Rule 86
4.5 Skewness 119
Exercises 87
Exercises 123
3.15 The Mean and Standard Deviation of Grouped
Data 88 4.6 Describing the Relationship between Two Variables 124

The Arithmetic Mean 88 Exercises 127

Standard Deviation 89 Chapter Summary 129
Exercises 91 Pronunciation Key 129
3.16 Ethics and Reporting Results 92 Chapter Exercises 130
Chapter Summary 92 Data Set Exercises 135
Pronunciation Key 94 Software Commands 135
Chapter Exercises 94 Answers to Self-Review 136
Data Set Exercises 99 Glossary 137
Software Commands 100 Problems 139
Answers to Self-Review 100 Cases 141
Practice Test 142
Chapter
4 Describing Data: Displaying and Chapter
Exploring Data 102 5 A Survey of Probability
4.1 Introduction 103
Concepts 144
 5.1 Introduction 145 6.6 Hypergeometric Probability Distribution 204 Exercises 207
5.2 What Is a Probability? 146 6.7 Poisson Probability Distribution 207
5.3 Approaches to Assigning Probabilities 148 Exercises 212
Classical Probability 148 Chapter Summary 212
Empirical Probability 149
Chapter Exercises 213
Subjective Probability 150
Data Set Exercises 218
Exercises 152
Software Commands 219
5.4 Some Rules for Computing
Probabilities 153 Answers to Self-Review 221
Rules of Addition 153
Exercises 158
Chapter
Rules of Multiplication 159
5.5 Contingency Tables 162
7 Continuous Probability
5.6 Tree Diagrams 164 Distributions 222
Exercises 166 7.1 Introduction 223
5.7 Bayes’ Theorem 167 7.2 The Family of Uniform Probability
Distributions 223
Exercises 170
Exercises 226
5.8 Principles of Counting 171
7.3 The Family of Normal Probability
The Multiplication Formula 171
Distributions 227
The Permutation Formula 172
The Combination Formula 174 7.4 The Standard Normal Probability
Distribution 229
Exercises 176
Applications of the Standard Normal
Chapter Summary 176
Distribution 231
Pronunciation Key 177 The Empirical Rule 231
Chapter Exercises 178 Exercises 233
Data Set Exercises 182 Finding Areas under the Normal
Software Commands 183 Curve 233

Answers to Self-Review 184 Exercises 236

Exercises 239

Chapter Exercises 241

6 Discrete Probability
Distributions 186 7.5 The Normal Approximation to the Binomial 242
6.1 Introduction 187
Continuity Correction Factor 242
6.2 What Is a Probability Distribution? 187 How to Apply the Correction Factor 244 Exercises 245
xxiv Contents
7.6 The Family of Exponential
Distributions 246

6.3 Random Variables 189 Exercises 250

Discrete Random Variable 190 Chapter Summary 251

Continuous Random Variable 190 Chapter Exercises 252
6.4 The Mean, Variance, and Standard Data Set Exercises 256
Deviation of a Discrete Probability Software Commands 256
Distribution 191
Answers to Self-Review 257
Mean 191
Variance and Standard Deviation 191
Exercises 193 A Review of Chapters 5–7 258
6.5 Binomial Probability Distribution 195 Glossary 259
How Is a Binomial Probability Problems 260
Computed? 196 Cases 261
Binomial Probability Tables 198
Practice Test 263
Exercises 201
Cumulative Binomial Probability
Distributions 202 Chapter
Exercises 203 8 Sampling Methods and the
 Central Limit Theorem 265 8.1 Chapter Summary 323

Introduction 266 Chapter Exercises 323

8.2 Sampling Methods 266 Data Set Exercises 327
Reasons to Sample 266 Software Commands 328
Simple Random Sampling 267 Answers to Self-Review 329
Systematic Random Sampling 270
Stratified Random Sampling 270
Cluster Sampling 271
A Review of Chapters 8 and 9 329
Exercises 272
Glossary 330
8.3 Sampling “Error” 274
Problems 331
8.4 Sampling Distribution of the Sample Mean 275
Case 332
Exercises 278
Practice Test 332
8.5 The Central Limit Theorem 279
Exercises 285
8.6 Using the Sampling Distribution of the Sample Mean Chapter
286
Exercises 289
10 One-Sample Tests of
Chapter Summary 289 Hypothesis 333
Pronunciation Key 290 10.1 Introduction 334
Chapter Exercises 290 10.2 What Is a Hypothesis? 334
Data Set Exercises 295 10.3 What Is Hypothesis Testing? 335
Hypothesis 335
Software Commands 295
Step 1: State the Null Hypothesis (H0 ) and the Alternate
Answers to Self-Review 296 Hypothesis (H1) 336
Step 2: Select a Level of Significance 337 Step 3:
Select the Test Statistic 338
Step 4: Formulate the Decision Rule 338
Chapter Step 5: Make a Decision 339
Contents xxv 10.4 Five-Step Procedure for Testing a 10.5 One-Tailed and Two-Tailed Tests of
Significance 340
10.6 Testing for a Population Mean: Known Population
9 Estimation and Confidence Standard Deviation 341

Intervals 297 A Two-Tailed Test 341

A One-Tailed Test 345
9.1 Introduction 298
10.7 p-Value in Hypothesis Testing 345
9.2 Point Estimate for a Population
Exercises 347
Mean 298
10.8 Testing for a Population Mean: Population Standard
9.3 Confidence Intervals for a Population Mean 299 Deviation Unknown 348
Population Standard Deviation Known 300 A Computer Exercises 352
Simulation 304
A Software Solution 353
Exercises 305
Exercises 355
Population Standard Deviation
Unknown 306 10.9 Tests Concerning Proportions 356
Exercises 312 Exercises 359
9.4 A Confidence Interval for 10.10 Type II Error 359
a Proportion 313 Exercises 362
Exercises 316 Chapter Summary 362
9.5 Choosing an Appropriate Sample Pronunciation Key 363
Size 316
Chapter Exercises 364
Sample Size to Estimate a Population
Data Set Exercises 368
Mean 317
Sample Size to Estimate a Population Software Commands 369
Proportion 318 Answers to Self-Review 369
Exercises 320
9.6 Finite-Population Correction
Factor 320 Chapter
Exercises 322 11 Two-Sample Tests of
 Hypothesis 371 Answers to Self-Review 454

11.1 Introduction 372

A Review of Chapters 10–12 455
11.2 Two-Sample Tests of Hypothesis:
Glossary 455
Independent Samples 372
Problems 456
Exercises 377
Cases 459
11.3 Two-Sample Tests about Proportions 378 Exercises
Practice Test 459
381
11.4 Comparing Population Means
with Unknown Population Standard
Deviations 382
Chapter
Equal Population Standard Deviations 383 Exercises
386
13 Correlation and Linear
Unequal Population Standard Deviations 388 Regression 461
xxvi Contents 13.1 Introduction 462
13.2 What Is Correlation Analysis? 463
13.3 The Correlation Coefficient 465
Exercises 391
Exercises 470
11.5 Two-Sample Tests of Hypothesis:
Dependent Samples 392 13.4 Testing the Significance of the Correlation Coefficient
472
11.6 Comparing Dependent and Independent Samples
395 Exercises 475
Exercises 398 13.5 Regression Analysis 476
Chapter Summary 399 Least Squares Principle 476
Drawing the Regression Line 479
Pronunciation Key 400
Exercises 481
Chapter Exercises 400
13.6 Testing the Significance of the Slope 483 Exercises 486
Data Set Exercises 406
13.7 Evaluating a Regression Equation’s Ability to Predict
Software Commands 407
486
Answers to Self-Review 408
The Standard Error of Estimate 486
The Coefficient of Determination 487
Exercises 488
Chapter Relationships among the Correlation

12 Analysis of Variance 410 12.1 Coefficient, the Coefficient of Determination, and the
Standard Error of Estimate 488
Introduction 411
Exercises 490
12.2 The F Distribution 411
13.8 Interval Estimates of Prediction 490
12.3 Comparing Two Population
Assumptions Underlying Linear
Variances 412
Regression 490
Exercises 415 Constructing Confidence and Prediction
12.4 ANOVA Assumptions 416 Intervals 492
12.5 The ANOVA Test 418 Exercises 494
Exercises 425 13.9 Transforming Data 495
12.6 Inferences about Pairs of Treatment Means 426 Exercises 497
Exercises 429 Chapter Summary 498
12.7 Two-Way Analysis of Variance 430 Exercises Pronunciation Key 499
434 Chapter Exercises 500
12.8 Two-Way ANOVA with Interaction 435 Data Set Exercises 509
Interaction Plots 436 Software Commands 510
Hypothesis Test for Interaction 437 Answers to Self-Review 511
Exercises 440
Chapter Summary 442
Pronunciation Key 443 Chapter
Chapter Exercises 443 14 Multiple Regression
Data Set Exercises 451
Analysis 512
Software Commands 452
 14.1 Introduction 513 Simple Average of the Price Indexes 579 Simple
Aggregate Index 580
14.2 Multiple Regression Analysis 513
15.6 Weighted Indexes 581
Laspeyres Price Index 581
Paasche Price Index 582
Exercises 517 Fisher’s Ideal Index 584
Contents xxvii Exercises 578 Exercises 584
15.7 Value Index 585

14.3 Evaluating a Multiple Regression Exercises 586

Equation 519 15.8 Special-Purpose Indexes 587
The ANOVA Table 519 Consumer Price Index 588
Multiple Standard Error of Estimate 520 Producer Price Index 589
Coefficient of Multiple Determination 521 Adjusted Dow Jones Industrial Average (DJIA) 589 S&P 500
Coefficient of Determination 522 Index 590
Exercises 523 Exercises 591
14.4 Inferences in Multiple Linear 15.9 Consumer Price Index 592
Regression 523
Special Uses of the Consumer Price
Global Test: Testing the Multiple Regression Model 524 Index 592
Evaluating Individual Regression
15.10 Shifting the Base 595
Coefficients 526
Exercises 597
Exercises 530
Chapter Summary 598
14.5 Evaluating the Assumptions of Multiple Regression 531
Chapter Exercises 599
Linear Relationship 532
Variation in Residuals Same for Large and Software Commands 602
Answers to Self-Review 603
Yˆ
Small Values 533
Distribution of Residuals 534
Multicollinearity 534 Chapter
Independent Observations 537
14.6 Qualitative Independent Variables 537 14.7 Regression
16 Time Series and
Models with Interaction 540 14.8 Stepwise Regression 542 Forecasting 604
Exercises 544 16.1 Introduction 605

14.9 Review of Multiple Regression 546 Chapter 16.2 Components of a Time Series 605

Summary 551 Secular Trend 605

Cyclical Variation 606
Pronunciation Key 553 Seasonal Variation 607
Chapter Exercises 553 Irregular Variation 608
Data Set Exercises 565 16.3 A Moving Average 608
Software Commands 566 16.4 Weighted Moving Average 611
Answers to Self-Review 567 Exercises 614
16.5 Linear Trend 615
A Review of Chapters 13 and 14 567 16.6 Least Squares Method 616
Glossary 568 Exercises 618
Problems 569 16.7 Nonlinear Trends 618
Cases 570 Exercises 620
Practice Test 571 16.8 Seasonal Variation 621
Determining a Seasonal Index 621
xxviii Contents
Chapter
15 Index Numbers 573 Exercises 626
15.1 Introduction 574 16.9 Deseasonalizing Data 627
15.2 Simple Index Numbers 574 Using Deseasonalized Data to
15.3 Why Convert Data to Indexes? 577 15.4 Forecast 628

Construction of Index Numbers 577 Exercises 630

15.5 Unweighted Indexes 579 16.10 The Durbin-Watson Statistic 631

 Exercises 636
Chapter Summary 636
18 Nonparametric Methods:
Chapter Exercises 636 Analysis of Ranked Data 680 18.1
Introduction 681
Data Set Exercise 643
18.2 The Sign Test 681
Software Commands 643
Exercises 685
Answers to Self-Review 644
Using the Normal Approximation to the
Binomial 686
A Review of Chapters 15 and 16 645 Exercises 688
Glossary 646 Testing a Hypothesis about a Median 688 Exercises
Problems 646 689
Practice Test 647 18.3 Wilcoxon Signed-Rank Test for
Dependent Samples 690
Exercises 693
18.4 Wilcoxon Rank-Sum Test for Independent Samples 695
Chapter
Exercises 698
17 Nonparametric Methods: 18.5 Kruskal-Wallis Test: Analysis of Variance by Ranks
698
Goodness-of-Fit Tests 648 17.1
Introduction 649 Exercises 702
17.2 Goodness-of-Fit Test: Equal Expected Frequencies 18.6 Rank-Order Correlation 704
649 Testing the Significance of rs 706
Exercises 654 Exercises 707
17.3 Goodness-of-Fit Test: Unequal Expected Frequencies Chapter Summary 709
655
Pronunciation Key 710
17.4 Limitations of Chi-Square 657 Chapter Exercises 710
Exercises 659 Data Set Exercises 713
17.5 Testing the Hypothesis That a Software Commands 713
Distribution of Data Is from a Normal
Population 659 Answers to Self-Review 714

17.6 Graphical and Statistical Approaches to Confirm

Normality 662 A Review of Chapters 17 and 18 716
Exercises 665 Glossary 716
17.7 Contingency Table Analysis 667 Problems 717
Exercises 671 Cases 718
Chapter Summary 672 Practice Test 718
Pronunciation Key 672
Chapter Exercises 672
Data Set Exercises 677
Chapter

Software Commands 678 19 Statistical Process Control

Answers to Self-Review 679 and Quality Management 720
19.1 Introduction 721
19.2 A Brief History of Quality Control 721 Six Sigma 724

Chapter 19.3 Causes of Variation 724

Contents xxix

19.4 Diagnostic Charts 725 Exercises 736

Pareto Charts 725 19.7 Attribute Control Charts 737
Fishbone Diagrams 727 Percent Defective Charts 737
Exercises 728 c-Bar Charts 740
19.5 Purpose and Types of Quality Control Charts 729 Exercises 741
Control Charts for Variables 729 19.8 Acceptance Sampling 742
Range Charts 733 Exercises 746
19.6 In-Control and Out-of-Control Chapter Summary 746
Situations 734
 Pronunciation Key 747
Chapter Exercises 747
Software Commands 751
What Is Statistics?

1
Answers to Self-Review 752

On the website: www.mhhe.com/lind15e

Chapter
20 An Introduction to Decision
Theory
20.1 Introduction
20.2 Elements of a Decision
20.3 A Case Involving Decision Making under Conditions of
Uncertainty
Payoff Table
Expected Payoff
Goals
Exercises
Learning Objectives When you have completed
When you have completed this chapter, you will be
Opportunity Loss
this chapter, you will be able to:
Exercises able to:
Expected Opportunity Loss
Exercises LO1 List ways that statistics
1 Organize data into a fre quency distribution.
20.4 Maximin, Maximax, and Minimax Regret Strategies
is used.
20.5 Value of Perfect Information
20.6 Sensitivity Analysis 2 Portray a frequency distribu
Exercises
LO2 Know the differences tion in a histogram, frequency
between descriptive and polygon, and cumulative fre
20.7 Decision Trees inferential statistics.
Chapter Summary quency polygon.
Chapter Exercises LO3 Understand the differ ences between a sample and a
3 Present data using such graphical techniques as line
Answers to Self-Review
population.

Appendixes 753
Appendix A: Data Sets 754
Appendix B: Tables 764
Appendix C: Answers to Odd-Numbered Chapter
Exercises and Review Exercises and Solutions
to Practice Tests 782
Photo Credits 829
Index 831
 charts.

FPO charts, bar charts, and pie

LO4 Explain the difference
between qualitative and quan
titative variables.

LO5 Compare the differences

between discrete and continu
ous variables.

LO6 Recognize the levels of

measurement in data.

Barnes & Noble stores recently began selling the Nook. With this
device, you can download over 1,500 books electronically and read
the book on a small monitor instead of purchasing the book. Assume
you have the number of Nooks sold each day for the last month at the
Barnes & Noble store at the Market Commons Mall in Riverside,
California. Describe a condition in which this information could be
considered a sample. Illustrate a second situation in which the same
data would be regarded as a population. (See Exercise 11 and LO3.)
2 Chapter 1

1.1 Introduction
More than 100 years ago, H. G. Wells, an English author and historian, suggested
that one day quantitative reasoning will be as necessary for effective citizenship as
the ability to read. He made no mention of business because the Industrial Revo
lution was just beginning. Mr. Wells could not have been more correct. While “busi
ness experience,” some “thoughtful guesswork,” and “intuition” are key
 attributes of successful managers, today’s business problems tend to
be too complex for this type of decision making alone.
One of the tools used to make decisions is statistics. Statistics is
used not only by businesspeople; we all also apply statistical concepts
in our lives. For example, to start the day you turn on the shower and
let it run for a few moments. Then you put your hand in the shower to
sample the temperature and decide to add more hot water or more cold
water, or determine that the temperature is just right and then enter the
shower. As a second example, suppose you are at Costco Wholesale
and wish to buy a frozen pizza. One of the pizza makers has a stand,
and they offer a small wedge of their pizza. After sampling the pizza, you
decide whether to purchase the pizza or not. In both the shower and pizza
examples, you make a decision and select a course of action based on a sample.
Businesses face similar situations. The Kellogg Company must ensure that the
mean amount of Raisin Bran in the 25.5-gram box meets label specifications. To do
so, it sets a “target” weight somewhat higher than the amount specified on the label.
Each box is then weighed after it is filled. The weighing machine reports a distribu
tion of the content weights for each hour as well as the number “kicked-out” for
being under the label specification during the hour. The Quality Inspection Depart
ment also randomly selects samples from the production line and checks the qual ity
of the product and the weight of the contents of the box. If the mean product weight
differs significantly from the target weight or the percent of kick-outs is too large, the
process is adjusted.
As a student of business or economics, you will need basic knowledge and
skills to organize, analyze, and transform data and to present the information. In this
text, we will show you basic statistical techniques and methods that will develop
your ability to make good personal and business decisions.

LO1 List ways that statistics is used. What are the differences in the sta tistics courses taught in the
Engineering College, the Psychology or Sociology Departments
in the Liberal Arts College, and the College of Business? The
biggest difference is the examples used. The course content is
basically the same. In the College of Business we are interested
in such things as profits, hours worked, and wages.
Psychologists are interested in test scores, and engineers are
interested in how many units are manufactured on a particular
machine. However, all three are interested in what is a typical
value and how much variation there is in the data. There may
also be a difference in the level of mathematics required. An
engi neering statistics course usually requires calculus.
Statistics courses in colleges of business and education usually
teach the course at a more applied level. You should be able to
handle the mathematics in this text if you have completed high
school algebra.
Examples of why we study statistics
So why is statistics required in so many majors? The first
reason is that numer ical information is everywhere. Look in the
1.2 Why Study Statistics? newspapers (USA Today), news maga zines (Time, Newsweek,
U.S. News and World Report), business magazines (Busi
If you look through your university catalog, you will find that nessWeek, Forbes), or general interest magazines (People),
statistics is required for many college programs. Why is this so? women’s magazines
What Is Statistics? 3

(Ladies Home Journal or Elle), or sports magazines (Sports Illustrated, ESPN The
Magazine), and you will be bombarded with numerical information. Here are some
examples:

• The average increase in weekly earnings, in 1982–84 dollars, from January 2009
to January 2010 was $8.32.
• In January 2010 the average amount of credit card debt per household was
$7,394. This is a decrease from $7,801 in July 2009. A 2010 Federal Reserve
survey found that 75 percent of U.S. households have at least one credit card.
• The following table summarizes the number of commercial aircraft manufactured
by Boeing, Inc. between 2006 and 2009.
 Sales of Boeing Aircraft
Type of Aircraft
Year 737 747 767 777 787 Total
2006 733 72 8 77 160 1,050
2007 850 25 36 143 369 1,423
2008 488 4 29 54 94 669
2009 197 5 7 30 24 263

• Go
to
the

following website: www.youtube.com/watch?v=pMcfrLYDm2U. It provides

interesting numerical information about countries, business, geogra phy, and
politics.
• USA Today (www.usatoday.com) prints “Snapshots” that are the result of sur
veys conducted by various research organizations, foundations, and the federal
government. The following chart summarizes what recruiters look for in hiring
seasonal employees.

USA TODAY Snapshot

By Jae Yang and Paul Trap, USA TODAY

Source: SnagAJob.com
Reprinted with permission (April 29, 2010) USA TODAY.

A second reason for taking a statistics course is that statistical techniques are
used to make decisions that affect our daily lives. That is, they affect our personal
welfare. Here are a few examples:

• Insurance companies use statistical analysis to set rates for home, automobile,
life, and health insurance. Tables are available showing estimates that a 20-year
old female has 60.25 years of life remaining, an 87-year-old woman 4.56 years
remaining, and a 50-year-old man 27.85 years remaining. Life insurance premi
ums are established based on these estimates of life expectancy. These tables
are available at www.ssa.gov/OACT/STATS/table4cb.html. [This site is sensitive
to capital letters.]
4 Chapter 1
 • The

Environmental Protection Agency is interested in the water quality of Lake Erie

as well as other lakes. They periodically take water samples to establish
the level of contamination and maintain the level of quality.
• Medical researchers study the cure rates for diseases using different drugs and
different forms of treatment. For example, what is the effect of treating a cer
tain type of knee injury surgically or with physical therapy? If you take an aspirin
each day, does that reduce your risk of a heart attack?
Statistics in Action statistics: (1) data are everywhere, (2) statistical techniques are
We call your atten tion to a feature used to make many decisions that affect our lives, and (3) no
title—Statistics in Action. Read each one carefully to get an matter what your career, you will make professional decisions
appreciation of the wide application of statistics in man agement, that involve data. An understanding of statistical methods will
economics, nursing, law enforce ment, sports, and other disciplines. help you make these decisions more effectively.
• In 2009, Forbes published a list of the richest Ameri cans. William
Gates, founder of Microsoft Corpo ration, is the rich est. His net worth
is estimated at
$59.0 billion.
1.3 What Is Meant by
(www.forbes.com) • In 2009, the four largest American companies,
ranked by revenue, were Walmart, Exxon Mobil, Chevron, and General Statistics?
Electric. (www.
forbes.com)
How do we define the word statistics? We encounter it
frequently in our everyday language. It really has two meanings.
• In the United
States, a typical In the more common usage, statistics refers to numerical
high school gradu ate earns $1.2 mil lion in his or her lifetime, a typical information. Examples include the average starting salary of
college graduate with a bachelor’s degree earns college graduates, the number of deaths due to alcoholism last
$2.1 million, and a typical college year, the change in the Dow Jones Industrial Average from
graduate with a yesterday to today, and the number of home runs hit by the
master’s degree
Chicago Cubs during the 2010 season. In these examples,
earns $2.5 million. (usgovinfo.about. com/library/weekly
/aa072602a.htm) statistics are a value or a percentage. Other examples include:
A third reason for taking a statistics course is that the
• The typical automobile in the United States travels 11,099
knowledge of statistical methods will help you understand how
miles per year, the typical bus 9,353 miles per year, and the
decisions are made and give you a better understanding of how
typical truck 13,942 miles per year. In Canada, the
they affect you.
corresponding information is 10,371 miles for automobiles,
No matter what line of work you select, you will find yourself 19,823 miles for buses, and 7,001 miles for trucks.
faced with deci sions where an understanding of data analysis
• The mean time waiting for technical support is 17 minutes.
is helpful. In order to make an informed decision, you will need
• The mean length of the business cycle since 1945 is 61
to be able to:
months.
1. Determine whether the existing information is adequate or
The above are all examples of statistics. A collection of
additional informa tion is required.
numerical information is called statistics (plural).
2. Gather additional information, if it is needed, in such a way
We frequently present statistical information in a graphical form.
that it does not pro vide misleading results.
A graph is often useful for capturing reader attention and to
3. Summarize the information in a useful and informative
portray a large amount of information. For example, Chart 1–1
manner. 4. Analyze the available information.
shows Frito-Lay volume and market share for the major snack
5. Draw conclusions and make inferences while assessing the
and potato chip categories in supermarkets in the United
risk of an incorrect conclusion.
States. It requires only a quick glance to discover there were
The statistical methods presented in the text will provide you nearly 800 million pounds of potato chips sold and that Frito-
with a framework for the decision-making process. Lay sold 64 percent of that total. Also note that Frito-Lay has 82
In summary, there are at least three reasons for studying percent of the corn chip market.
What Is Statistics? 5

Potato Chips 64% 82%

Tortilla Chips Pretzels 75%

Extruded Snacks Corn Chips 26%

56%
Frito-Lay Rest of Industry

0 100 200 300 400 500 600 700 800

Millions of Pounds

CHART 1–1 Frito-Lay Volume and Share of Major Snack Chip

Categories in U.S. Supermarkets

The subject of statistics, as we will explore it in this text, has a much broader
meaning than just collecting and publishing numerical information. We define sta
tistics as:

STATISTICS The science of collecting, organizing, presenting, analyzing,

and interpreting data to assist in making more effective decisions.

As the definition suggests, the first step in investigating a problem is to collect

relevant data. They must be organized in some way and perhaps presented in a
chart, such as Chart 1–1. Only after the data have been organized are we then able
to analyze and interpret them. Here are some examples of the need for data
collection.

• Research analysts for Merrill Lynch evaluate many facets of a

particular stock before making a “buy” or “sell” recommendation.
They collect the past sales data of the company and estimate
future earnings. Other factors, such as the projected worldwide
demand for the company’s products, the strength of the com
petition, and the effect of the new union–management contract,
are also considered before making a recommendation.
• The marketing department at Colgate-Palmolive Co., a manufac
turer of soap products, has the responsibility of making recom
mendations regarding the potential profitability of a newly devel
oped group of face soaps having fruit smells, such as grape,
orange, and pineapple. Before making a final decision, the mar
keters will test it in several markets. That is, they may advertise
and sell it in Topeka, Kansas, and Tampa, Florida. On the basis
of test marketing in these two regions, Colgate-Palmolive will
make a decision whether to market the soaps in the entire
country.
• Managers must make decisions about the quality of their product or service. For
example, customers call software companies for technical advice when they are
not able to resolve an issue regarding the software. One measure of the quality
of customer service is the time a customer must wait for a technical consultant
to answer the call. A software company might set a target of one minute as the
typical response time. The company would then collect and ana lyze data on the
response time. Does the typical response time differ by day of the week or time
of day? If the response times are increasing, managers might decide to increase
the number of technical consultants at particular times of the day or week.
6 Chapter 1

1.4 Types of Statistics

The study of statistics is usually divided into two categories: descriptive statistics
and inferential statistics.

LO2 Know the differences between descriptive and DESCRIPTIVE STATISTICS Methods of organizing,
inferential statistics. summarizing, and presenting data in an informative way.
Descriptive Statistics
The definition of statistics given earlier referred to “organizing, For instance, the United States government reports the
presenting, analyz ing . . . data.” This facet of statistics is population of the United States was 179,323,000 in 1960;
usually referred to as descriptive statistics. 203,302,000 in 1970; 226,542,000 in 1980; 248,709,000 in
1990; 265,000,000 in 2000; and 308,400,000 in 2010. This LO3 Understand the differences between a sample and a
informa tion is descriptive statistics. It is descriptive statistics if population.
we calculate the percent age growth from one decade to the
next. However, it would not be descriptive sta tistics if we used
these to estimate the population of the United States in the year Reasons for sampling
2020 or the percentage growth from 2010 to 2020. Why? The What Is Statistics? 7
reason is these sta tistics are not being used to summarize past
populations but to estimate future pop ulations. The following
are some other examples of descriptive statistics. decimals, and percentages; and only 77 percent of high school
seniors correctly totaled the cost of a salad, burger, fries, and a
• There are a total of 46,837 miles of interstate highways in the cola on a restaurant menu. Since these are inferences about a
United States. The interstate system represents only 1 percent
population (all high school seniors) based on sample data, we
of the nation’s total roads but carries more than 20 percent of refer to them as inferential statistics. You might think of
the traffic. The longest is I-90, which stretches from Boston to
inferential statistics as a “best guess” of a population value
Seattle, a distance of 3,099 miles. The shortest is I-878 in New based on sample information.
York City, which is 0.70 of a mile in length. Alaska does not
have any interstate highways, Texas has the most interstate
miles at 3,232, and New York has the most interstate routes INFERENTIAL STATISTICS The methods used to estimate a
with 28. property of a population on the basis of a sample.
• The average person spent $103.00 on traditional Valentine’s
Day merchandise in 2010. This is an increase of $0.50 from
Note the words population and sample in the definition of
2009. As in previous years, men will spend nearly twice the
inferential statistics. We often make reference to the population
amount women spend on the holiday. The average man spent
of 308.8 million people living in the United States or the 1,336.1
$135.35 to impress the people in his life while women only
million people living in China. However, in statistics the word
spent $72.28. Family pets will also feel the love, the average
population has a broader meaning. A population may consist
person spending $3.27 on their furry friends, up from $2.17 last
of individuals—such as all the stu dents enrolled at Utah State
year.
University, all the students in Accounting 201, or all the CEOs
Masses of unorganized data—such as the census of from the Fortune 500 companies. A population may also consist
population, the weekly earnings of thousands of computer of objects, such as all the Cobra G/T tires produced at Cooper
programmers, and the individual responses of 2,000 registered Tire and Rubber Company in the Find lay, Ohio, plant; the
voters regarding their choice for president of the United States accounts receivable at the end of October for Lorrange Plastics,
— are of little value as is. However, statistical techniques are Inc.; or auto claims filed in the first quarter of 2010 at the
available to organize this type of data into a meaningful form. Northeast Regional Office of State Farm Insurance. The
Data can be organized into a frequency dis tribution. (This measurement of interest might be the scores on the first
procedure is covered in Chapter 2.) Various charts may be examination of all students in Accounting 201, the tread wear of
used to describe data; several basic chart forms are also the Cooper Tires, the dollar amount of Lorrange Plastics’s
presented in Chapter 4. accounts receivable, or the amount of auto insur ance claims at
Specific measures of central location, such as the mean, State Farm. Thus, a population in the statistical sense does not
describe the central value of a group of numerical data. A always refer to people.
number of statistical measures are used to describe how
closely the data cluster about an average. These measures of
POPULATION The entire set of individuals or objects of interest
central tendency and dispersion are discussed in Chapter 3.
or the measurements obtained from all individuals or objects of
interest.
Inferential Statistics
The second type of statistics is inferential statistics—also To infer something about a population, we usually take a
called statistical infer ence. Our main concern regarding sample from the population.
inferential statistics is finding something about a population
from a sample taken from that population. For example, a
recent survey showed only 46 percent of high school seniors SAMPLE A portion, or part, of the population of interest.
can solve problems involving fractions,
Why take a sample instead of studying every member of the
population? A sam ple of registered voters is necessary
because of the prohibitive cost of contacting millions of voters
before an election. Testing wheat for moisture content destroys
the wheat, thus making a sample imperative. If the wine tasters
tested all the wine, none would be available for sale. It would be
physically impossible for a few marine biologists to capture and
tag all the seals in the ocean. (These and other reasons for
sampling are discussed in Chapter 8.)
As noted, using a sample to learn something about a population
is done exten sively in business, agriculture, politics, and
government, as cited in the following examples:

• Television networks constantly monitor the popularity of their

programs by hir ing Nielsen and other organizations to sample • Gamous and Associates, a public accounting firm, is
the preferences of TV viewers. For example, in a sample of 800 conducting an audit of Pronto Printing Company. To begin, the
prime-time viewers, 320, or 40 percent, indi cated they watched accounting firm selects a random sam ple of 100 invoices and
American Idol on Fox last week. These program ratings are checks each invoice for accuracy. There is at least one error on
used to set advertising rates or to cancel programs. five of the invoices; hence the accounting firm estimates that 5
per cent of the population of invoices contain at least one error.
8 Chapter 1

• A random sample of 1,260 marketing graduates from four-year schools showed

their mean starting salary was $42,694. We therefore estimate the
mean starting salary for all marketing graduates of four-year institutions to be
$42,694.
The relationship between a sample and a population is portrayed below. For
example, we wish to estimate the mean miles per gallon of SUVs. Six SUVs are
selected from the population. The mean MPG of the six is used to estimate MPG for
the population.

Population All items Items selected from the population

Sample

We strongly suggest you do the Self-Review exercise. method of solution are given at the end of the chapter. You can
Following is a self-review problem. There are a number of them find the answer to the following Self-Review on page 19. We
interspersed throughout each chapter. They test your recommend that you solve each one and then check your
comprehension of the preceding material. The answer and answer.

Self-Review 1–1 The answers are at the end of the chapter.

The Atlanta-based advertising firm, Brandon and Associates, asked a sample of 1,960
consumers to try a newly developed chicken dinner by Boston Market. Of the 1,960
sampled, 1,176 said they would purchase the dinner if it is marketed.
(a) What could Brandon and Associates report to Boston Market regarding acceptance of
the chicken dinner in the population?
(b) Is this an example of descriptive statistics or inferential statistics? Explain.

1.5 Types of Variables

There are two basic types of variables: (1) qualitative and (2) quantitative (see Chart
Qualitative variable qualitative variables are gender, religious affiliation, type of
automobile owned, state of birth, and eye color. When the data
are qualitative, we are usually interested in how many or what
LO4 Explain the difference between qualitative and percent fall in each category. For example, what percent of the
quantitative variables. population has blue eyes? What per cent of the total number of
1–2). When the characteristic being studied is nonnumeric, it is cars sold last month were SUVs? Qualitative data are often
called a qualita tive variable or an attribute. Examples of summarized in charts and bar graphs (Chapter 2).
What Is Statistics? 9
 Types of Variables

Qualitative Quantitative

• Brand of PC
• Marital status • Hair color • TV sets owned
Discrete Continuous

CHART 1–2 Summary of the Types of Variables

• Children in a family
• Amount of income tax paid
• Strokes on a golf hole • Weight of a student • Yearly rainfall in Tampa, FL

Quantitative variable Discrete variables can assume only certain values, and there
are “gaps” between the values. Examples of discrete variables
are the number of bedrooms in a house (1, 2, 3, 4, etc.), the
LO5 Compare the differences between discrete and continuous num ber of cars arriving at Exit 25 on I-4 in Florida near Walt
variables. Disney World in an hour (326, 421, etc.), and the number of
students in each section of a statistics course (25 in section A,
42 in section B, and 18 in section C). We count, for example,
the number of cars arriving at Exit 25 on I-4, and we count the
number of statistics stu dents in each section. Notice that a
home can have 3 or 4 bedrooms, but it can not have 3.56
bedrooms. Thus, there is a “gap” between possible values.
Typically, discrete variables result from counting.
Observations of a continuous variable can assume any value
within a specific range. Examples of continuous variables are
the air pressure in a tire and the weight of a shipment of
tomatoes. Other examples are the amount of raisin bran in a
box and the duration of flights from Orlando to San Diego.
Grade point average (GPA) is a continuous variable. We could
LO6 Recognize the levels of measurement in data. report the GPA of a particular student as 3.2576952. The usual
practice is to round to 3 places—3.258. Typically, continuous
variables result from measuring.

1.6 Levels of Measurement

Data can be classified according to levels of measurement. The
level of measurement of the data dictates the calculations that
can be done to summarize and present the data. It will also
deter mine the statistical tests that should be performed. For
example, there are six colors of candies in a bag of M&M’s.
When the variable studied can be reported numerically, the Suppose we assign brown a value of 1, yellow 2, blue 3, orange
variable is called a quantitative variable. Examples of 4, green 5, and red 6. From a bag of candies, we add the
quantitative variables are the balance in your checking account, assigned color val ues and divide by the number of candies and
the ages of company presidents, the life of an automobile bat report that the mean color is 3.56. Does this mean that the
tery (such as 42 months), and the number of children in a average color is blue or orange? Of course not! As a second
family. example, in a high school track meet there are eight
Quantitative variables are either discrete or continuous. competitors in the 400-meter run. We
10 Chapter 1
 report the
order of finish
and that the
mean finish is
4.5. What
does the
mean fin ish
tell us?
Nothing! In both of these instances, we have not properly used the level of
measurement.
There are actually four levels of measurement: nominal, ordinal, interval, and
ratio. The lowest, or the most primitive, measurement is the nominal level. The high
est, or the level that gives us the most information about the observation, is the ratio
level of measurement.
Statistics in Action 1. The variable of interest is divided into categories or
Where did statistics get its start? In 1662 John Graunt pub lished an
article
called “Natural and Political Observa tions Made upon Bills of
Mortality.” The author’s “obser vations” were the re sult of a study
and analysis of a weekly church publication called “Bill of Mor tality,”
which listed births, christenings, and deaths and their causes. Graunt
real ized that the Bills of Mortality repre
sented only a frac tion of all births and deaths in London. However, he
used the data to reach broad conclusions about the impact of disease,
such as the plague, on the general popu lation. His logic is an example
of statistical inference. His analy sis and interpretation of the data are
thought to mark the start of statistics.

Nominal-Level Data
For the nominal level of measurement, observations of a
qualitative variable can only be classified and counted. There is
no particular order to the labels. The classifica tion of the six
colors of M&M’s milk chocolate candies is an example of the
outcomes. 2. There is no natural order to the outcomes.
nomi nal level of measurement. We simply classify the candies
by color. There is no nat ural order. That is, we could report the USA TODAY Snapshot
brown candies first, the orange first, or any of the colors first.
Gender is another example of the nominal level of 03/15/2007-updated 11:51 PM ET
measurement. Suppose we count the number of students
entering a football game with a student ID and report how many Workers say they
are men and how many are women. We could report either the prefer higher salaries
to any other perks.
men or the women first. For the nominal level, the only
measurement involved consists of counts. Sometimes, for
better reader understanding, we convert these counts to
percentages. The following “Snapshot” from USA Today shows
the results from a survey of workers. The variable of interest is
“Perks” and there are five pos sible outcomes: “More money,”
“Better healthcare,” “Better retirement,” “Work/ family balance,”
and, we will assume, “Other.” The outcome “Other” is not
shown on the chart, but is necessary to make the percent of
respondents total 100 percent. There is no natural order to the
outcomes, we could have put “Better healthcare” first instead
of “More money.”
To process the data, such as the information regarding worker
perks, or infor mation on gender, employment by industry, or
state of birth of a student, we often numerically code the
information. That is, we assign students from Alabama a code
of 1, Alaska a code of 2, Arizona as 3, and so on. Using this
procedure, Wiscon sin is coded 49 and Wyoming 50. This
coding facilitates counting by a computer. However, because
we have assigned numbers to the various categories, this does
not give us license to manipulate the numbers. To explain, 1 2
does not equal 3; that is, Alabama Alaska does not yield
Arizona.
To summarize, the nominal level has the following properties:
By Anne R. Carey and Chad Palmer, USA Today Reprinted with permission (March 15, 2007) USA TODAY.
Source: hudson-index.com
What Is Statistics? 11

Ordinal-Level Data
The next higher level of data is the ordinal level. Table 1–1 lists the student ratings
of Professor James Brunner in an Introduction to Finance course. Each student in
the class answered the question “Overall, how did you rate the instructor in this
class?” The variable rating illustrates the use of the ordinal scale of measurement.
One clas sification is “higher” or “better” than the next one. That is, “Superior” is
better than “Good,” “Good” is better than “Average,” and so on. However, we are
not able to distinguish the magnitude of the differences between groups. Is the
difference between “Superior” and “Good” the same as the difference between
“Poor” and “Infe rior”? We cannot tell. If we substitute a 5 for “Superior” and a 4 for
“Good,” we can conclude that the rating of “Superior” is better than the rating of
“Good,” but we can not add a ranking of “Superior” and a ranking of “Good,” with
the result being mean ingful. Further we cannot conclude that a rating of “Good”
(rating is 4) is necessarily twice as high as a “Poor” (rating is 2). We can only
conclude that a rating of “Good” is better than a rating of “Poor.” We cannot
conclude how much better the rating is.

TABLE 1–1 Rating of a Finance Professor

Rating Frequency
Superior 6
Good 28
Average 25
Poor 12
Inferior 3

Another example of ordinal-level data is the Homeland Security

Advisory System. The Department of Homeland Security publishes this
information regarding the risk of terrorist activity to federal, state, and
local authorities and to the American people. The five risk levels from
lowest to highest, including a description and color codes, are shown to
the left.
This is an example of the ordinal scale because we know the order
or the ranks of the risk levels—that is, orange is higher than yellow—but
the amount of the difference in risk is not necessarily the same. To put
it another way, the difference in the risk level between yellow and
orange is not necessarily the same as between green and blue.
In summary, the properties of the ordinal level of data are:
1. Data classifications are represented by sets of labels or names (high,
medium, low) that have relative values.
2. Because of the relative values, the data classified can be ranked or
ordered.

Interval-Level Data
The interval level of measurement is the next highest level. It includes all the
characteristics of the ordinal level, but in addition, the difference between val ues is
a constant size. An example of the interval level of measurement is tem perature.
Suppose the high temperatures on three consecutive winter days in Boston are 28,
31, and 20 degrees Fahrenheit. These temperatures can be eas ily ranked, but we
can also determine the difference between temperatures. This is possible because 1
degree Fahrenheit represents a constant unit of measure ment. Equal differences
between two temperatures are the same, regardless of their position on the scale.
That is, the difference between 10 degrees Fahrenheit
12 Chapter 1

and 15 degrees is 5, the difference between 50 and 55 degrees is also 5 degrees. It

is also important to note that 0 is just a point on the scale. It does not repre sent the
absence of the condition. Zero degrees Fahrenheit does not represent the absence
of heat, just that it is cold! In fact 0 degrees Fahrenheit is about 18 degrees on the
Celsius scale.
Another example of the interval scale of measurement is women’s dress sizes.
Listed below is information on several dimensions of a standard U.S. women’s
dress.

Size Bust (in) Waist (in) Hips (in)

8 32 24 35
10 34 26 37
12 36 28 39
14 38 30 41
16 40 32 43
18 42 34 45
20 44 36 47
22 46 38 49
24 48 40 51
26 50 42 53
28 52 44 55

Why is the “size” scale an interval measurement? Observe as the size changes by 2
units (say from size 10 to size 12 or from size 24 to size 26) each of the
measurements increases by 2 inches. To put it another way, the intervals are the
same.
There is no natural zero point for dress size. A “size 0” dress does not have
“zero” material. Instead, it would have a 24-inch bust, 16-inch waist, and 27-inch
hips. Moreover, the ratios are not reasonable. If you divide a size 28 by a size 14,
you do not get the same answer as dividing a size 20 by 10. Neither ratio is equal to
two as the “size” number would suggest. In short, if the distances between the
numbers make sense, but the ratios do not, then you have an interval scale of
measurement.
The properties of the interval-level data are:
1. Data classifications are ordered according to the amount of the characteristic
they possess.
2. Equal differences in the characteristic are represented by equal differences in the
measurements.

Ratio-Level Data
Practically all quantitative data is recorded on the ratio level of measurement. The
ratio level is the “highest” level of measurement. It has all the characteristics of the
interval level, but in addition, the 0 point is meaningful and the ratio between two
numbers is meaningful. Examples of the ratio scale of measurement include wages,
units of production, weight, changes in stock prices, distance between branch
offices, and height. Money is a good illustration. If you have zero dollars, then you
have no money. Weight is another example. If the dial on the scale of a correctly
calibrated device is at 0, then there is a complete absence of weight. The ratio of
two numbers is also meaningful. If Jim earns $40,000 per year selling insur ance and
Rob earns $80,000 per year selling cars, then Rob earns twice as much as Jim.
Table 1–2 illustrates the use of the ratio scale of measurement. It shows the
incomes of four father-and-son combinations.
What Is Statistics? 13

TABLE 1–2 Father–Son Income Combinations

Name Father Son

Lahey $80,000 $ 40,000
Nale 90,000 30,000
Rho 60,000 120,000
 Steele 75,000 130,000

Observe that the senior Lahey earns twice as much as his son. In the Rho fam
ily, the son makes twice as much as the father.
In summary, the properties of the ratio-level data are:
1. Data classifications are ordered according to the amount of the characteristics
they possess.
2. Equal differences in the characteristic are represented by equal differences in the
numbers assigned to the classifications.
3. The zero point is the absence of the characteristic and the ratio between two
numbers is meaningful.

Chart 1–3 summarizes the major characteristics of the various levels of

measurement.

Levels of Measurement

Nominal Ordinal Interval Ratio

Data may only be classified values

Data are ranked Meaningful difference between Meaningful 0 point and ratio between values

• Jersey numbers of football • Your rank in class • Team • Temperature • Dress size • Number of sales calls made
players • Make of car standings in the Pac-10 • Number of patients seen • Distance to class

CHART 1–3 Summary of the Characteristics for Levels of Measurement

Self-Review 1–2 What is the level of measurement reflected by the following data? (a) The age of each person
in a sample of 50 adults who listen to one of the 1,230 talk radio stations in the United States is:

35 29 41 34 44 46 42 42 37 47
30 36 41 39 44 39 43 43 44 40
47 37 41 27 33 33 39 38 43 22
44 39 35 35 41 42 37 42 38 43
35 37 38 43 40 48 42 31 51 34

(b) In a survey of 200 luxury-car owners, 100 were from California, 50 from New York, 30
from Illinois, and 20 from Ohio.
14 Chapter 1

Exercises
The answers to the odd-numbered exercises are at the end of the book.

1. What is the level of measurement for each of the following variables?

a. Student IQ ratings.
b. Distance students travel to class.
c. The jersey numbers of a sorority soccer team.
d. A classification of students by state of birth.
e. A summary of students by academic class—that is, freshman, sophomore, junior, and
senior.
f. Number of hours students study per week.
2. What is the level of measurement for these items related to the newspaper business? a.
The number of papers sold each Sunday during 2011.
b. The departments, such as editorial, advertising, sports, etc.
c. A summary of the number of papers sold by county.
d. The number of years with the paper for each employee.
3. Look in the latest edition of USA Today or your local newspaper and find examples of each
 level of measurement. Write a brief memo summarizing your findings.
4. For each of the following, determine whether the group is a sample or a population. a.
The participants in a study of a new cholesterol drug.
b. The drivers who received a speeding ticket in Kansas City last month.
c. Those on welfare in Cook County (Chicago), Illinois.
d. The 30 stocks reported as a part of the Dow Jones Industrial Average.

1.7 Ethics and Statistics

Following events such as Wall Street money manager Bernie Madoff’s Ponzi
scheme, which swindled billions from investors, and financial misrepresentations by
Enron and Tyco, business students need to understand that these events were
based on the misrepresentation of business and financial data. In each case, people
within each organization reported financial information to investors that indicated the
companies were performing much better than the actual situation. When the true
financial infor mation was reported, the companies were worth much less than
advertised. The result was many investors lost all or nearly all of the money they put
into these companies.
The article “Statistics and Ethics: Some Advice for Young Statisticians,” in The
American Statistician 57, no. 1 (2003), offers guidance. The authors advise us to prac
tice statistics with integrity and honesty, and urge us to “do the right thing” when
collecting, organizing, summarizing, analyzing, and interpreting numerical
information. The real contribution of statistics to society is a moral one. Financial
analysts need to provide information that truly reflects a company’s performance so
as not to mis lead individual investors. Information regarding product defects that
may be harmful to people must be analyzed and reported with integrity and honesty.
The authors of The American Statistician article further indicate that when we
practice statistics, we need to maintain “an independent and principled point-of-
view.”
As you progress through this text, we will highlight ethical issues in the collec
tion, analysis, presentation, and interpretation of statistical information. We also
hope that, as you learn about using statistics, you will become a more informed
consumer of information. For example, you will question a report based on data that
do not fairly represent the population, a report that does not include all relevant
statistics, one that includes an incorrect choice of statistical measures, or a
presentation that introduces the writer’s bias in a deliberate attempt to mislead or
misrepresent.

1.8 Computer Applications

Computers are now available to students at most colleges and universities.
Spreadsheets, such as Microsoft Excel, and statistical software packages, such as
Minitab, are available in most computer labs. The Microsoft Excel package is
What Is Statistics? 15

bundled with many home computers. In this text, we use both Excel and Minitab for
the applications. We also use an Excel add-in called MegaStat. This add-in gives
Excel the capability to produce additional statistical reports.
The following example shows the application of computers in statistical analy
sis. In Chapters 2, 3, and 4, we illustrate methods for summarizing and describing
data. An example used in these chapters refers to profit, as well as other variables,
on each of the 180 vehicles sold last month by the Applewood Auto Group. The
following Excel output reveals, among other things, (1) there were 180 vehicles sold,
the mean (average) profit per vehicle was $1,843.17, and the amount of profit ranged
from $294 to $3,292.
 The following output is from the Minitab system. It contains much of the same
information.

Had we used a calculator to arrive at these measures and others needed to fully
analyze the selling prices, hours of calculation would have been required. The
16 Chapter 1

likelihood of an error in arithmetic is high when a large number of values are con
cerned. On the other hand, statistical software packages and spreadsheets can
provide accurate information in seconds.
At the option of your instructor, and depending on the software system avail
able, we urge you to apply a computer package to the exercises in the Data Set
Exercises section in each chapter. It will relieve you of the tedious calculations and
allow you to concentrate on data analysis.

Chapter Summary
I. Statistics is the science of collecting, organizing, presenting, analyzing, and interpreting
data to assist in making more effective decisions.
II. There are two types of statistics.
A. Descriptive statistics are procedures used to organize and summarize data.
B. Inferential statistics involve taking a sample from a population and making estimates
about a population based on the sample results.
1. A population is an entire set of individuals or objects of interest or the measure
ments obtained from all individuals or objects of interest.
 2. A sample is a part of the population.
III. There are two types of variables.
A. A qualitative variable is nonnumeric.
1. Usually we are interested in the number or percent of the observations in each
category.
2. Qualitative data are usually summarized in graphs and bar charts.
B. There are two types of quantitative variables and they are usually reported numerically.
1. Discrete variables can assume only certain values, and there are usually gaps
between values.
2. A continuous variable can assume any value within a specified range.
IV. There are four levels of measurement.
A. With the nominal level, the data are sorted into categories with no particular order to the
categories.
B. The ordinal level of measurement presumes that one classification is ranked higher than
another.
C. The interval level of measurement has the ranking characteristic of the ordinal level of
measurement plus the characteristic that the distance between values is a con
stant size.
D. The ratio level of measurement has all the characteristics of the interval level, plus there
is a 0 point and the ratio of two values is meaningful.

Chapter Exercises
5. Explain the difference between qualitative and quantitative variables. Give an example of
qualitative and quantitative variables.
6. Explain the difference between a sample and a population.
7. Explain the difference between a discrete and a continuous variable. Give an example of
each not included in the text.
8. For the following questions, would you collect information using a sample or a popula
tion? Why?
a. Statistics 201 is a course taught at a university. Professor A. Verage has taught nearly
1,500 students in the course over the past 5 years. You would like to know the aver
age grade for the course.
b. As part of a research project, you need to report the average profitability of the num
ber one corporation in the Fortune 500 for the past 10 years.
c. You are looking forward to graduation and your first job as a salesperson for one of five
large pharmaceutical corporations. Planning for your interviews, you will need to
know about each company’s mission, profitability, products, and markets.
What Is Statistics? 17

d. You are shopping for a new MP3 music player such as the Apple iPod. The manu
facturers advertise the number of music tracks that can be stored in the memory. Usu
ally, the advertisers assume relatively short, popular music to estimate the number of
tracks that can be stored. You, however, like Broadway musical tunes and they are
much longer. You would like to estimate how many Broadway tunes will fit on your
MP3 player.
9. Exits along interstate highways were formerly numbered successively from the western or
southern edge of a state. However, the Department of Transportation has recently
changed most of them to agree with the numbers on the mile markers along the highway.
a. What level of measurement were data on the consecutive exit numbers? b. What level
of measurement are data on the milepost numbers?
c. Discuss the advantages of the newer system.
10. A poll solicits a large number of college undergraduates for information on the following
variables: the name of their cell phone provider (AT&T, Verizon, and so on), the numbers
of minutes used last month (200, 400, for example), and their satisfaction with the ser vice
(Terrible, Adequate, Excellent, and so forth). What is the data scale for each of these three
variables?
11. Barnes & Noble stores recently began selling the Nook. With this device, you can
download over 1,500 books electronically and read the book on a small monitor instead
of purchasing the book. Assume you have the number of Nooks sold each day for the last
month at the Barnes & Noble store at the Market Commons Mall in Riverside, California.
Describe a condition in which this information could be considered a sample. Illustrate a
second situation in which the same data would be regarded as a population.
12. Utilize the concepts of sample and population to describe how a presidential election is
unlike an “exit” poll of the electorate.
13. Place these variables in the following classification tables. For each table, summarize your
observations and evaluate if the results are generally true. For example, salary is reported
as a continuous quantitative variable. It is also a continuous ratio-scaled variable. a.
Salary
 b. Gender
c. Sales volume of MP3 players
d. Soft drink preference
e. Temperature
f. SAT scores
g. Student rank in class
h. Rating of a finance professor
i. Number of home computers

Discrete Variable Continuous Variable

Qualitative

Quantitative a. Salary

Discrete Continuous
Nominal Ordinal

Interval

Ratio a. Salary
18 Chapter 1

14. Using data from such publications as the Statistical Abstract of the United States, The
World Almanac, Forbes, or your local newspaper, give examples of the nominal, ordinal,
interval, and ratio levels of measurement.
15. The Struthers Wells Corporation employs more than 10,000 white collar workers in its
sales offices and manufacturing facilities in the United States, Europe, and Asia. A sam
ple of 300 of these workers revealed 120 would accept a transfer to a location outside the
United States. On the basis of these findings, write a brief memo to Ms. Wanda Carter,
Vice President of Human Services, regarding all white collar workers in the firm
and their willingness to relocate.
16. AVX Stereo Equipment, Inc., recently began a “no-hassles” return policy. A sample of 500
customers who had recently returned items showed 400 thought the policy was fair, 32
thought it took too long to complete the transaction, and the rest had no opin ion. On the
basis of this information, make an inference about customer reaction to the new policy.
17. The following table reports the number of cars and light duty trucks sold by the eight
largest automakers in the first two months of 2010 compared to the first two months of
2009.

Year-to-Date Sales
Through February Through February
Manufacturer 2010 2009
General Motors Corp. 287,242 252,701
Ford Motor Company 249,514 185,825
Chrysler LLC 141,592 146,207
Toyota Motor Sales USA Inc. 198,823 226,870
American Honda Motor Co. Inc. 148,150 142,606
Nissan North America Inc. 132,761 108,133
Hyundai Motor America 64,507 55,133
Mazda Motor of America Inc. 32,748 31,821

a. Compare the total sales for the eight automakers. Has there been an increase or a
decrease in sales for 2010 compared to the same period in 2009?
b. Compute the market share for each of the companies. Has there been a large change
in the market share for any of the companies?
 c. Compare the percentage increases for each of the eight companies. What significant
changes are there from 2009 to 2010 for each of the companies?
18. The following chart depicts the average amounts spent by consumers on holiday gifts.

Write a brief report summarizing the amounts spent during the holidays. Be sure to
include the total amount spent, and the percent spent by each group.
What Is Statistics? 19

19. The following chart depicts the earnings in billions of dollars for ExxonMobil for the period
2003 until 2009. Write a brief report discussing the earnings at ExxonMobil during the
period. Was one year higher than the others? Did the earnings increase, decrease, or stay
the same over the period?
 Data Set Exercises
20. Refer to the Real Estate data at the back of the text, which report information on homes
sold in the Goodyear, Arizona, area last year. Consider the following variables: selling
price, number of bedrooms, township, and distance from the center of the city. a. Which
of the variables are qualitative and which are quantitative?
b. Determine the level of measurement for each of the variables.
21. Refer to the Baseball 2009 data, which report information on the 30 Major League Base
ball teams for the 2009 season. Consider the following variables: number of wins, team
salary, season attendance, whether the team is in the American or National League, and
the number of home runs hit.
a. Which of these variables are quantitative and which are qualitative?
b. Determine the level of measurement for each of the variables.
22. Refer to the Buena School District bus data, which report information on the school dis
trict’s bus fleet.
a. Which of the variables are qualitative and which are quantitative?
b. Determine the level of measurement for each variable.
20 Chapter 1

Chapter 1 Answers to
Self-Review
1–1 a. On the basis of the sample of 1,960 consumers, we estimate
that, if it is marketed, 60 percent of all consumers will purchase the
Frequency Tables, Frequency
chicken dinner (1,176/1,960) 100 60 percent. Distributions, and Graphic
b. Inferential statistics, because a sample was used to
draw a conclusion about how all Presentation
consumers in the population would react if the chicken
dinner were marketed.
1–2 a. Age is a ratio-scale variable. A 40-year-old is twice as old
as someone 20 years old.
b. Nominal scale. We could arrange the states in any order.

Describing Data:
 2
Learning Objectives When you have completed this
chapter, you will be able to:

LO1 Make a frequency table for a set of data.

LO2 Organize data into a bar chart.

LO3 Present a set of data in a pie chart.

LO4 Create a frequency dis tribution for a data set.

LO5 Understand a relative frequency distribution.

LO6 Present data from a fre quency distribution in a his

Merrill Lynch recently completed a study of online investment togram or frequency polygon.
portfolios for a sample of clients. For the 70 participants in the
LO7 Construct and interpret a cumulative frequency
study, organize these data into a frequency distribution. (See
distribution.
Exercise 43 and LO4.)
22 Chapter 2

2.1 Introduction
The highly competitive automobile retailing industry in the United States has
changed dramatically in recent years. These changes spurred events such as the:
• bankruptcies of General Motors and Chrysler in 2009.
• elimination of well-known brands such as Pontiac and
Saturn.
• closing of over 1,500 local dealerships.
• collapse of consumer credit availability.
• consolidation dealership groups.
Traditionally, a local family owned and operated the com
munity dealership, which might have included one or two man
ufacturers or brands, like Pontiac and GMC Trucks or Chrysler
and the popular Jeep line. Recently, however, skillfully managed
and well-financed companies have been acquiring local dealer
ships in large regions of the country. As these groups acquire the local dealerships,
they often bring standardized selling practices, common software and hardware
technology platforms, and management reporting techniques. The goal of these new
organizations is to provide an improved buying experience for the consumer, while
increasing profitability. Megadealerships often employ over 10,000 people, generate
several billion dollars in annual sales, own more than 50 franchises, and are traded
on the New York Stock Exchange or NASDAQ. Today, the largest megadealership is
AutoNation (ticker symbol AN). Others include Penske Auto Group (PAG and second
largest), Asbury Automotive Group (ABG), and Hendrick Auto Group (which is
privately held).
The Applewood Auto Group is an ownership group that includes four deal
erships. The group sells a wide range of vehicles, including the inexpensive but
popular Korean brands Kia and Hyundai, BMW and Volvo sedans and luxury SUVs,
 and a full line of Ford and Chevrolet cars and trucks.
Ms. Kathryn Ball is a member of the senior management team at Applewood
Auto Group, which has its corporate offices adjacent to Hilltop Motors. She is
responsible for tracking and analyzing vehicle sales and the profitability of those
vehicles. Kathryn would like to summarize the profit earned on the vehicles sold with
tables, charts, and graphs that she would review monthly. She wants to know the
profit per vehicle sold, as well as the lowest and highest amount of profit. She is also
interested in describing the demographics of the buyers. What are their ages? How
many vehicles have they previously purchased from one of the Applewood
dealerships? What type of vehicle did they purchase?
The Applewood Auto Group oper
ates four dealerships:
• Tionesta Ford Lincoln Mercury sells
the Ford, Lincoln, and Mercury cars and
trucks.
• Olean Automotive Inc. has the Nis
san franchise as well as the General
Motors brands of Chevrolet, Cadillac,
and GMC Trucks.
• Sheffield Motors Inc. sells Buick,
GMC trucks, Hyundai, and Kia.
• Hilltop Motors offers the Chrysler,
Dodge, and Jeep line as well as BMW
and Volvo.
Every month, Ms. Ball collects data from
each of the four dealerships and enters it

LO1 Make a frequency table for a set of data.

 FREQUENCY TABLE A grouping of qualitative data into
mutually exclusive classes showing the number of observations
in each class.

In Chapter 1, we distinguished between qualitative and

quantitative variables. To review, a qualitative variable is
nonnumeric, that is, it can only be classified into distinct
categories. There is no particular order to these categories.
Examples of qualitative data include political affiliation
(Republican, Democrat, Independent), state of birth
(Alabama, . . . , Wyoming), and method of payment for a
purchase at Barnes & Noble (cash, check, debit, or credit). On
Describing Data: Frequency Tables, Frequency the other hand, quantitative variables are numerical in nature.
Distributions, and Graphic Presentation 23 Examples of quantitative data relating to college students
include the price of their textbooks, their age, and the hours
they spend studying each week of the semester.
into an Excel spreadsheet. Last month the Applewood Auto In the Applewood Auto Group data set, there are five variables
Group sold 180 vehicles at the four dealerships. A copy of the for each vehicle sale: age of the buyer, amount of profit, dealer
first few observations appears at the bottom of the previous that made the sale, type of vehicle sold, and number of
page. The variables collected include: previous purchases by the buyer. The dealer and the type of
vehicle are qualitative variables. The amount of profit, the age of
• Profit—the amount earned by the dealership on the sale of
the buyer, and the number of previous purchases are quantita
each vehicle. • Age—the age of the buyer at the time of the
purchase.
tive variables.
Suppose Ms. Ball wanted to summarize last month’s sales
• Location—the dealership where the vehicle was purchased. •
Vehicle type—SUV, sedan, compact, hybrid, or truck. by location. To summarize this qualitative data, we classify the
vehicles sold last month according to their location: Tionesta,
• Previous—the number of vehicles previously purchased at
any of the four Applewood dealerships by the consumer. Olean, Sheffield, or Hilltop. We use location to develop a fre
quency table with four mutually exclusive (distinctive) classes.
The entire data set is available at the McGraw-Hill website and This means that a particular vehicle cannot belong to more than
in Appendix A.5 at the end of the text. one class. Each vehicle is uniquely classified into one of the
four mutually exclusive locations. This frequency table is shown
2.2 Constructing a Frequency in Table 2–1. The number of observations, representing the
sales at each location, is called the class frequency. So the
Table class fre quency for vehicles sold at the Kane location is 52.

Recall from Chapter 1 that techniques used to describe a set of

data are called descriptive statistics. To put it another way,
Relative Class Frequencies
descriptive statistics organize data to show the general pattern You can convert class frequencies to relative class frequencies
of the data and where values tend to concentrate and to to show the fraction of the total number of observations in each
expose extreme or unusual data values. The first procedure we class. A relative frequency captures the
discuss is a fre quency table.
24 Chapter 2

TABLE 2–1 Frequency Table for Vehicles Sold Last Month at Applewood Auto Group by Location

Location Number of Cars

Kane 52
Olean 40
Sheffield 45
Tionesta 43
Total 180

relationship between a class total and the total number of observations. In the vehi
cle sales example, we may want to know the percentage of total cars sold at each of
the four locations. To convert a frequency distribution to a relative frequency dis
tribution, each of the class frequencies is divided by the total number of observa
tions. For example, the fraction of vehicles sold last month at the Kane location is
0.289, found by 52 divided by 180. The relative frequency for each location is shown
in Table 2–2.

TABLE 2–2 Relative Frequency Table of Vehicles Sold by Type Last Month at
 Applewood Auto Group

Location Number of Cars Relative Frequency

Kane 52 .289
Olean 40 .222
Sheffield 45 .250
Tionesta 43 .239
Total 180 1.000

Graphic Presentation of Qualitative Data

LO2 Organize data into a bar chart. horizontal axis and the class frequencies on the vertical axis.
The most common graphic form to present a qualitative variable The class frequencies are proportional to the heights of the
is a bar chart. In most cases, the horizontal axis shows the bars.
variable of interest. The vertical axis shows the frequency or
fraction of each of the possible outcomes. A distinguishing
feature of a bar chart is there is distance or a gap between the
We use the Applewood Auto Group data as an example (Chart
bars. That is, because the variable of interest is qualitative, the
2–1). The vari able of interest is the location where the vehicle
bars are not adjacent to each other. Thus, a bar chart
was sold and the number of vehi cles sold at each location is
graphically describes a frequency table using a series of
the class frequency. We label the horizontal axis with the four
uniformly wide rectangles, where the height of each rectangle is
locations and scale the vertical axis with the number sold. The
the class frequency.
height of the bars, or rectangles, corresponds to the number of
vehicles at each location. There were 52 vehicles sold last
month at the Kane location, so the height of the Kane bar is 52;
BAR CHART A graph that shows qualitative classes on the the height of the bar for the Olean location is 40. The variable
Describing Data: Frequency Tables, Frequency Distributions, and Graphic

Presentation 25 50

dl

S
30 Sheffield Tionesta
s

20
c

he
V
f

10
r

u
0
N
Kane Olean
40
LO3 Present a set of data using a pie chart. Amount Percentage
Location Use of Sales ($ million) of Sales
Prizes 1,460.0 60
Education 702.3 29
CHART 2–1 Number of Vehicles Sold by Location Bonuses 150.0 6
Expenses 124.3 5

location is of nominal scale, so the order of the locations on the Total 2,436.6 100
horizontal axis does not matter. Listing this variable
alphabetically or by some type of geograph ical arrangement
might also be appropriate. The first step to develop a pie chart is to record the
Another useful type of chart for depicting qualitative information percentages 0, 5, 10, 15, and so on evenly around the
is a pie chart. circumference of a circle (see Chart 2–2). To plot the 60 percent
share awarded for prizes, draw a line from the center of the
circle to 0 and another line from the center of the circle to 60
PIE CHART A chart that shows the proportion or percentage percent. The area in this “slice” represents the lottery proceeds
that each class represents of the total number of frequencies. that were awarded in prizes. Next, add the 60 per cent of
expenses awarded in prizes to the 29 percent payments to
education; the result is 89 percent. Draw a line from the center
We explain the details of constructing a pie chart using the of the circle to 89 percent, so the area between 60 percent and
information in Table 2–3, which shows a breakdown of the 89 percent depicts the payments made to education.
expenses for the Ohio State Lottery in 2009.

TABLE 2–3 Ohio State Lottery Expenses in 2009

26 Chapter 2 Operating Expenses
Bonuses/
Commissions 89%
95% 0%

75% 60% 50%

Prizes Education 25%

CHART 2–2 Pie Chart of Ohio Lottery Expenses in 2009

Continuing, add the 6 percent for bonuses, which gives us a total of 95 percent.
Draw a line from the center of the circle to 95, so the “slice” between 89 percent and
95 percent represents the payment of bonuses. The remainder, 5 percent, is for
operating expenses.
Because each slice of the pie represents the relative share of each component,
we can easily compare them:

• The largest expense of the Ohio Lottery is for prizes.

• About 30 percent of the proceeds is transferred to education. •
Operating expenses account for only 5 percent of the proceeds.

We can use software to quickly create a visually appealing and informative pie
chart. The following chart, using the information in Table 2–3, depicts the uses of
Ohio Lottery expenses in 2009.
 Pie charts and bar charts serve much the same function. What are the criteria
for selecting one over the other? In most cases, pie charts are the most informative

Awesome 102
ExampleSolution Excellent 58
Good 30
Poor 10

1. What type of measurement scale is used for ease of

navigation? 2. Draw a bar chart for the survey results.
3. Draw a pie chart for the survey results.

The data are measured on an ordinal scale. That is, the scale is
ranked in relative ease when moving from “poor” to
“awesome.” Also, the interval between each rating is unknown
so it is impossible, for example, to conclude that a rating of
good is twice the value of a poor rating.
Describing Data: Frequency Tables, Frequency We can use a bar chart to graph the data. The vertical scale
shows the rel ative frequency and the horizontal shows the
Distributions, and Graphic Presentation 27
values of the ease of navigation scale.

when the goal is to compare the relative difference in the Ease of Navigation of SkiLodges.com Web Page
percentage of observa tions for each of the nominal scale
variables. Bar charts are preferred when the goal is to compare 60
the number of observations in each category.
50

SkiLodges.com is test marketing its new website and is

interested in how easy its Web page design is to navigate. It
randomly selected 200 regular Internet users and asked them to
perform a search task on the Web page. Each person was
asked to rate the relative ease of navigation as poor, good,
excellent, or awesome. The results are shown in the following
table:
%

40

y
 c

q
30
e

i
20
t

10

0
Poor Good Excellent Awesome
Ease of Navigation

A pie chart can also be used to graph this data. The pie chart emphasizes that more
than half of the respondents rate the relative ease of using the website awesome.
28 Chapter 2 Good
15%

Awesome
51%
Excellent
Ease of Navigation of SkiLodges.com Web Page 29%
Poor
5%

Self-Review 2–1 The answers are at the end of the chapter .

DeCenzo Specialty Food and Beverage Company has been serving a cola drink with an
additional flavoring, Cola-Plus, that is very popular among its customers. The company is
interested in customer preferences for Cola-Plus versus Coca-Cola, Pepsi, and a lemon lime
beverage. They ask 100 randomly sampled customers to take a taste test and select the
beverage they preferred most. The results are shown in the following table:

Beverage Number
Cola-Plus 40
Coca-Cola 25
Pepsi 20
Lemon-Lime 15
Total 100

(a) Is the data qualitative or quantitative? Why?

(b) What is the table called? What does it show?
(c) Develop a bar chart to depict the information.
(d) Develop a pie chart using the relative frequencies.

Exercises
The answers to the odd-numbered exercises are at the end of the book.

1. A pie chart shows the relative market share of cola products. The “slice” for Pepsi-Cola has
a central angle of 90 degrees. What is its market share?
2. In a marketing study, 100 consumers were asked to select the best digital music player from
the iPod, the iRiver, and the Magic Star MP3. To summarize the consumer responses with
a frequency table, how many classes would the frequency table have?
3. A total of 1,000 residents in Minnesota were asked which season they preferred. The results
were 100 liked winter best, 300 liked spring, 400 liked summer, and 200 liked fall. If the
 data were summarized in a frequency table, how many classes would be used? What
would be the relative frequencies for each class?
4. Two thousand frequent midwestern business travelers are asked which midwestern city
they prefer: Indianapolis, Saint Louis, Chicago, or Milwaukee. The results were 100 liked
Indianapolis best, 450 liked Saint Louis, 1,300 liked Chicago, and the remainder preferred
Milwaukee. Develop a frequency table and a relative frequency table to summarize this
information.

LO4 Create a frequency distribution for a data set. Bright white 130
Describing Data: Frequency Tables, Frequency Metallic black 104
Distributions, and Graphic Presentation 29 Magnetic lime 325
Tangerine orange 455
Fusion red 286
5. Wellstone Inc. produces and markets replacement covers for cell
phones in a variety of colors. The company would like to allocate its
a. What is the table called?
production plans to five different colors: bright white, metallic black,
b. Draw a bar chart for the table.
magnetic lime, tangerine orange, and fusion red. The com pany set up
c. Draw a pie chart.
a kiosk in the Mall of America for several hours and asked randomly
d. If Wellstone Inc. plans to produce 1 million cell phone covers, how
selected people which cover color was their favorite. The results follow:
many of each color should it produce?
6. A small business consultant is investigating the performance of
several companies. The fourth quarter sales for last year (in thousands
of dollars) for the selected companies were:
Fourth-Quarter Sales section, using the Applewood Automotive Group data, we
Corporation ($ thousands) summarized a qualitative variable, location of the sale, using a
Hoden Building Products $ 1,645.2 frequency table, a relative frequency table, and a bar chart.
J & R Printing Inc. 4,757.0 The Applewood Auto Group data also includes several
Long Bay Concrete Construction 8,913.0 quantitative variables: the age of the buyer, the profit earned on
Mancell Electric and Plumbing 627.1 the sale of the vehicle, and the number of previous purchases.
Maxwell Heating and Air Conditioning 24,612.0 Suppose Ms. Ball wants to summarize last month’s sales by
Mizelle Roofing & Sheet Metals 191.9 profit earned. We can describe profit using a frequency
distribution.

The consultant wants to include a chart in his report comparing the

sales of the six com panies. Use a bar chart to compare the fourth- FREQUENCY DISTRIBUTION A grouping of data into mutually
quarter sales of these corporations and write a brief report exclusive classes showing the number of observations in each
summarizing the bar chart. class.

How do we develop a frequency distribution? The first step is to

2.3 Constructing Frequency tally the data into a table that shows the classes and the
number of observations in each class. The steps in constructing
Distributions: Quantitative Data a frequency distribution are best described by an example.
Remember, our goal is to construct tables, charts, and graphs
In Chapter 1 and earlier in this chapter, we distinguished
that will quickly reveal the concentration, extreme values, and
between qualitative and quantitative data. In the previous
shape of the data.
30 Chapter 2

reports the profit on each of the 180 vehicles sold last month at
Example the four Applewood locations. What is the typical profit on each
We return to the situation where Ms. Kathryn Ball of the
sale? What is the largest profit on any sale? What is the lowest
Applewood Auto Group wants to develop tables, charts, and
profit on any sale? Around what value did the profits tend to
graphs to show the typical profit for each sale. Table 2–4
cluster?
TABLE 2–4 Profit on Vehicles Sold Last Month by the Highest
Applewood Auto Group

$1,387 $2,148 $2,201 $ 963 $ 820 $2,230 $3,043 $2,584 $2,370 1,754 2,207 996 1,298
1,266 2,341 1,059 2,666 2,637 1,817 2,252 2,813 1,410 1,741 3,292 1,674 2,991 1,426
1,040 1,428 323 1,553 1,772 1,108 1,807 934 2,944 1,273 1,889 352 1,648 1,932 1,295
2,056 2,063 2,147 1,529 1,166 482 2,071 2,350 1,344 2,236 2,083 1,973 3,082 1,320
1,144 2,116 2,422 1,906 2,928 2,856 2,502 1,951 2,265 1,485 1,500 2,446 1,952 1,269
2,989 783 2,692 1,323 1,509 1,549 369 2,070 1,717 910 1,538 1,206 1,761 1,638 2,348
978 2,454 1,797 1,536 2,339 1,342 1,919 1,961 2,498 1,238 1,606 1,955 1,957 2,700
443 2,357 2,127 294 1,818 1,680 2,199 2,240 2,222 754 2,866 2,430 1,115 1,824 1,827
2,482 2,695 2,597 1,621 732 1,704 1,124 1,907 1,915 2,701 1,325 2,742 870 1,464 1,876
1,532 1,938 2,084 3,210 2,250 1,837 1,174 1,626 2,010 1,688 1,940 2,639 377 2,279
2,842 1,412 1,761 2,165 1,822 2,197 842 1,220 2,626 2,434 1,809 1,915 2,231 1,897
2,646 1,963 1,401 1,501 1,640 2,415 2,119 2,389 2,445 1,461 2,059 2,175 1,752 1,821
1,546 1,766 335 2,886 1,731 2,338 1,118 2,058 2,487
Lowest
Table 2–4 shows the profits from the 180 sales. We refer to this unorganized infor
Solution mation as
raw data or ungrouped data. With a little searching, we can find the smallest profit
($294) and the highest profit ($3,292), but that is about all. It is diffi cult to determine
a typical amount of profit. It is also difficult to visualize where the profits tend to
cluster. The raw data are more easily interpreted if organized into a frequency
distribution.

The steps for TABLE 2–5 An Example of Too Few Classes

organizing data into a frequency distribution.
Step 1: Decide on the number of classes. The goal is to use Vehicle Profit ($) Number of Vehicles
just enough group ings or classes to reveal the shape of the set $ 200 up to $1,400 42
of observations. Some judg ment is needed here. Too many 1,400 up to 2,600 115
classes or too few classes might not reveal the basic shape of 2,600 up to 3,800 23
the data set. In the vehicle profit example, three classes would
Total 180
not give much insight into the pattern of the data (see Table 2–
5).
A useful recipe to determine the number of classes (k) is the “2
to the k rule.” This guide suggests you select the smallest
number (k) for the number of classes such that 2k (in words, 2
raised to the power of k) is greater than the number of
observations (n). In the Applewood Auto Group

Statistics in Action
In 1788, James
Madison, John Jay, and Alexander
Hamilton anony mously published a series of essays enti tled The
Federalist. These Federalist pa pers were an attempt to convince the
peo ple of New York that they should ratify the Constitution. In the
course of history, the authorship of most of these papers became
known, but 12 remained con tested. Through the use of statistical
analysis, and particu larly the study of the frequency of the use of
various words, we
can now conclude that James Madison is the likely author of the 12
papers. In fact, the statistical evidence that Madi son is the author is
overwhelming.
Describing Data: Frequency Tables, Frequency
Distributions, and Graphic Presentation 31
 example, there were 180 vehicles
sold. So n 180. If we try k 7,
which means we would use 7
classes, 27 128, which is less
than 180. Hence, 7 is too few
classes. If we let k 8, then 28
256, which is greater than 180.
So the recommended number of
classes is 8.
Step 2: Determine the class interval or class width.
Generally the class interval or class width is the same for all
classes. The classes all taken together must cover at least the
distance from the lowest value in the data up to the highest
value. Expressing these words in a formula:

i H L
k
where i is the class interval, H is the highest observed value, L
is the lowest observed value, and k is the number of classes.
For the Applewood Auto Group, the lowest value is $294 and
the highest value is $3,292. If we need 8 classes, the interval
should be:

i H L

k $3,292 $294

8 $374.75
In practice, this interval size is usually rounded up to some
convenient number, such as a multiple of 10 or 100. The value
of $400 is a rea sonable choice.
In frequency distributions, equal class intervals are preferred.
How ever, unequal class intervals may be necessary in certain
situations to avoid a large number of empty, or almost empty,
classes. Such is the case in Table 2–6. The Internal Revenue
Service used unequal-sized class intervals to report the
adjusted gross income on individual tax returns. Had they used Number of Returns
an equal-sized interval of, say, $1,000, more than 1,000 classes Adjusted Gross Income (in thousands)
would have been required to describe all the incomes. A No adjusted gross income 178.2
frequency distribution with 1,000 classes would be difficult to $ 1 up to $ 5,000 1,204.6
inter pret. In this case, the distribution is easier to understand in 5,000 up to 10,000 2,595.5
spite of the unequal classes. Note also that the number of 10,000 up to 15,000 3,142.0
income tax returns or “frequencies” is reported in thousands in 15,000 up to 20,000 3,191.7
this particular table. This also makes the information easier to 20,000 up to 25,000 2,501.4
understand. 25,000 up to 30,000 1,901.6
30,000 up to 40,000 2,502.3
TABLE 2–6 Adjusted Gross Income for Individuals Filing
Income Tax Returns 40,000 up to 50,000 1,426.8
50,000 up to 75,000 1,476.3
75,000 up to 100,000 338.8
100,000 up to 200,000 223.3
200,000 up to 500,000 55.2
500,000 up to 1,000,000 12.0
1,000,000 up to 2,000,000 5.1
2,000,000 up to 10,000,000 3.4
10,000,000 or more 0.6
32 Chapter 2

Step 3: Set the individual class limits. State clear class limits so you can put each
observation into only one category. This means you must avoid overlapping
or unclear class limits. For example, classes such as “$1,300–$1,400”
and “$1,400–$1,500” should not be used, because it is not clear whether
the value $1,400 is in the first or second class. Classes stated as
“$1,300–$1,400” and “$1,500–$1,600” are frequently used, but may also be
confusing without the additional common convention of rounding all data at
or above $1,450 up to the second class and data below $1,450 down to the
first class. In this text, we will generally use the format $1,300 up to $1,400
and $1,400 up to $1,500 and so on. With this format it is clear that $1,399
goes into the first class and $1,400 in the second.
Because we round the class interval up to get a convenient class size,
we cover a larger than necessary range. For example, using 8 classes
with a width of $400 in the Applewood Auto Group example results in
a range of 8($400) $3,200. The actual range is $2,998, found by
($3,292 $294). Comparing that value to $3,200, we have an excess
of $202. Because we need to cover only the distance (H L), it is nat
ural to put approximately equal amounts of the excess in each of the
two tails. Of course, we should also select convenient class limits. A
guideline is to make the lower limit of the first class a multiple of the
class interval. Sometimes this is not possible, but the lower limit should
at least be rounded. So here are the classes we could use for this data.

Classes
$ 200 up to $ 600
600 up to 1,000
1,000 up to 1,400
1,400 up to 1,800
1,800 up to 2,200
2,200 up to 2,600
2,600 up to 3,000
3,000 up to 3,400

Step 4: Tally the vehicle profit into the classes. To begin, the profit from the
sale of the first vehicle in Table 2–4 is $1,387. It is tallied in the $1,000
up to
$1,400 class. The second profit in the first row of Table 2–4 is $2,148. It is
tallied in the $1,800 up to $2,200 class. The other profits are tallied in a sim
ilar manner. When all the profits are tallied, the table would appear as:
 Profit Frequency
$ 200 up to $ 600 |||
||||
600 up to 1,000 |
|||| ||||
1,000 up to 1,400 |||
|||| |||| |||| ||||
1,400 up to 1,800 |||
|||| |||| |||| |||| |||| |||| ||||
1,800 up to 2,200 |||| |||| |||| |||| |||| |||| |||| |||| |||| |||| |||| |||| |||| |||| ||||
2,200 up to 2,600 ||
2,600 up to 3,000 ||||
|||| |||| ||||
3,000 up to 3,400 ||||
Total

Step 5: Count the number of items in each class. The number of observations
in each class is called the class frequency. In the $200 up to $600 class
there are 8 observations, and in the $600 up to $1,000 class there are 11
observations. Therefore, the class frequency in the first class is 8 and
the class frequency in the second class is 11. There are a total of
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 33

180 observations or frequencies in the entire set of data. So the sum of

all the frequencies should be equal to 180.

TABLE 2–7 Frequency Distribution of Profit for Vehicles Sold Last Month at
Applewood Auto Group

Profit Frequency
$ 200 up to $ 600 8
600 up to 1,000 11
1,000 up to 1,400 23
1,400 up to 1,800 38
1,800 up to 2,200 45
2,200 up to 2,600 32
2,600 up to 3,000 19
3,000 up to 3,400 4
Total 180

Now that we have organized the data into a frequency distribution, we can sum
marize the pattern in the profits of the vehicles for the Applewood Auto Group.
Observe the following:
1. The profit from a vehicle ranged between $200 and $3,400.
2. The profits are concentrated between $1,000 and $3,000. The profit on 157 vehi
cles or 87 percent was within this range.
3. The largest concentration, or highest frequency, is in the $1,800 up to $2,200
class. There are 45 observations. The middle of this class is $2,000. So we say
that the typical profit on selling a vehicle is $2,000.
By presenting this information to Ms. Ball, we give her a clear picture of the distri
bution of the vehicle profits for last month.
We admit that arranging the information on profits into a frequency distribution
does result in the loss of some detailed information. That is, by organizing the data
into a frequency distribution, we cannot pinpoint the exact profit on any vehicle,
such as $1,387, $2,148, or $2,201. Further, we cannot tell that the actual lowest
amount of profit for any vehicle sold is $294 or that the most profit was $3,292.
However, the lower limit of the first class and the upper limit of the largest class
convey essentially the same meaning. Likely, Ms. Ball will make the same judgment
if she knows the lowest price is about $200 that she will if she knows the exact profit
is $292. The advantages of condensing the data into a more understandable and
organized form more than offset this disadvantage.
 Self-Review 2–2 The commissions earned for the first quarter of last year by the 11 members of the sales
staff at Master Chemical Company are:

$1,650 $1,475 $1,510 $1,670 $1,595 $1,760 $1,540 $1,495 $1,590 $1,625 $1,510
(a) What are the values such as $1,650 and $1,475 called?
(b) Using $1,400 up to $1,500 as the first class, $1,500 up to $1,600 as the second class,
and so forth, organize the quarterly commissions into a frequency distribution.
(c) What are the numbers in the right column of your frequency distribution called?
(d) Describe the distribution of quarterly commissions, based on the frequency distribution.
What is the largest concentration of commissions earned? What is the smallest, and the
largest? What is the typical amount earned?

We will use two other terms frequently: class midpoint and class interval. The
midpoint is halfway between the lower limits of two consecutive classes. It is com
puted by adding the lower limits of consecutive classes and dividing the result by 2.
34 Chapter 2

Referring to Table 2–7, the lower class limit of the first class is $200 and the next
class limit is $600. The class midpoint is $400, found by ($600 $200) 2. The mid
point of $400 best represents, or is typical of, the profits of the vehicles in that class.
To determine the class interval, subtract the lower limit of the class from the
lower limit of the next class. The class interval of the Applewood data is $400, which
we find by subtracting the lower limit of the first class, $200, from the lower limit of
the next class; that is, $600. ($600 $200 $400.) You can also determine the class
interval by finding the difference between consecutive midpoints. The midpoint of
the first class is $400 and the midpoint of the second class is $800. The difference is
$400.

2.4 A Software Example

As we mentioned in Chapter 1, there are many software packages that perform sta
tistical calculations. Throughout this text we will show the output from Microsoft
Excel; from MegaStat, which is an add-in to Microsoft Excel; and from Minitab. The
commands necessary to generate the outputs are given in the Software Com
mands section at the end of each chapter. By following these commands, you will
be able to duplicate the output.
The following is a frequency distribution, produced by MegaStat, showing the
prices of the 180 vehicles sold last month at the Applewood Auto Group. The form
of the output is somewhat different than the frequency distribution of Table 2–7, but
the overall conclusions are the same.

Frequency Distribution-Quantitative

Profit Cumulative
Lower Upper Midpoint Width Frequency Percent Frequency Percent
200 600 400 400 8 4.4 8 4.4
600 1,000 800 400 11 6.1 19 10.6
1,000 1,400 1,200 400 23 12.8 42 23.3
1,400 1,800 1,600 400 38 21.1 80 44.4
1,800 2,200 2,000 400 45 25.0 125 69.4
2,200 2,600 2,400 400 32 17.8 157 87.2
2,600 3,000 2,800 400 19 10.6 176 97.8
3,000 3,400 3,200 400 4 2.2 180 100.0
180 100.0

Self-Review 2–3 Barry Bonds of the San Francisco Giants established a new single-season Major League
Baseball home run record by hitting 73 home runs during the 2001 season. The longest of these home runs
traveled 488 feet and the shortest 320 feet. You need to construct a frequency distribution of these home run
lengths.
(a) How many classes would you use?
(b) What class interval would you suggest?
(c) What actual classes would you suggest?
 2.5 Relative Frequency Distribution
LO5 Understand a relative frequency distribution. centage of the vehicle profits are in the $1,000 up to $1,400
class. In another study, we may want to know what percentage
of the employees used 5 up to 10 personal leave days last year.
To convert a frequency distribution to a relative frequency dis
A relative frequency converts the frequency to a percentage. tribution, each of the class frequencies is divided by the total
It may be desirable, as we did earlier with qualitative data, to number of observa tions. From the distribution of vehicle
convert class frequen cies to relative class frequencies to show profits, Table 2–7, the relative frequency for the $1,000 up to
the proportion of the total number of observations in each $1,400 class is 0.128, found by dividing 23 by 180. That is,
class. In our vehicle profits, we may want to know what per profit
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 35

on 12.8 percent of the vehicles sold is between $1,000 and $1,400. The relative fre
quencies for the remaining classes are shown in Table 2–8.
TABLE 2–8 Relative Frequency Distribution of Profit for Vehicles Sold Last Month at
Applewood Auto Group

Profit Frequency Relative Frequency Found by

$ 200 up to $ 600 8 .044 8 180
600 up to 1,000 11 .061 11 180
1,000 up to 1,400 23 .128 23 180
1,400 up to 1,800 38 .211 38 180
1,800 up to 2,200 45 .250 45 180
2,200 up to 2,600 32 .178 32 180
2,600 up to 3,000 19 .106 19 180
3,000 up to 3,400 4 .022 4 180
Total 180 1.000

Self-Review 2–4 Refer to Table 2–8, which shows the relative frequency distribution for the profit earned
on vehicles sold last month at the Applewood Auto Group.
(a) How many vehicles are in the $1,800 up to $2,200 class?
(b) What proportion of the vehicles sold for a profit of between $1,800 up to $2,200? (c)
What proportion of the vehicles sold for a profit of $2,200 or more?

Exercises
7. A set of data consists of 38 observations. How many classes would you recommend for
the frequency distribution?
8. A set of data consists of 45 observations between $0 and $29. What size would you rec
ommend for the class interval?
9. A set of data consists of 230 observations between $235 and $567. What class interval
would you recommend?
10. A set of data contains 53 observations. The lowest value is 42 and the largest is 129. The
data are to be organized into a frequency distribution.
a. How many classes would you suggest?
b. What would you suggest as the lower limit of the first class?
11. Wachesaw Manufacturing Inc. produced the following number of units in the last 16 days.
This icon indicates that the data is available at the text website: www.mhhe.com/lind15e. You will be able to download the
data directly into Excel or Minitab from this site.

27 27 27 28 27 25 25 28
26 28 26 28 31 30 26 26

The information is to be organized into a frequency distribution.

a. How many classes would you recommend?
b. What class interval would you suggest?
c. What lower limit would you recommend for the first class?
d. Organize the information into a frequency distribution and determine the relative fre
quency distribution.
e. Comment on the shape of the distribution.
12. The Quick Change Oil Company has a number of outlets in the metropolitan Seattle area.
 The daily number of oil changes at the Oak Street outlet in the past 20 days are:

65 98 55 62 79 59 51 90 72 56
70 62 66 80 94 79 63 73 71 85

The data are to be organized into a frequency distribution.

a. How many classes would you recommend?
b. What class interval would you suggest?
36 Chapter 2

c. What lower limit would you recommend for the first class?
d. Organize the number of oil changes into a frequency distribution.
e. Comment on the shape of the frequency distribution. Also determine the relative fre
quency distribution.
13. The manager of the BiLo Supermarket in Mt. Pleasant, Rhode Island, gathered the fol
lowing information on the number of times a customer visits the store during a month.
The responses of 51 customers were:

5 3314 4 56 42666 71
1 14 1 2 4 4 4 5 6 3 5 3 4 5 6
8 4 7 6 5 9 11 3 12 4 7 6 5 15 1
1 10 8 9 2 12

a. Starting with 0 as the lower limit of the first class and using a class interval of 3, orga
nize the data into a frequency distribution.
b. Describe the distribution. Where do the data tend to cluster?
c. Convert the distribution to a relative frequency distribution.
14. The food services division of Cedar River Amusement Park Inc. is studying the amount
families who visit the amusement park spend per day on food and drink. A sample of 40
families who visited the park yesterday revealed they spent the following amounts:

$77 $18 $63 $84 $38 $54 $50 $59 $54 $56 $36 $26 $50 $34 $44
41 58 58 53 51 62 43 52 53 63 62 62 65 61 52
60 60 45 66 83 71 63 58 61 71

a. Organize the data into a frequency distribution, using seven classes and 15 as the
lower limit of the first class. What class interval did you select?
b. Where do the data tend to cluster?
c. Describe the distribution.
d. Determine the relative frequency distribution.

2.6 Graphic Presentation

of a Frequency Distribution
LO6 Present data from a frequency distribution in a histogram or a qualitative data. The classes are marked on the horizontal axis
frequency polygon. and the class frequencies on the vertical axis. The class fre
Sales managers, stock analysts, hospital administrators, and quencies are represented by the heights of the bars. However,
other busy executives often need a quick picture of the there is one impor tant difference based on the nature of the
distributions of sales, stock prices, or hospital costs. These data. Quantitative data are usually mea sured using scales that
distributions can often be depicted by the use of charts and are continuous, not discrete. Therefore, the horizontal axis
graphs. Three charts that will help portray a frequency represents all possible values, and the bars are drawn adjacent
distribution graphically are the his togram, the frequency to each other to show the continuous nature of the data.
polygon, and the cumulative frequency polygon.

Histogram HISTOGRAM A graph in which the classes are marked on the

horizontal axis and the class frequencies on the vertical axis.
A histogram for a frequency distribution based on quantitative The class frequencies are represented by the heights of the
data is similar to the bar chart showing the distribution of bars, and the bars are drawn adjacent to each other.
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 37

Example Below is the frequency distribution of the profits on vehicle sales last month at the
 Applewood Auto Group.

Profit Frequency
$ 200 up to $ 600 8
600 up to 1,000 11
1,000 up to 1,400 23
1,400 up to 1,800 38
1,800 up to 2,200 45
2,200 up to 2,600 32
2,600 up to 3,000 19
3,000 up to 3,400 4
Total 180

Construct a histogram. What observations can you reach based on the information
presented in the histogram?

the first three classes are shown in Chart 2–3.

Solution
The class frequencies are scaled along the vertical axis (Y-axis)
and either the class limits or the class midpoints along the
horizontal axis. To illustrate the construction of the histogram, 32
s

yc

16
l a

n
l
ci

e
he c

V
(
f

24
u

8 811
q
r

e
eb

r
m

23
f

u s

s
N

200 600 1000 1400

Profit $

CHART 2–3 Construction of a Histogram

From Chart 2–3 we note the profit on eight vehicles was $200 up to $600.
Therefore, the height of the column for that class is 8. There are 11 vehicles sales
where the profit was $600 up to $1,000. So, logically, the height of that column is 11.
The height of the bar represents the number of observations in the class.
This procedure is continued for all classes. The complete histogram is shown in
Chart 2–4. Note that there is no space between the bars. This is a feature of the
histogram. Why is this so? Because the variable plotted on the horizontal axis is
quantitative and the ratio scale of measurement. In a bar chart, the scale of mea
surement is nominal and the vertical bars are separated. These are important dis
tinctions between the histogram and the bar chart.
From Chart 2–4 we can make the following statement:
1. The profit from a vehicle ranged from about $200 up to about $3,400. 2. The
profits are concentrated between $1,000 and $3,000. The profit on 157 vehicles, or
87 percent, was within this range.
3. The largest concentration, or highest frequency, is in the $1,800 up to $2,200
class. The middle of this class is $2,000. So we say that the typical profit on
selling a vehicle is $2,000.
35 45 32

l r

Statistics in Nightingale is c

i
f

s
8 11 4
Action known as the
s
he
V
c a

l
dl
n

23
c

Florence
o
e
(

32 24 16 8 19
S
u

founder of the nurs ing profession. How ever, 200 600 1000 1400 1800 2200 2600 3000 3400 Profit $
she also saved many lives by using

statistical analysis. When she encoun tered an unsanitary

condition or an un dersupplied hospital, she improved the conditions
and then used statistical data to document the im provement. Thus,
she was able to con vince others of the need for medical re form,
particularly in the area of sanita tion. She developed original graphs to
demonstrate that, during the Crimean War, more soldiers died from
unsanitary conditions than were killed in combat.
CHART 2–4 Histogram of the Profit on 180 Vehicles Sold at the
Applewood Auto Group

Thus, the histogram provides an easily interpreted visual

representation of a fre quency distribution. We should also
point out that we would have made the same observations and
the shape of the histogram would have been the same had we
used a relative frequency distribution instead of the actual
frequencies. That is, if we had used the relative frequencies of Frequency Polygon
Table 2–8, we would have had a histogram of the same shape
A frequency polygon also shows the shape of a distribution
as Chart 2–4. The only difference is that the vertical axis would
and is similar to a his togram. It consists of line segments
have been reported in percentage of vehicles instead of the
connecting the points formed by the inter sections of the class
number of vehicles.
midpoints and the class frequencies. The construction of a
We use the Microsoft Excel system to produce the histogram
frequency polygon is illustrated in Chart 2–5 (on page 39). We
for the Apple wood Auto Group vehicle sales data. Note that
use the profits from the cars sold last month at the Applewood
class midpoints are used as the labels for the classes. The
Auto Group. The midpoint of each class is scaled on the X-axis
software commands to create this output are given in the
and the class frequencies on the Y-axis. Recall that the class
Software Commands section at the end of the chapter.
midpoint is the value at the center of a class and represents the
typical values in
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 39

that class. The class frequency is the number of observations in a particular class.
The profit earned on the vehicles sold last month by the Applewood Auto Group is
repeated below.

Profit Midpoint Frequency

$ 200 up to $ 600 $ 400 8
600 up to 1,000 800 11
1,000 up to 1,400 1,200 23
1,400 up to 1,800 1,600 38
1,800 up to 2,200 2,000 45
2,200 up to 2,600 2,400 32
2,600 up to 3,000 2,800 19
3,000 up to 3,400 3,200 4
Total 180

As noted previously, the $200 up to $600 class is represented by the mid point
$400. To construct a frequency polygon, move horizontally on the graph to the
midpoint, $400, and then vertically to 8, the class frequency, and place a dot. The X
and the Y values of this point are called the coordinates. The coordinates of the next
point are X 800 and Y 11. The process is continued for all classes. Then the points
 are connected in order. That is, the point representing the lowest class is joined to
the one representing the second class and so on. Note in Chart 2–5 that, to
complete the frequency polygon, midpoints of $0 and $3,600 are added to the X-
axis to “anchor” the polygon at zero frequencies. These two values, $0 and $3,600,
were derived by subtracting the class interval of $400 from the lowest mid point
($400) and by adding $400 to the highest midpoint ($3,200) in the frequency
distribution.

48
40
yc

e
24 0 400
u

800 1200 1600 2000 2400 2800 3200 3600

q

16
Profit $
e

8
F

32

CHART 2–5 Frequency Polygon of Profit on 180 Vehicles Sold at Applewood Auto Group

Both the histogram and the frequency polygon allow us to get a quick picture of
the main characteristics of the data (highs, lows, points of concentration, etc.).
Although the two representations are similar in purpose, the histogram has the
advantage of depicting each class as a rectangle, with the height of the rectangu lar
bar representing the number in each class. The frequency polygon, in turn, has an
advantage over the histogram. It allows us to compare directly two or more
40 Chapter 2

frequency distributions. Suppose Ms. Ball wants to compare the profit per vehicle
sold at Applewood Auto Group with a similar auto group, Fowler Auto in Grayling,
Michigan. To do this, two frequency polygons are constructed, one on top of the
other, as in Chart 2–6. Two things are clear from the chart:

• The typical vehicle profit is larger at Fowler Motors—about $2,000 for Apple
wood and about $2,400 for Fowler.
• There is less dispersion in the profits at Fowler Motors than at Applewood. The
lower limit of the first class for Applewood is $0 and the upper limit is
$3,600. For Fowler Motors, the lower limit is $800 and the upper limit is the
same: $3,600.

The total number of cars sold at the two dealerships is about the same, so a
direct comparison is possible. If the difference in the total number of cars sold is
large, then converting the frequencies to relative frequencies and then plotting the
two distributions would allow a clearer comparison.

yc

e
24 800 1200 1600 2000 2400 2800 3200 3600
Profit $
u

e
16
r

8
F

56
48 0 400
40 Fowler Motors
32 Applewood
 CHART 2–6 Distribution of Profit at Applewood Auto Group and Fowler Motors

Self-Review 2–5 The annual imports of a selected group of electronic suppliers are shown in the following
frequency distribution.

Imports Number Imports Number

($ millions) of Suppliers ($ millions) of Suppliers
2 up to 5 6 11 up to 14 10
5 up to 8 13 14 up to 17 1
8 up to 11 20

(a) Portray the imports as a histogram.

(b) Portray the imports as a relative frequency polygon.
(c) Summarize the important facets of the distribution (such as classes with the highest and
lowest frequencies).
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 41

Exercises
15. Molly’s Candle Shop has several retail stores in the coastal areas of North and South
Carolina. Many of Molly’s customers ask her to ship their purchases. The following chart
shows the number of packages shipped per day for the last 100 days.

13 10
yc

ne
23
18
u

30 20 28
q

35
r

10
0
5 10 15 20 25 30 35
Number of Packages

a. What is this chart called?

b. What is the total number of frequencies?
c. What is the class interval?
d. What is the class frequency for the 10 up to 15 class?
e. What is the relative frequency of the 10 up to 15 class?
f. What is the midpoint of the 10 up to 15 class?
g. On how many days were there 25 or more packages shipped?
16. The following chart shows the number of patients admitted daily to Memorial Hospital
through the emergency room.

yc

e
30 0
u

2 4 6 8 10 12 Number of Patients
q

e
20
r

10

a. What is the midpoint of the 2 up to 4 class?

b. How many days were 2 up to 4 patients admitted?
c. Approximately how many days were studied?
d. What is the class interval?
e. What is this chart called?
17. The following frequency distribution reports the number of frequent flier miles, reported in
thousands, for employees of Brumley Statistical Consulting Inc. during the most recent
quarter.

Frequent Flier Miles Number of

 (000) Employees
0 up to 3 5
3 up to 6 12
6 up to 9 23
9 up to 12 8
12 up to 15 2
Total 50

a. How many employees were studied?

b. What is the midpoint of the first class?
c. Construct a histogram.
42 Chapter 2

d. A frequency polygon is to be drawn. What are the coordinates of the plot for the first
class?
e. Construct a frequency polygon.
f. Interpret the frequent flier miles accumulated using the two charts.
18. Ecommerce.com, a large Internet retailer, is studying the lead time (elapsed time between
when an order is placed and when it is filled) for a sample of recent orders. The lead
times are reported in days.

Lead Time (days) Frequency

0 up to 5 6
5 up to 10 7
10 up to 15 12
15 up to 20 8
20 up to 25 7
Total 40

a. How many orders were studied?

b. What is the midpoint of the first class?
c. What are the coordinates of the first class for a frequency polygon?
d. Draw a histogram.
e. Draw a frequency polygon.
f. Interpret the lead times using the two charts.

Cumulative Frequency Distributions

LO7 Construct and interpret a cumulative frequency distribution. than $1,400 or the profit earned on the lowest selling 40 percent
Consider once again the distribution of the profits on vehicles of the vehicles. These values can be approximated by
sold by the Apple wood Auto Group. Suppose we were developing a cumulative frequency distribution and
interested in the number of vehicles that sold for a profit of less portraying it graphically in a cumulative frequency polygon.

Example The frequency distribution of the profits earned at Applewood Auto Group is repeated from
Table 2–7.

Profit Frequency
$ 200 up to $ 600 8
600 up to 1,000 11
1,000 up to 1,400 23
1,400 up to 1,800 38
1,800 up to 2,200 45
2,200 up to 2,600 32
2,600 up to 3,000 19
3,000 up to 3,400 4
Total 180

Construct a cumulative frequency polygon. Seventy-five percent of the vehicles sold

earned a profit of less than what amount? Sixty of the vehicles earned a profit of
less than what amount?
 cumulative frequency polygon require cumulative frequencies.
Solution To construct a cumulative frequency distri bution, refer to the
As the names imply, a cumulative frequency distribution and a
preceding table and note that there were eight vehicles in which
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 43

the profit earned was less than $600. Those 8 vehicles, plus the 11 in the next higher
class, for a total of 19, earned a profit of less than $1,000. The cumulative frequency
for the next higher class is 42, found by 8 11 23. This process is continued for all
the classes. All the vehicles earned a profit of less than $3,400. (See Table 2–9.)

TABLE 2–9 Cumulative Frequency Distribution for Profit on Vehicles Sold Last
Month at Applewood Auto Group

Profit Frequency Cumulative Frequency Found by

$ 200 up to $ 600 8 8 8
600 up to 1,000 11 19 8 11
1,000 up to 1,400 23 42 8 11 23
1,400 up to 1,800 38 80 8 11 23 30
1,800 up to 2,200 45 125 8 11 23 30 45 2,200 up to 2,600 32 157 8 11 23 30 45
32 2,600 up to 3,000 19 176 8 11 23 30 45 32 19 3,000 up to 3,400 4 180 8 11
23 30 45 32 19 4 Total 180

To plot a cumulative frequency distribution, scale the upper limit of each class
along the X-axis and the corresponding cumulative frequencies along the Y-axis. To
provide additional information, you can label the vertical axis on the left in units and
the vertical axis on the right in percent. In the Applewood Auto Group, the vertical
axis on the left is labeled from 0 to 180 and on the right from 0 to 100 percent. The
value of 50 percent corresponds to 90 vehicles.
To begin, the first plot is at X 200 and Y 0. None of the vehicles sold for a
profit of less than $200. The profit on 8 vehicles was less than $600, so the next plot
is at X 600 and Y 8. Continuing, the next plot is X 1,000 and Y 19. There were
19 vehicles that sold for a profit of less than $1,000. The rest of the points are
plotted and then the dots connected to form the chart below.

dl V

S
20
s

f
e

0
l
o

he
V
f 100 t

r
r

e
e

25
m

u
75 P

d
N
l

180 160 140 120 100 80 o

60 s

40
c

i 200 600 1000 1400 1800 2200 2600 3000

50
h 3400 Profit $
e

CHART 2–7 Cumulative Frequency Polygon for Profit on Vehicles Sold Last Month
at Applewood Auto Group
44 Chapter 2

To find the amount of profit earned on 75 percent of the cars sold, draw a hor
izontal line from the 75 percent mark on the right-hand vertical axis over to the poly
 gon, then drop down to the X-axis and read the amount of profit. The value on the X-
axis is about $2,300, so we estimate that 75 percent of the vehicles sold earned a
profit for the Applewood group of $2,230.
To find the profit earned on 60 vehicles, we locate the value of 60 on the left
hand vertical axis. Next, we draw a horizontal line from the value of 60 to the poly
gon and then drop down to the X-axis and read the profit. It is about $1,590, so we
estimate that 60 of the vehicles sold for a profit of less than $1,590. We can also
make estimates of the percentage of vehicles that sold for less than a partic ular
amount. To explain, suppose we want to estimate the percentage of vehicles that
sold for a profit of less than $1,600. We begin by locating the value of $1,600 on the
X-axis, move vertically to the polygon, and then horizontally to the vertical axis on
the right. The value is about 56 percent, so we conclude that 56 percent of the
vehicles sold for a profit of less than $1,600.

Self-Review 2–6 A sample of the hourly wages of 15 employees at Home Depot in Brunswick, Georgia,
was organized into the following table.

Hourly Wages Number of Employees

$ 8 up to $10 3
10 up to 12 7
12 up to 14 4
14 up to 16 1

(a) What is the table called?

(b) Develop a cumulative frequency distribution and portray the distribution in a cumula tive
frequency polygon.
(c) On the basis of the cumulative frequency polygon, how many employees earn $11 an
hour or less? Half of the employees earn an hourly wage of how much or more? Four
employees earn how much or less?

Exercises
19. The following chart shows the hourly wages of a sample of certified welders in the Atlanta,
Georgia area.

yc

e
50
c

r
u

e
q

P
e

10
F

40
100

30

75
t 25
n

20
0 5 10 15 20 25 30 Hourly Wage

a. How many welders were studied?

b. What is the class interval?
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 45

c. About how many welders earn less than $10.00 per hour?
d. About 75 percent of the welders make less than what amount?
e. Ten of the welders studied made less than what amount?
f. What percent of the welders make less than $20.00 per hour?
 20. The following chart shows the selling price ($000) of houses sold in the Billings, Montana
area.

yc e

n
100 P

25
e

75
q

r
t

F
n

200 150 100 50 50 0 100 150 200 250 350 50 300 Selling Price
($000)
e

a. How many homes were studied?

b. What is the class interval?
c. One hundred homes sold for less than what amount?
d. About 75 percent of the homes sold for less than what amount?
e. Estimate the number of homes in the $150,000 up to $200,000 class. f.
About how many homes sold for less than $225,000?
21. The frequency distribution representing the number of frequent flier miles accumulated by
employees at Brumley Statistical Consulting Company is repeated from Exercise 17.

Frequent Flier Miles

(000) Frequency
0 up to 3 5
3 up to 6 12
6 up to 9 23
9 up to 12 8
12 up to 15 2
Total 50

a. How many employees accumulated less than 3,000 miles?

b. Convert the frequency distribution to a cumulative frequency distribution. c. Portray the
cumulative distribution in the form of a cumulative frequency polygon. d. Based on the
cumulative frequency polygon, about 75 percent of the employees accu mulated how
many miles or less?
22. The frequency distribution of order lead time at Ecommerce.com from Exercise 18 is
repeated below.

Lead Time (days) Frequency

0 up to 5 6
5 up to 10 7
10 up to 15 12
15 up to 20 8
20 up to 25 7
Total 40

a. How many orders were filled in less than 10 days? In less than 15 days? b.
Convert the frequency distribution to a cumulative frequency distribution. c.
Develop a cumulative frequency polygon.
d. About 60 percent of the orders were filled in less than how many days?
46 Chapter 2

Chapter Summary
I. A frequency table is a grouping of qualitative data into mutually exclusive classes show ing
the number of observations in each class.
II. A relative frequency table shows the fraction of the number of frequencies in each class.
III. A bar chart is a graphic representation of a frequency table.
IV. A pie chart shows the proportion each distinct class represents of the total number of
frequencies.
V. A frequency distribution is a grouping of data into mutually exclusive classes showing the
number of observations in each class.
A. The steps in constructing a frequency distribution are:
1. Decide on the number of classes.
 2. Determine the class interval.
3. Set the individual class limits.
4. Tally the raw data into classes.
5. Count the number of tallies in each class.
B. The class frequency is the number of observations in each class.
C. The class interval is the difference between the limits of two consecutive classes.
D. The class midpoint is halfway between the limits of consecutive classes.
VI. A relative frequency distribution shows the percent of observations in each class.
VII. There are three methods for graphically portraying a frequency distribution.
A. A histogram portrays the number of frequencies in each class in the form of a rectangle.
B. A frequency polygon consists of line segments connecting the points formed by the
intersection of the class midpoint and the class frequency.
C. A cumulative frequency distribution shows the number or percent of observations
below given values.

Chapter Exercises
23. Describe the similarities and differences of qualitative and quantitative variables. Be sure to
include:
a. What level of measurement is required for each variable type?
b. Can both types be used to describe both samples and populations?
24. Describe the similarities and differences of a frequency table and a frequency distribution.
Be sure to include which requires qualitative data and which requires quantitative data.
25. Alexandra Damonte will be building a new resort in Myrtle Beach, South Carolina. She
must decide how to design the resort based on the type of activities that the resort will
offer to its customers. A recent poll of 300 potential customers showed the following
results about customers’ preferences for planned resort activities:

Like planned activities 63

Do not like planned activities 135
Not sure 78
No answer 24

a. What is the table called?

b. Draw a bar chart to portray the survey results.
c. Draw a pie chart for the survey results.
d. If you are preparing to present the results to Ms. Damonte as part of a report, which
graph would you prefer to show? Why?
26. Speedy Swift is a package delivery service that serves the greater Atlanta, Georgia met
ropolitan area. To maintain customer loyalty, one of Speedy Swift’s performance objec
tives is on-time delivery. To monitor its performance, each delivery is measured on the
following scale: early (package delivered before the promised time), on-time (package
delivered within 5 minutes of the promised time), late (package delivered more than 5
minutes past the promised time), lost (package never delivered). Speedy Swift’s objective
Describing Data: Frequency Tables, Frequency Distributions, and Graphic Presentation 47

is to deliver 99 percent of all packages either early or on-time. Another objective is to

never lose a package.

Speedy collected the following data for last month’s performance:

On-time On-time Early Late On-time On-time On-time On-time Late On-time Early On-time On-time Early On-time
On-time On-time On-time On-time On-time Early On-time Early On-time On-time On-time Early On-time On-time
On-time Early On-time On-time Late Early Early On-time On-time On-time Early
On-time Late Late On-time On-time On-time On-time On-time On-time On-time On-time Late Early On-time Early
On-time Lost On-time On-time On-time Early Early On-time On-time Late Early Lost On-time On-time On-time On-
time On-time Early On-time Early On-time Early On-time Late On-time On-time Early On-time On-time On-time Late
On-time Early On-time On-time On-time On-time On-time On-time On-time Early Early On-time On-time On-time

a. What scale is used to measure delivery performance? What kind of variable is delivery
performance?
b. Construct a frequency table for delivery performance for last month.
c. Construct a relative frequency table for delivery performance last month.
 d. Construct a bar chart of the frequency table for delivery performance for last month. e.
Construct a pie chart of on-time delivery performance for last month.
f. Analyze the data summaries and write an evaluation of last month’s delivery perfor
mance as it relates to Speedy Swift’s performance objectives. Write a general recom
mendation for further analysis.
27. A data set consists of 83 observations. How many classes would you recommend for a
frequency distribution?
28. A data set consists of 145 observations that range from 56 to 490. What size class inter val
would you recommend?
29. The following is the number of minutes to commute from home to work for a group of
automobile executives.

28 25 48 37 41 19 32 26 16 23 23 29 36
31 26 21 32 25 31 43 35 42 38 33 28

a. How many classes would you recommend?

b. What class interval would you suggest?
c. What would you recommend as the lower limit of the first class?
d. Organize the data into a frequency distribution.
e. Comment on the shape of the frequency distribution.
30. The following data give the weekly amounts spent on groceries for a sample of
households.

$271 $363 $159 $ 76 $227 $337 $295 $319 $250

279 205 279 266 199 177 162 232 303
192 181 321 309 246 278 50 41 335
116 100 151 240 474 297 170 188 320
429 294 570 342 279 235 434 123 325

a. How many classes would you recommend?

b. What class interval would you suggest?
c. What would you recommend as the lower limit of the first class?
d. Organize the data into a frequency distribution.
48 Chapter 2

31. A social scientist is studying the use of iPods by college students. A sample of 45 stu
dents revealed they played the following number of songs yesterday.

468 79637767147 7
4 6 4 10 2 4 6 3 4 6 8 4 3 3 6
8 8 4 6 4 6 5 5 9 6 8 8 6 5 10

Organize the above information into a frequency distribution.

a. How many classes would you suggest?
b. What is the most suitable class interval?
c. What is the lower limit of the initial class?
d. Create the frequency distribution.
e. Describe the profile of the distribution.
32. David Wise handles his own investment portfolio, and has done so for many years. Listed
below is the holding time (recorded to the nearest whole year) between purchase and
sale for his collection of stocks.

8 8 6 11 11 9 8 5 11 4 8 5 14 7 12 8 6 11 9 7
9 15 8 8 12 5 9 8 5 9 10 11 3 9 8 6

a. How many classes would you propose?

b. What class interval would you suggest?
c. What quantity would you use for the lower limit of the initial class?
 d. Using your responses to parts (a), (b), and (c), create a frequency distribution.
e. Identify the appearance of the frequency distribution.
33. You are exploring the music in your iTunes library. The total play counts over the past year
for the songs on your “smart playlist” are shown below. Make a frequency dis
tribution of the counts and describe its shape. It is often claimed that a small fraction
of a person’s songs will account for most of their total plays. Does this seem to be
the case here?

128 56 54 91 190 23 160 298 445 50

578 494 37 677 18 74 70 868 108 71
466 23 84 38 26 814 17

34. The Journal of Finance made its content available on the Internet starting in July of 2005.
The table below shows the number of times a monthly version was downloaded and the
number of articles that were viewed during each month. Suppose you wish to make a
frequency distribution of the number of downloads.

312 2,753 2,595 6,057 7,624 6,624 6,362 6,575 7,760 7,085 7,272
5,967 5,256 6,160 6,238 6,709 7,193 5,631 6,490 6,682 7,829 7,091
6,871 6,230 7,253 5,507 5,676 6,974 6,915 4,999 5,689 6,143 7,086

a. How many classes would you propose?

b. What class interval would you suggest?
c. What quantity would you use for the lower limit of the initial class?
d. Using your responses to parts (a), (b), and (c), create a frequency distribution.
e. Identify the appearance of the frequency distribution.
Describing Data: Frequency Tables, Frequency Distributions, and Graphic

Presentation 49 35. The following histogram shows the scores on the first exam for a

statistics class.

yc

e
10 14 21
u

q
5
0 12
3
e

25 20 15 6

50 60 70 80 90 100
Score

a. How many students took the exam?

b. What is the class interval?
c. What is the class midpoint for the first class?
d. How many students earned a score of less than 70?
36. The following chart summarizes the selling price of homes sold last month in the Sarasota,
Florida, area.

yc

e
150 100 200 250 300 350
u

q
100 75
50
e

50
r

250
n

0 50 100 150
e

25
cr

200
eP
 Selling Price ($000)

a. What is the chart called?

b. How many homes were sold during the last month?
c. What is the class interval?
d. About 75 percent of the houses sold for less than what amount?
e. One hundred seventy-five of the homes sold for less than what amount? 37. A chain of
sport shops catering to beginning skiers, headquartered in Aspen, Colorado, plans to conduct
a study of how much a beginning skier spends on his or her initial purchase of equipment and
supplies. Based on these figures, it wants to explore the possibility of offering combinations,
such as a pair of boots and a pair of skis, to induce customers to buy more. A sample of cash
register receipts revealed these initial purchases:

$140 $ 82 $265 $168 $ 90 $114 $172 $230 $142 86 125 235 212 171 149 156 162 118
139 149 132 105 162 126 216 195 127 161 135 172 220 229 129 87 128 126 175 127
149 126 121 118 172 126

a. Arrive at a suggested class interval. Use six classes, and let the lower limit of the first
class be $70.
b. What would be a better class interval?
c. Organize the data into a frequency distribution using a lower limit of $80. d.
Interpret your findings.