CERTIFICATE LEVEL

Subject Fundamentals of Management Accounting (BA2)

K.Sivagar
Lecturer B.Sc (Hons), ACMA, CGMA

Module Tute 10 – Summarising and Analysing Data

Code BA2/KS/10
 Summarising and Analysing Data
Risk Analysis
Risk and Uncertainty
Risk
The CIMA Terminology defines risk as “condition in which there exists a quantifiable dispersion in the
possible outcomes from any activity”.

There are a number of possible outcomes and the probability of each outcome is known.

Uncertainty
The CIMA Terminology defines uncertainty as “inability to predict the outcome from an activity due to
lack of information about the required input/output relationships or about the environment within which
the activity takes place”.

There are a number of possible outcomes, but the probability of each outcome is not known.

The difference between risk and uncertainty is therefore that risk is quantifiable while uncertainty is
unquantifiable.

Summarising and Analysing Data

Good information is needed to make good decisions. In order for data to become information, we must
be able to summarise and analyse it.

Some mathematical techniques which can be used to analyse data are as follows.
• Tabulating data (Tallying/Frequency distributions)
• Charts and diagrams (Pie charts/Bar charts/Histograms and ogives)
• Averaging (Arithmetic mean/Median/Mode)
• Measures of spread (Range/Variance/Standard deviation/Coefficient of variance)

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Tabulating Data
Tallying
Tallying is one way of converting raw data into a more concise format to make it easier to use.

Practice Question – 01
The daily absentee rate at a small factory is recorded for one calendar month (22 working days):
Number of employees absent:
6 8 7 3 5 5 6 8 2 4 5
7 6 2 3 3 4 8 3 5 4 7
Tally these data into a frequency distribution.

Grouped Distributions
In some cases, if we try to tally using each possible measurement taken, then we will still have too many
values to be really useful. A far more sensible approach is to tally the number of values in a certain range
or class.

Practice Question – 02
For one month, the daily outputs, in units, of a certain product (A) are recorded:
Daily output, units
49 47 33 58 56 59 45 39 53 51 44 49 37
53 48 47 40 36 50 55 44 42
Tally these data into a frequency distribution using the intervals 30 – under 35; 35 – under 40; and so
on.

Cumulative Frequency Distributions

These are the number of data values up to (or up to and including) a certain point. They can easily be
compiled as running totals from the corresponding frequency distribution.

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Practice Question – 03
Using the data given in Test your understanding 2 you obtained the following distribution:
Output of A units No. of days (frequency)
30 – under 35 1
35 – under 40 3
40 – under 45 4
45 – under 50 6
50 – under 55 4
55 – under 60 4
Form the cumulative frequency distribution for this data.

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Charts and diagrams
Note: You cannot be asked to actually draw charts during a computer-based assessment. Exam questions
therefore take the form of labelling charts, calculating particular values, selecting a type of chart
appropriate to particular data and drawing conclusions from charts.

Pie charts
Pie charts are a very easily understood way of depicting the percentage or proportional breakdown of a
total into various categories.

Example:
A company trades in five distinct geographical markets. In the last financial year, its turnover was:
Turnover ($
Market Mn)
Sri Lanka 55
India 25
Bangladesh 10
Australia 30
UK 40
Total 160

Market Turnover ($ Mn) Turnover (%) Turnover (˚)

Sri Lanka 55 34% (55/160) X 100 124 (55/160) X 100 X 360
India 25 16% 56
Bangladesh 10 6% 23
Australia 30 19% 68
UK 40 25% 90
Total 160 100% 360

Turnover ($ Mn)

Sri Lanka
25% India
34%
Bangladesh
19% Australia
6% 16% UK

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Bar charts
Bar charts are another simple way of representing actual data pictorially. A chart is drawn where labels
for the observations are shown on the horizontal (x) axis and the frequencies of each are shown on the
vertical (y) axis.

Example:
A company trades in five distinct geographical markets. In the last financial year, its turnover was:
Turnover ($
Market Mn)
Sri Lanka 55
India 25
Bangladesh 10
Australia 30
UK 40
Total 160

Turnover ($ Mn)
60

50

40

30

20

10

0
Sri Lanka India Bangladesh Australia UK

Multiple bar chart:

Example

Turnover ($ Mn)
Market
Company 1 Company 2
Sri Lanka 55 70
India 25 20
Bangladesh 10 15
Australia 30 25
UK 40 50
Total 160 180

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 Turnover ($ Mn)
80

60

40

20

0
Sri Lanka India Bangladesh Australia UK

Company 1 Company 2

Compound/component/stacked bar chart:

Turnover
200

150

100

50

0
Company 1 Company 2

Sri Lanka India Bangladesh Australia UK

Histograms
When we looked at bar charts we saw that the vertical height of the bar represented the frequency while
the horizontal (x) axis simply showed the labels of the items or classes. With histograms the frequency is
represented by the area of a block or rectangle.
Example:
Time
(minutes) Frequency
15 - under 17 3
17 - under 19 5
19 - under 21 10
21 - under 23 7
23 - under 25 4
25 - under 27 1
30

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Ogives
An ogive is a graph of the cumulative frequency distributions met earlier.
Example:
Time Cumulative
(minutes) Frequency Frequency
15 - under 17 3 3
17 - under 19 5 8
19 - under 21 10 18
21 - under 23 7 25
23 - under 25 4 29
25 - under 27 1 30

35
30
Cumulative Frequency

25
20
15
10
5
0
15 - under 17 17 - under 19 19 - under 21 21 - under 23 23 - under 25 25 - under 27
Time (minutes)

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Unequal sizes: Histogram & Ogive
Example:
The compiler of a careers guide is given the following information on the initial salaries of graduates
entering a certain profession during the year prior to the guide’s publication.
No. of graduate
Annual Salary ($) entrants Cum. No. of graduate entrants
9,000 - under 11,000 108 108
11,000 - under 13,000 156 264
13,000 - under 14,000 94 358
14,000 - under 14,500 80 438
14,500 - under 15,000 25 463

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Averaging Data
In mathematics there are different measures of average.
• Mean
• Median
• Mode

The mean
The “average number” found by adding all data points and dividing by the number of data points. This is
denoted by the symbol “µ”.

∑𝑥
x̅ =
𝑛

Practice Question – 04
A shopkeeper is about to put his shop up for sale. As part of the details of the business, he wishes to quote
the average weekly takings. The takings in each of the last 6 weeks are:
$1,120 $990 $1,040 $1,030 $1,105 $1,015

Determine the mean weekly takings that the shopkeeper could quote.

The mean from a frequency distribution:

∑𝑓𝑥
x̅ =
∑𝑓

Practice question – 05
The following distribution shows the number of employees absent per day for a company over a 22 day
period.
No. of employees absent No. of days (frequency)
2 2
3 4
4 3
5 4
6 3
7 3
8 3

Find the arithmetic mean for the above distribution.

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Calculating the mean from grouped data:
∑𝑓𝑥
x̅ =
∑𝑓

Practice Question – 06
The output levels of product B have been given in the following distribution:
Output of B (kg) No. of days (frequency)
350 – under 360 4
360 – under 370 6
370 – under 380 5
380 – under 390 4
390 – under 400 3

Find the arithmetic mean for the above distribution (to two dp).

The median
This is defined as the middle of a set of values, when arranged in ascending (or descending) order.

In general, if there are n observations, the position of the median is given by (n + 1)/2.

Practice Question – 07
A shopkeeper is about to put his shop up for sale. As part of the details of the business, he wishes to
quote the average weekly takings. The takings in each of the last 6 weeks are:
$1,120 $990 $1,040 $1,030 $1,105 $1,015
Calculate the median.

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Practice question – 08
The following distribution shows the number of employees absent per day for a company over a 22 day
period.
No. of employees absent No. of days (frequency)
2 2
3 4
4 3
5 4
6 3
7 3
8 3

Calculate the median of the data on staff absences.

Calculating the median from a diagram:

Practice question – 09
Draw the ogive for practice question - 06 and find the median from the ogive.

The mode
The mode or modal value of a data set is that value that occurs most often.

Practice question – 10
Find the mode for the following distributions.
Complaints per week No. of weeks
0 5
1 12
2 7
3 2
4 1

Practice question – 11
Find the mode for practice question - 06 on the output of product B.

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Measures of spread
Range
The range is defined as the highest value minus the lowest value.

Range = Highest value – Lowest value + 1

Practice question – 12
A recently retired couple are considering investing their pension lump sums in the purchase of a small
shop. Two suitable businesses, A and B, are discovered. The average weekly takings of the two shops are
quoted as $1,050 and $1,080 for A and B, respectively. Upon further investigation, the investors discover
that the averages quoted come from the following recent weekly takings figures:

Shop A: $1,120 $990 $1,040 $1,030 $1,105 $1,015

Shop B: $1,090 $505 $915 $1,005 $2,115 $850

Advise the couple.

The standard deviation and variance

The standard deviation is a way of measuring how far away on average the data points are from the
mean.

The mathematical symbol used to denote standard deviation is σ.

The basic formula for calculating standard deviation is,

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Practice question – 13
The following distribution shows the number of employees absent per day for a company over a 22 day
period.
No. of employees absent (X) No. of days (frequency)
2 2
3 4
4 3
5 4
6 3
7 3
8 3
Using the above data calculate the standard deviation (to 2 dp).

Practice Question – 14
The output levels of product B have been given in the following distribution:
Output of B (kg) No. of days (frequency)
350 – under 360 4
360 – under 370 6
370 – under 380 5
380 – under 390 4
390 – under 400 3
Using the above data find the standard deviation.

The coefficient of variation

The coefficient of variation is a statistical measure of the dispersion of data points in a data series
around the mean.

The coefficient of variation is the ratio of the standard deviation to the mean, and is useful when
comparing the degree of variation from one data series to another, even if the means are quite different
from each other.

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Practice Question – 15
Government statistics on the basic weekly wages of workers in two countries show the following. (All
figures are shown in $)
Country V: mean = 120 standard deviation = 55
Country W: mean = 90 standard deviation = 50
Calculate the coefficient of variation and comment on it.

Practice Question – 16
In country P, the coefficient of variation for the salaries of trainee accountants is 40%, while in country Q
it is 60%.
Which of the following statements can be made on the basis of this information? Select all that apply.
A. In P, 40% of trainee accountants have a below-average salary.
B. In Q, the lowest salary of trainee accountants is 60% of the average.
C. Salaries of trainee accountants are more variable in Q than in P.
D. Salaries of trainee accountants are higher on average in Q than in P.

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 Objective Test Questions

1. Sample 1: 2, 5, 5, 12
Sample 2: 1, 3, 5, 8, 8
Which of the following statistics has the same value in both samples?
A. Arithmetic mean
B. Standard deviation
C. Median
D. Mode

2. In a supermarket, the number of employees and the annual earnings per employee are shown as
follows.
Annual earnings Number employed
$
6,000 3
7,000 5
10,000 3
11,000 1
12,000 2
15,000 1
The median value of annual earnings is:
………………..

3. A factory employs 100 people and is divided into three departments. The mean (arithmetic) output
per employee per month for all employees is 139 units.
What is the mean output per employee per month for department 2?
…………………..
Department No of employees in Mean output per employee
department per month units
1 54 130
2 ? ?
3 24 140

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4. The weights of three items – A, B and C – vary independently and have the following means and
standard deviations.
Mean weight kg Variance
A 120 400
B 100 400
C 80 100
The three items are sold together in a single packet.
What is the mean weight of a packet of one unit each of A, B and C, and the standard deviation of the
weights of packets?
Mean weight kg Standard deviation kg
A. 100 30
B. 100 900
C. 300 30
D. 300 900

5. On one particular checkout in a supermarket, the service time has an arithmetic mean of 5 minutes
and a standard deviation of 1 minute. The coefficient of variation will be:
A. 50%
B. 20%
C. 5%
D. 2%

6. The following has been calculated for a frequency distribution.

∑ (f) = 50
∑ (fx) = 1,610
∑ (fx²) = 61,250
The value of the standard deviation (to 1 decimal place) is ………………………..

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7. The number of rejects from 50 samples of the same size is as follows:
Number of rejects in each sample Number of samples (frequency of reject)
0 5
1 10
2 10
3 20
4 5
5 0
The arithmetic mean number of rejects per sample is:
A. 2.2
B. 2.4
C. 3
D. 20

8. The number of daily complaints to a railway company has an average (arithmetic mean) of 12 and
standard deviation of 3 complaints. The coefficient of variation, measured as a percentage, is
therefore:
A. 0.25%
B. 4%
C. 25%
D. 400%

The following information relates to questions 9, 10 and 11

The following times have been recorded for dealing with customer queries.
30, 35, 31, 25, 25, 31, 23, 31, 30

9. What is the median time? ………………….

10. What is the mode time? …………………..

11. What is the mean time? ……………………

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12. A histogram uses a set of rectangles to represent a grouped frequency table. To be correctly
presented, the histogram must show the relationship of the rectangles to the frequencies by
reference to the:
A. Height
B. Area
C. Width
D. Diagonal of each rectangle

13. The following table shows the typical salary of part qualified management accountants in five
different regions of England.
Area Typical salary
$
South-east 21,500
Midlands 20,800
North-east 18,200
North-west 17,500
South-west 16,700
The best diagram to draw to highlight the differences between areas is;
A. A pie diagram
B. A multiple bar chart
C. A percentage component bar chart
D. A simple bar chart

14. In a pie chart, printing costs for the year are represented by 60˚ and the total costs for the year are
$630,000. What are the printing costs for the year?
$ ……………….. (Give your answer to the nearest whole $)

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