Ebook Statistics for managers using Microsoft excel (5th edition) Part 1

Business Data Analysis

SCH-MGMT 650

STATISTICS FOR MANAGERS
USING Microsoft Excel
David M. Levine David F. Stephan
Timothy C. Krehbiel Mark L. Berenson

Custom Edition for

UMASS-Amherst
Professor Robert Nakosteen
Taken from:
Statistics for Managers: Using Microsoft Excel, Fifth Edition
by David M. Levine, David F. Stephan, Timothy C. Krehbiel, and Mark L. Berenson


Cover photo taken by Lauren Labrecque.
Taken from:
Statistics for Managers: Using Microsoft Excel, Fifth Edition
by David M. Levine, David F. Stephan, Timothy C. Krehbiel, and Mark L. Berenson
Copyright 2008, 2005, 2002, 1999, 1997 by Pearson Education, Inc.
Published by Prentice Hall
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To our wives,
Marilyn L., Mary N., Patti K., and Rhoda B.,
and to our children
Sharyn, Mark, Ed, Rudy, Rhonda, Kathy, and Lori


ABOUT

THE

AUTHORS

The textbook authors
meet to discuss statistics at Shea Stadium for
a Mets v. Phillies game.
Shown left to right,
Mark Berenson, David
Stephan, David Levine,
Tim Krehbiel.

David M. Levine is Professor Emeritus of Statistics and Computer Information Systems at
Bernard M. Baruch College (City University of New York). He received B.B.A. and M.B.A.
degrees in Statistics from City College of New York and a Ph.D. degree from New York
University in Industrial Engineering and Operations Research. He is nationally recognized as a
leading innovator in statistics education and is the co-author of 14 books including such best
selling statistics textbooks as Statistics for Managers using Microsoft Excel, Basic Business
Statistics: Concepts and Applications, Business Statistics: A First Course, and Applied
Statistics for Engineers and Scientists using Microsoft Excel and Minitab.
He also recently wrote Even You Can Learn Statistics and Statistics for Six Sigma Green Belts
published by Financial Times-Prentice-Hall. He is coauthor of Six Sigma for Green Belts and
Champions and Design for Six Sigma for Green Belts and Champions, also published by
Financial Times-Prentice-Hall, and Quality Management Third Ed., McGraw-Hill-Irwin
(2005). He is also the author of Video Review of Statistics and Video Review of Probability,
both published by Video Aided Instruction. He has published articles in various journals
including Psychometrika, The American Statistician, Communications in Statistics,
Multivariate Behavioral Research, Journal of Systems Management, Quality Progress, and The
American Anthropologist and given numerous talks at Decision Sciences, American Statistical
Association, and Making Statistics More Effective in Schools of Business conferences. While
at Baruch College, Dr. Levine received several awards for outstanding teaching and curriculum
development.

David F. Stephan is an instructional designer and lecturer who pioneered the teaching of
spreadsheet applications to business school students in the 1980 s. He has over 20 years experience teaching at Baruch College, where he developed the first personal computing lab to support statistics and information systems studies and was twice nominated for his excellence
in teaching. He is also proud to have been the lead designer and assistant project director of a
U.S. Department of Education FIPSE project that brought interactive, multimedia learning to
Baruch College.
Today, David focuses on developing materials that help users make better use of the information analysis tools on their computer desktops and is a co-author, with David M. Levine, of
Even You Can Learn Statistics.

vi


About the Authors

vii

Timothy C. Krehbiel is Professor of Decision Sciences and Management Information
Systems at the Richard T. Farmer School of Business at Miami University in Oxford, Ohio. He
teaches undergraduate and graduate courses in business statistics. In 1996 he received the prestigious Instructional Innovation Award from the Decision Sciences Institute. In 2000 he
received the Richard T. Farmer School of Business Administration Effective Educator Award.
He also received a Teaching Excellence Award from the MBA class of 2000.
Krehbiel s research interests span many areas of business and applied statistics. His work
appears in numerous journals including Quality Management Journal, Ecological Economics,
International Journal of Production Research, Journal of Marketing Management,
Communications in Statistics, Decision Sciences Journal of Innovative Education, Journal of
Education for Business, Marketing Education Review, and Teaching Statistics. He is a coauthor of three statistics textbooks published by Prentice Hall: Business Statistics: A First
Course, Basic Business Statistics, and Statistics for Managers Using Microsoft Excel. Krehbiel
is also a co-author of the book Sustainability Perspectives in Business and Resources.
Krehbiel graduated summa cum laude with a B.A. in history from McPherson College in 1983,
and earned an M.S. (1987) and Ph.D. (1990) in statistics from the University of Wyoming.

Mark L. Berenson is Professor of Management and Information Systems at Montclair State
University (Montclair, New Jersey) and also Professor Emeritus of Statistics and Computer
Information Systems at Bernard M. Baruch College (City University of New York). He currently teaches graduate and undergraduate courses in statistics and in operations management
in the School of Business and an undergraduate course in international justice and human
rights that he co-developed in the College of Humanities and Social Sciences.
Berenson received a B.A. in economic statistics and an M.B.A. in business statistics from City
College of New York and a Ph.D. in business from the City University of New York.
Berenson s research has been published in Decision Sciences Journal of Innovative Education,
Review of Business Research, The American Statistician, Communications in Statistics,
Psychometrika, Educational and Psychological Measurement, Journal of Management
Sciences and Applied Cybernetics, Research Quarterly, Stats Magazine, The New York
Statistician, Journal of Health Administration Education, Journal of Behavioral Medicine, and
Journal of Surgical Oncology. His invited articles have appeared in The Encyclopedia of
Measurement & Statistics and in Encyclopedia of Statistical Sciences. He is co-author of
11 statistics texts published by Prentice Hall, including Statistics for Managers using Microsoft
Excel, Basic Business Statistics: Concepts and Applications, and Business Statistics: A First
Course.
Over the years, Berenson has received several awards for teaching and for innovative contributions to statistics education. In 2005 he was the first recipient of The Catherine A. Becker
Service for Educational Excellence Award at Montclair State University.



BRIEF CONTENTS
Preface xix
1 INTRODUCTION AND DATA COLLECTION 1
2 PRESENTING DATA IN TABLES AND CHARTS 31
3 NUMERICAL DESCRIPTIVE MEASURES 95
4 BASIC PROBABILITY 147
5 SOME IMPORTANT DISCRETE PROBABILITY DISTRIBUTIONS 179
6 THE NORMAL DISTRIBUTION AND OTHER CONTINUOUS DISTRIBUTIONS 217

7 SAMPLING AND SAMPLING DISTRIBUTIONS 251
8 CONFIDENCE INTERVAL ESTIMATION 283
9 FUNDAMENTALS OF HYPOTHESIS TESTING: ONE-SAMPLE TESTS 327
10 SIMPLE LINEAR REGRESSION 369
11 INTRODUCTION TO MULTIPLE REGRESSION 429
Appendices A-F 471
Self-Test Solutions and Answers to Selected Even-Numbered Problems 513
Index 535

CD-ROM TOPICS
4.5
5.6
6.6
7.6
8.7
9.7

COUNTING RULES CD4-1
USING THE POISSON DISTRIBUTION TO APPROXIMATE THE BINOMIAL DISTRIBUTION CD5-1
THE NORMAL APPROXIMATION TO THE BINOMIAL DISTRIBUTION CD6-1
SAMPLING FROM FINITE POPULATIONS CD7-1
ESTIMATION AND SAMPLE SIZE DETERMINATION FOR FINITE POPULATIONS CD8-1
THE POWER OF A TEST CD9-1

ix



CONTENTS
Preface xix

1 INTRODUCTION AND DATA COLLECTION 1
1.1
1.2

Why Learn Statistics 2
Statistics for Managers 2
How This Text is Organized 3
Using Statistics @ Good Tunes 4
1.3 Basic Vocabulary of Statistics 4
1.4 Data Collection 6
1.5 Types of Variables 8
Levels of Measurement and Measurement Scales 9
1.6 Microsoft Excel Worksheets 11
Worksheet Cells 11
Designing Effective Worksheets 12
Summary 13
Key Terms 13
Chapter Review Problems 14
End-of-Chapter Cases 15
Learning with the Web Cases 16
References 17
Excel Companion to Chapter 1 18
Key Terms 30

2 PRESENTING DATA IN TABLES AND CHARTS 31
Using Statistics @ Choice Is Yours, Part I 32
2.1 Tables and Charts for Categorical Data 32
The Summary Table 33
The Bar Chart 33
The Pie Chart 34

The Pareto Diagram 35
2.2 Organizing Numerical Data 40
The Ordered Array 41
The Stem-and-Leaf Display 41
2.3 Tables and Charts for Numerical Data 44
The Frequency Distribution 44
The Relative Frequency Distribution and the Percentage Distribution 46
The Cumulative Distribution 47
The Histogram 48
The Polygon 50
The Cumulative Percentage Polygon (Ogive) 51
2.4 Cross Tabulations 54
The Contingency Table 55
The Side-by-Side Bar Chart 56

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xii

Contents

2.5

2.6

Scatter Plots and Time-Series Plots 58
The Scatter Plot 58
The Time-Series Plot 59
Misusing Graphs and Ethical Issues 62

Microsoft Excel Graphs 64

Summary 66
Key Terms 66
Chapter Review Problems 67
Managing the Springville Herald 73
Web Case 74
References 74
Excel Companion to Chapter 2 75

3 NUMERICAL DESCRIPTIVE MEASURES 95
Using Statistics @ Choice Is Yours, Part II 96
3.1 Measures of Central Tendency 96
The Mean 97
The Median 99
The Mode 100
Quartiles 101
The Geometric Mean 103
3.2 Variation and Shape 105
The Range 105
The Interquartile Range 106
The Variance and the Standard Deviation 106
The Coefficient of Variation 110
Z Scores 111
Shape 112
Visual Explorations: Exploring Descriptive Statistics 113
Microsoft Excel Descriptive Statistics Results 114
3.3 Numerical Descriptive Measures for a Population 118
The Population Mean 118
The Population Variance and Standard Deviation 119

The Empirical Rule 120
The Chebyshev Rule 120
3.4 Exploratory Data Analysis 122
The Five-Number Summary 123
The Box-and-Whisker Plot 124
3.5 The Covariance and the Coefficient of Correlation 127
The Covariance 127
The Coefficient of Correlation 128
3.6 Pitfalls in Numerical Descriptive Measures and Ethical Issues 133
Ethical Issues 133
Summary 134
Key Equations 134
Key Terms 135
Chapter Review Problems 135
Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


Contents

xiii

Managing the Springville Herald 142
Web Case 142
References 142
Excel Companion to Chapter 3 143

4 BASIC PROBABILITY 147
Using Statistics @ The Consumer Electronics Company 148
4.1 Basic Probability Concepts 149

Events and Sample Spaces 150
Contingency Tables 151
Simple (Marginal) Probability 151
Joint Probability 152
General Addition Rule 154
4.2 Conditional Probability 157
Computing Conditional Probabilities 157
Decision Trees 159
Statistical Independence 161
Multiplication Rules 162
Marginal Probability Using the General Multiplication Rule 163
4.3 Bayes Theorem 166
4.4 Ethical Issues and Probability 171
4.5
(CD-ROM Topic) Counting Rules 172
Summary 172
Key Equations 172
Key Terms 172
Chapter Review Problems 173
Web Case 176
References 176
Excel Companion to Chapter 4 177

5 SOME IMPORTANT DISCRETE PROBABILITY
DISTRIBUTIONS 179
Using Statistics @ Saxon Home Improvement 180
5.1 The Probability Distribution for a Discrete Random Variable 180
Expected Value of a Discrete Random Variable 181
Variance and Standard Deviation of a Discrete Random Variable 182
5.2 Covariance and Its Application in Finance 184

Covariance 184
Expected Value, Variance, and Standard Deviation of the Sum
of Two Random Variables 186
Portfolio Expected Return and Portfolio Risk 186
5.3 Binomial Distribution 189
5.4 Poisson Distribution 197
5.5 Hypergeometric Distribution 201
5.6
(CD-ROM Topic) Using the Poisson Distribution to Approximate
the Binomial Distribution 204
Summary 204
Key Equations 204
Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


xiv

Contents

Key Terms 205
Chapter Review Problems 206
Managing the Springville Herald 209
Web Case 209
References 210
Excel Companion to Chapter 5 211

6 THE NORMAL DISTRIBUTION AND OTHER
CONTINUOUS DISTRIBUTIONS 217
Using Statistics @ OurCampus! 218

6.1 Continuous Probability Distributions 218
6.2 The Normal Distribution 219
Visual Explorations: Exploring the Normal Distribution 229
6.3 Evaluating Normality 234
Comparing Data Characteristics to Theoretical Properties 234
Constructing the Normal Probability Plot 236
6.4 The Uniform Distribution 238
6.5 The Exponential Distribution 241
6.6
(CD-ROM Topic) The Normal Approximation to the Binomial
Distribution 243
Summary 243
Key Equations 243
Key Terms 243
Chapter Review Problems 244
Managing the Springville Herald 246
Web Case 246
References 246
Excel Companion to Chapter 6 247

7 SAMPLING AND SAMPLING DISTRIBUTIONS 251
Using Statistics @ Oxford Cereals 252
7.1 Types of Sampling Methods 252
Simple Random Samples 253
Systematic Samples 256
Stratified Samples 256
Cluster Samples 257
7.2 Evaluating Survey Worthiness 258
Survey Error 259
Ethical Issues 260

7.3 Sampling Distributions 261
7.4 Sampling Distribution of the Mean 262
The Unbiased Property of the Sample Mean 262
Standard Error of the Mean 264
Sampling from Normally Distributed Populations 265
Sampling from Non-Normally Distributed Populations
The Central Limit Theorem 268
Visual Explorations: Exploring Sampling Distributions 270
7.5 Sampling Distribution of the Proportion 272
Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


Contents

7.6

xv

(CD-ROM Topic) Sampling From Finite Populations 275

Summary 275
Key Equations 276
Key Terms 276
Chapter Review Problems 276
Managing the Springville Herald 279
Web Case 279
References 280
Excel Companion to Chapter 7 281

8 CONFIDENCE INTERVAL ESTIMATION 283
Using Statistics @ Saxon Home Improvement 284
8.1 Confidence Interval Estimation for the Mean (* Known) 285
8.2 Confidence Interval Estimation for the Mean (* Unknown) 290
Student s t Distribution 290
Properties of the t Distribution 290
The Concept of Degrees of Freedom 291
The Confidence Interval Statement 292
8.3 Confidence Interval Estimation for the Proportion 296
8.4 Determining Sample Size 299
Sample Size Determination for the Mean 300
Sample Size Determination for the Proportion 302
8.5 Applications of Confidence Interval Estimation in Auditing 306
Estimating the Population Total Amount 307
Difference Estimation 308
One-Sided Confidence Interval Estimation of the Rate of Noncompliance
with Internal Controls 311
8.6 Confidence Interval Estimation and Ethical Issues 313
8.7
(CD-ROM Topic) Estimation and Sample Size Determination
for Finite Populations 314
Summary 314
Key Equations 314
Key Terms 315
Chapter Review Problems 315
Managing the Springville Herald 320
Web Case 321
References 321
Excel Companion to Chapter 8 322

9 FUNDAMENTALS OF HYPOTHESIS TESTING:
ONE-SAMPLE TESTS 327
Using Statistics @ Oxford Cereals, Part II 328
9.1 Hypothesis-Testing Methodology 328
The Null and Alternative Hypotheses 328
The Critical Value of the Test Statistic 330
Regions of Rejection and Nonrejection 330
Risks in Decision Making Using Hypothesis-Testing Methodology 331
Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


xvi

Contents

9.2

9.3

9.4

9.5

9.6
9.7

Z Test of Hypothesis for the Mean (* Known) 334
The Critical Value Approach to Hypothesis Testing 334
The p-Value Approach to Hypothesis Testing 337

A Connection Between Confidence Interval Estimation
and Hypothesis Testing 340
One-Tail Tests 342
The Critical Value Approach 342
The p-Value Approach 343
t Test of Hypothesis for the Mean (* Unknown) 346
The Critical Value Approach 347
The p-Value Approach 349
Checking Assumptions 349
Z Test of Hypothesis for the Proportion 353
The Critical Value Approach 354
The p-Value Approach 355
Potential Hypothesis-Testing Pitfalls and Ethical Issues 357
(CD-ROM Topic) The Power of a Test 359

Summary 359
Key Equations 360
Key Terms 360
Chapter Review Problems 360
Managing the Springville Herald 363
Web Case 363
References 363
Excel Companion to Chapter 9 364

10 SIMPLE LINEAR REGRESSION 369
Using Statistics @ Sunflowers Apparel 370
10.1 Types of Regression Models 370
10.2 Determining the Simple Linear Regression Equation 372
The Least-Squares Method 373
Visual Explorations: Exploring Simple Linear Regression Coefficients 376

Predictions in Regression Analysis: Interpolation Versus Extrapolation 377
Computing the Y Intercept, b0, and the Slope, b1 377
10.3 Measures of Variation 382
Computing the Sum of Squares 382
The Coefficient of Determination 384
Standard Error of the Estimate 386
10.4 Assumptions 387
10.5 Residual Analysis 388
Evaluating the Assumptions 388
10.6 Measuring Autocorrelation: The Durbin-Watson Statistic 392
Residual Plots to Detect Autocorrelation 392
The Durbin-Watson Statistic 394
10.7 Inferences About the Slope and Correlation Coefficient 397
t Test for the Slope 397
F Test for the Slope 398

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


Contents

xvii

Confidence Interval Estimate of the Slope (*1) 400
t Test for the Correlation Coefficient 400
10.8 Estimation of Mean Values and Prediction of Individual Values 404
The Confidence Interval Estimate 404
The Prediction Interval 405
10.9 Pitfalls in Regression and Ethical Issues 408

Summary 412
Key Equations 413
Key Terms 414
Chapter Review Problems 414
Managing the Springville Herald 420
Web Case 421
References 421
Excel Companion to Chapter 10 422

11 INTRODUCTION TO MULTIPLE REGRESSION 429
Using Statistics @ OmniFoods 430
11.1 Developing a Multiple Regression Model 430
Interpreting the Regression Coefficients 431
Predicting the Dependent Variable Y 433
11.2 r 2, Adjusted r 2, and the Overall F Test 435
Coefficient of Multiple Determination 436
Adjusted r 2 436
Test for the Significance of the Overall Multiple Regression Model 437
11.3 Residual Analysis for the Multiple Regression Model 439
11.4 Inferences Concerning the Population Regression Coefficients 441
Tests of Hypothesis 441
Confidence Interval Estimation 443
11.5 Testing Portions of the Multiple Regression Model 445
Coefficients of Partial Determination 448
11.6 Using Dummy Variables and Interaction Terms in Regression Models 450
Interactions 453
Summary 460
Key Equations 462
Key Terms 462
Chapter Review Problems 463

Managing the Springville Herald 466
Web Case 466
References 466
Excel Companion to Chapter 11 467

Appendices 471
A.
B.
C.
D.

Review of Arithmetic, Algebra, and Logarithms 472
Summation Notation 474
Statistical Symbols and Greek Alphabet 477
Student CD-ROM Contents 478

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


xviii

Contents

E.
F.

Tables 485
FAQs About Using Microsoft Excel and PHStat2 510

Self-Test Solutions and Answers to Select Even-Numbered
Problems 513
Index 535
CD-ROM Topics
4.5
5.6
6.6
7.6
8.7
9.7

Counting Rules CD4-1
Using the Poisson Distribution To Approximate the Binomial
Distribution CD5-1
The Normal Approximation to the Binomial Distribution CD6-1
Sampling From Finite Populations CD7-1
Estimation and Sample Size Determination for Finite Populations CD8-1
The Power of a Test CD9-1

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


P R E FA C E
Educational Philosophy
In our many years of teaching business statistics, we have continually searched for ways to
improve the teaching of these courses. Our active participation in a series of Making Statistics
More Effective in Schools and Business (MSMESB), Decision Sciences Institute (DSI), and
American Statistical Association conferences as well as the reality of serving a diverse group of
students at large universities have shaped our vision for teaching these courses. Over the years, our

vision has come to include these key principles:
1.

2.

3.

4.

Students need to be shown the relevance of statistics.
Students need a frame of reference when learning statistics, especially when statistics is
not their major. That frame of reference for business students should be the functional
areas of business that is, accounting, finance, information systems, management, and
marketing. Each statistical topic needs to be presented in an applied context related to at
least one of these functional areas.
The focus in teaching each topic should be on its application in business, the interpretation of results, the presentation of assumptions, the evaluation of the assumptions, and
the discussion of what should be done if the assumptions are violated.
Students need to be familiar with the software used in the business world.
Integrating spreadsheet software into all aspects of an introductory statistics course
allows the course to focus on interpretation of results instead of computations.
Introductory business statistics courses should recognize that in business, spreadsheet
software is typically available on a decision maker s desktop.
Students need to be given sufficient guidance on using software.
Textbooks should provide enough instructions so that students can effectively use the
software integrated with the study of statistics, without having the software instruction
dominate the course.
Students need ample practice in order to understand how statistics is used in business.
Both classroom examples and homework exercises should involve actual or realistic data
as much as possible.
Students should work with data sets, both small and large, and be encouraged to look

beyond the statistical analysis of data to the interpretation of results in a managerial
context.

New to This Edition: Statistics Coverage
This new fifth edition of Statistics for Managers Using Microsoft Excel enhances the statistical
coverage of previous editions in a number of ways:
Every chapter has been rewritten to use a more engaging, conversational writing style
that students will appreciate. Complex topics are discussed in simple, straightforward
sentences.
From the Authors Desktop essays provide greater background for the topic just covered
and raise important issues.
This edition includes many more examples from everyday life. Notable examples include
what you would do with $1,000 (Chapter 2), time to get ready in the morning (Chapter 3),
and waiting time at a fast-food restaurant (Chapter 9).
Many new applied examples and exercises with data from The Wall Street Journal, USA
Today, Consumer Reports, and other sources have been added to the book.
Many problems have been restructured to contain no more than four parts, allowing students to break down the concepts and apply the material more easily.
A Key Equations list at the end of each chapter lists the equations used in the chapter.
Worked-out solutions to self-test questions are provided at the back of the book.

xix
Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


xx

Preface

A roadmap for selecting the proper statistical method is included at the front of the text to

help students select the proper technique and to make connections between topics.
Student surveys are included as an integrating theme for exercises across many chapters.

New to This Edition: Excel Coverage
This new fifth edition of Statistics for Managers Using Microsoft Excel enhances the Excel coverage of previous editions in a number of ways:
Totally rewritten Excel sections have been organized into end-of-chapter Excel
Companions for easy reference.
Wherever possible, Excel Companions present step-by-step instructions and Excel command
sequences that are compatible across all current versions of Excel, including Excel 2007.
Clearly marked separate Excel 97 2003 and Excel 2007 instructions are provided for those
Excel techniques that are fundamentally different in Excel 2007.
Basic Excel sections allow the use of Excel without any outside enhancement, and
PHStat2 sections describe the use of the PHStat2 add-in included on the student CD-ROM.
Margin notes link worksheet and chart illustrations to the instructions of Excel Companion
sections.
Worksheet illustrations, like the following example, display underlying cell formulas that
show how results are computed:

Chapter-by-Chapter Changes in the Fifth Edition
Each chapter includes a new opening page that displays the chapter sections and subsections.
Accompanying each chapter is an Excel Companion that discusses how to apply Microsoft Excel
to the statistical techniques of the chapter. In addition, the Excel Companion includes completely
new material for using Excel in most chapters. The following changes have been made to this fifth
edition:
Chapter 1 has rewritten Sections 1.1 (Why Learn Statistics), 1.2 (Statistics for Managers),
and 1.3 (Basic Vocabulary of Statistics) and a completely new Section 1.6 (Microsoft Excel
Worksheets). The sections on survey sampling have been moved to Chapter 7.
Chapter 2 includes a new data set concerning mutual fund returns for 2001 2005. Graphs
for a single variable are covered prior to graphs for two variables. Graphs for categorical
variables are covered prior to graphs for numerical variables. The examples in this chapter

refer to what to do with $1,000 and the cost of restaurant meals in addition to mutual fund
returns.
Chapter 3 includes a new data set concerning mutual fund returns for 2001 2005. The
examples in this chapter refer to the time to get ready in the morning as well as mutual fund

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


Preface

xxi

returns. Z scores for detecting outliers are now included. The sample covariance is now
included, as is the coefficient of correlation.
Chapter 4 now includes additional examples.
Chapter 5 covers the Poisson distribution prior to the hypergeometric distribution.
Chapter 6 has a simplified section on the normal probability plot. Coverage of sampling
distributions has been moved to a new Chapter 7.
Chapter 7 now covers sampling distributions along with types of survey sampling methods
and survey worthiness.
Chapter 8 has 28 new problems.
Chapter 9 uses a simple, six-step method to perform hypothesis tests using the critical value
approach and a straightforward five-step method to perform hypothesis tests using the pvalue.
Chapter 10 (formerly Chapter 13) now includes computations for the regression coefficients and sum of squares in chapter examples.
Chapter 11 (formerly Chapter 14) now covers R2, and adjusted R2 prior to residual analysis.

Hallmark Features
We have continued many of the traditions of past editions and have highlighted some of those features below:
Using Statistics business scenarios Each chapter begins with a Using Statistics example

that shows how statistics is used in accounting, finance, information systems, management,
or marketing. Each scenario is used throughout the chapter to provide an applied context for
the concepts.
Emphasis on data analysis and interpretation of Excel results We believe that the use
of computer software is an integral part of learning statistics. Our focus emphasizes analyzing data by interpreting the results from Microsoft Excel while reducing emphasis on doing
computations. For example, in the coverage of tables and charts in Chapter 2, the focus is on
the interpretation of various charts, not on their construction by hand. In our coverage of
hypothesis testing in Chapter 9, extensive computer results have been included so that the
p-value approach can be emphasized.
Pedagogical aides An active writing style, boxed numbered equations, set-off examples
to provide reinforcement for learning concepts, problems divided into Learning the
Basics and Applying the Concepts, key equations, and key terms are included.
Answers Most answers to the even-numbered exercises are provided in an appendix at the
end of the book.
PHStat2 This add-in, which is included on the student CD-ROM, extends the statistical
capabilities of Microsoft Excel and executes the low-level menu selection and worksheet
entry tasks associated with implementing statistical analysis in Excel. When combined with
the Analysis ToolPak add-in, virtually all statistical methods taught in an introductory
statistics course can be demonstrated using Microsoft Excel.
Web Cases A chapter-ending Web Case is included for each of the first 11 chapters. By
visiting Web sites related to the companies and researching the issues raised in the Using
Statistics scenarios that start each chapter, students learn to identify misuses of statistical
information. The Web Cases require students to sift through claims and assorted information in order to discover the data most relevant to the case. Students then determine
whether the conclusions and claims are supported by the data. (Instructional tips for using
the Web Cases and solutions to the Web Cases are included in the Instructor s Solutions
Manual.)
Case studies and team projects Detailed case studies are included in numerous chapters. A Springville Herald case is included at the end of most chapters as an integrating
theme. A team project relating to mutual funds is included in many chapters as an integrating theme.
Visual Explorations Microsoft Excel add-in workbook that allows students to interactively explore important statistical concepts in descriptive statistics, the normal distribution,

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


xxii

Preface

sampling distributions, and regression analysis. For example, in descriptive statistics, students observe the effect of changes in the data on the mean, median, quartiles, and standard
deviation. With the normal distribution, students see the effect of changes in the mean and
standard deviation on the areas under the normal curve. In sampling distributions, students
use simulation to explore the effect of sample size on a sampling distribution. In regression
analysis, students have the opportunity of fitting a line and observing how changes in the
slope and intercept affect the goodness of fit.

Supplement Package
The supplement package that accompanies this text includes the following:
Instructor s Solutions Manual This manual includes solutions for end-of-section and
end-of-chapter problems, answers to case questions, where applicable, and teaching tips for
each chapter. Electronic solutions are provided in Excel and Word formats.
Student Solutions Manual This manual provides detailed solutions to virtually all the
even-numbered exercises and worked-out solutions to the self-test problems.
Test Item File The Test Item File contains true/false, multiple-choice, fill-in, and problem-solving questions based on the definitions, concepts, and ideas developed in each
chapter of the text.
TestGen software A test bank has been designed for use with the TestGen test-generating
software. This computerized package allows instructors to custom design, save, and generate classroom tests. The test program permits instructors to edit, add, or delete questions
from the test bank; edit existing graphics and create new graphics; analyze test results; and
organize a database of tests and student results. This software allows for flexibility and ease
of use. It provides many options for organizing and displaying tests, along with a search and
sort feature. The program is available on the instructor s CD-ROM, and associated conversion files can be found online at the Instructor s Resource Center.

Instructor s Resource Center The Instructor s Resource Center contains the electronic
files for the complete Instructor s Solutions Manual, the Test Item File, and Lecture
PowerPoint presentations (www.prenhall.com/levine).
Course and Homework Management Tools
Prentice Hall s OneKey This tool offers the best teaching and learning resources, all
in one place. OneKey for Statistics for Managers Using Microsoft Excel, is all an instructor needs to plan and administer a course and is all students need for anytime, anywhere
access to course materials. Conveniently organized by textbook chapter, the compiled
resources include links to quizzes, PowerPoint presentations, data files, links to Web
Cases, a PHStat2 download, a Visual Explorations download, the Student Solutions
Manual, and additional instructor resources.
WebCT and Blackboard With a local installation of either course management system, Prentice Hall provides content designed especially for this textbook to create a complete course suite, tightly integrated with the system s course management tools.
PH GradeAssist This online homework and assessment system allows the instructor to
assign problems for student practice, homework, or quizzes. The problems, taken directly
from the text, are algorithmically generated, so each student gets a slightly different problem with a different answer. This feature allows students multiple attempts for more practice and improved competency. PH GradeAssist grades the results and can export them to
Microsoft Excel worksheets.
Companion Web site www.prenhall.com/levine contains the following:
An online study guide with true/false, multiple-choice, and essay questions designed to
test students comprehension of chapter topics
PowerPoint presentation files with chapter outlines and key equations
Student data files for text problems in Excel
PHStat2 Web site PHStat2 has a home page at www.prenhall.com/phstat.

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.


Preface

xxiii

Index page Web site An index page for the supporting material for all the
Web Cases included in the text can be found at www.prenhall.com/Springville/
SpringvilleSFM5e.htm.

Acknowledgments
We are extremely grateful to the Biometrika Trustees, American Cyanimid Company, the RAND
Corporation, the American Society for Testing and Materials for their kind permission to publish
various tables in Appendix E and the American Statistical Association for its permission to publish
diagrams from the American Statistician. Also, we are grateful to Professors George A. Johnson
and Joanne Tokle of Idaho State University and Ed Conn, Mountain States Potato Company, for
their kind permission to incorporate parts of their work as our Mountain States Potato Company
case in Chapter 15.

A Note of Thanks
We would like to thank John Beyers, University of Maryland, University College; Ephrem Eyob,
Virginia State University; Mickey Hepner, University of Central Oklahoma; Bill Jedicka, Harper
College; Morgan Jones, University of North Carolina; Michael Lewis, West Virginia State
University; Susan Pariseau, Merrimack College; Rupert Rhodd, Florida Atlantic University; Jim
Robison, Sonoma State University; Abdulhamid Sukar, Cameron University; and Gary Tikriti,
University of South Florida, St. Petersburg, for their comments, which have made this a better book.
We would especially like to thank Mark Pfaltzgraff, Jeff Shelstad, Eric Frank, Anne Graydon,
Cynthia Zonneveld, Nancy Welcher, Ashley Lulling, Barbara Witmer, Kelly Loftus, and Laura
Cirigliano of the editorial, marketing, and production teams at Prentice Hall. We would like to
thank our statistical reader and accuracy checker Annie Puciloski for her diligence in checking our
work; Kitty Jarrett for her copyediting; Julie Kennedy for her proofreading; and Heidi Allgair,
Sandra Krausman, and Cindy Miller of GGS Book Services, for their work in the production of
this text.
Finally, we would like to thank our parents, wives, and children for their patience, understanding, love, and assistance in making this book a reality. It is to them that we dedicate this book.

Concluding Remarks

We have gone to great lengths to make this text both pedagogically sound and error free. If you
have any suggestions or require clarification about any of the material, or if you find any errors,
please contact us at or Include
the phrase SMUME edition 5 in the subject line of your email. For more information about
using PHStat2, see Appendix F, review the PHStat2 readme file on the student CD-ROM, and
visit the PHStat2 Web site, at www.prenhall.com/phstat.
David M. Levine
David F. Stephan
Timothy C. Krehbiel
Mark L. Berenson

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.



CHAPTER 1
Introduction and Data Collection
1.1

WHY LEARN STATISTICS

1.2

STATISTICS FOR MANAGERS
How This Text Is Organized

USING STATISTICS @ Good Tunes
1.3

BASIC VOCABULARY OF STATISTICS

1.4

DATA COLLECTION

1.5

TYPES OF VARIABLES
Levels of Measurement and Measurement Scales

1.6

MICROSOFT EXCEL WORKSHEETS
Worksheet Cells
Designing Effective Worksheets

EXCEL COMPANION TO CHAPTER 1
E1.1 Preliminaries: Basic Computing Skills
E1.2 Basic Workbook Operations
E1.3 Worksheet Entries
E1.4 Worksheet Formatting
E1.5 Copy-and-Paste Operations
E1.6 Add-ins: Making Things Easier for You

LEARNING OBJECTIVES
This chapter will help you learn:
* How statistics is used in business
* The sources of data used in business
* The types of data used in business

* The basics of Microsoft Excel

Statistics for Managers Using Microsoft Excel, Fifth Edition, by David M. Levine, Mark L. Berenson, and Timothy C. Krehbiel. Published by Prentice Hall.
Copyright 2008 by Pearson Education, Inc.