Statistical Analysis for Managers Week 3

APPLICATIONS OF DISTRIBUTIONS IN THE BUSINESS WORLD The Normal Distribution
Here are examples of variables that might follow a normal distribution and for which the techniques of this chapter are useful: Manufacturing
1. Dollar value of inventory 2. Percent defective in manufacturing process 3. Number of days to receive shipments 4. Number of overtime hours per week 5. Hours of labor per unit 6. Weights of manufactured parts

Marketing:
1. Ages of credit card holders 2. Numerical ratings of store performance by customers 3. Monthly market share 4. % of customers lost per month 5. Miles travelled by customers to store

Finance:
1. Interest rates paid as deviation from prime rate 2. Company’s stock price as % of Dow Jones 3. Ratios of annual dividends to earnings 4. Several companies’ price/earnings ratios

Accounting:
1. Accounts receivable 2. Accounts payable 3. Cash balance 4. Value of inventory

Personnel:
1. Time with company 2. Years of education 3. Score on company entrance test 4. Job performance rates 5. Annual salary 6. Sick days taken per year

Quality Control:
1. Time between defects 2. Defective items per shift 3. % out of tolerance
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Statistical Analysis for Managers Week 3

4. Time until part failure 5. Time until defective condition detected

The Binomial Distribution
The binomial distribution is widely applicable in business because so many situations involve the concept of success versus failure. Some examples of situations that can be modeled with the binomial distribution are:
1. Manufactured or purchased parts either meet quality control specifications or don’t. 2. A factory either makes its shift quota or does not. 3. An item sold to a customer or warranty either is returned for repair or is not. 4. A customer buying a major appliance either returns for another purchase or