7/31/2019 Unit7 Complete

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9707/1,2 Business Studies Unit 7: Information for Decision-making

A Levels

INFORMATION FOR DECISION MAKING

1) Collection of data(Market Resource)2) Presentation of data (Market Resource)3) Analysis and evaluation of data.

Before we analyze the data we should known whether the data is reliable or not.

Factors influencing the reliability of data1. Whether the data is primary or secondary in nature.2. Sample size the longer the sample size the more reliable the data is.3. Sampling method if it is not reliable then data isnt too.4. Questionnaire bias reading question, not understanding the questions.5. Response rate respondents may lie or dont answer at all.

Much of the information that a business collects will be too detailed to be useful. It is necessary for thisraw data to be organized properly so that decision makers can use it effectively. Following methods areused for this purpose:1, Measures of central tendency averages mean, median, mode

2. Measures of dispersion inter-quartile range

Measures of central tendencyIt is a measure of the most likely or common result from a set of data. It is also known as averages. Thethree most commonly used average types are:

1. Arithmetic mean2. mode3. median

MeanMean is a figure that shows the average result of any data. It is calculated (for ungrouped data) by thefollowing formula:-

valuesofNo

valuesallofSumx

.=

For grouped data it is calculated as:

f

xfx

=

)(

(x)Qty of stock Frequency f f(x) Cumulative2812

144

1264120

16080

21022

2630

6810

1214

40 420

f

xfx

=

)(

unitsx 5.1040

420==

10units show the order it places on average every time.Therefore, the business on average orders 1011 units whenever it places an order. The company mightuse this figure as its average order quantity for stock control purpose.The biggest limitation of mean is the effect of extreme values. A very large value or a very small valuewould give a very wrong mean i.e. not very accurate.

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7/31/2019 Unit7 Complete

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7/31/2019 Unit7 Complete

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9707/1,2 Business Studies Unit 7: Information for Decision-making

A Levels

Measures of dispersionIt is the measure of spread of the data. In some cases information is widely spread and in others there is anarrow dispersion. The following methods are generally used for calculating dispersion:

1. range2. inter-quartile range3. standard deviation not part of

4. variance AS or A2 syllabus

Range:It is the easiest and simplest method to calculate dispersion. It is the difference between the highest andthe lowest value in a set of data.

Range = highest value lowest valueOR

= maximum value minimum value

Range is also distorted by extreme high or low values. In such cases sometimes the highest and thelowest value are excluded. That type of range is known as BUTTER RANGE.

Inter-quartile Range:

The inter-quartile range considers the range within the control 50% of the set of data. It therefore ignoresthe top and bottom 25% of the data. The inter-quartile range is therefore narrow than the range. For largeamounts of data, deciles and percentiles are also used.

Steps to calculate the inter-quartile range:1. In order to calculate the inter-quartile range it is necessary to arrange data with lowest item first

and the highest item last (ascending order).2. Then the first quartile which is a quarter of the ascending ordered data set must be found. It is

possible to calculate the first quartile using the formula:

First Quartile (Q1) =4

n

where n equals the number of values.

3. Then the third quartile has to be calculated which is threequarters of the way. The third quartilecan be calculated using the formula:

Third Quartile (Q3) =4

3n

4. The difference between the first and the third quartile gives the inter-quartile range.

Unit 7

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