Business Statistics

WORKSHOP 4 SOLUTIONS
Q4.1
Digital World manufactures 65% of its motherboards at a factory in China and 35% at a
factory in Australia. Of those manufactured in China, 3% are defective, but 12% of those
manufactured in Australia are defective.

In the following, calculate any probabilities to 2 decimal places.

(a) Draw a well-labelled tree diagram for this problem. Show all joint probabilities. Use the
following notation in all of your answers.

D: a motherboard is defective; D : it is not defective.

C: a motherboard was manufactured in China; C it was not manufactured in China (i.e.

it was manufactured in Australia).

P(C and D)=0.02

P(D|C)=0.03

P(C)= 0.65 P(C and )=0.63

P( |C)=0.97

P( and D)=0.04
P(D| )=0.12

P( )= 0.35
0.35

P( | )= 0.88 P( and )=0.31

(b) If a motherboard is from China, what is the probability it is defective?

P(D|C) = 0.03

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(c) If a motherboard is defective, what is the probability it is from China?

P(C and D) P(C and D)

P(C | D)  
P( D) P(C and D)  P(C and D)

0.02
 0.33
0.02  0.04

(d) Are the events C and D mutually exclusive? Explain.

No they are not mutually exclusive because some defective motherboards come from
China.
P(C and D) = 0.02 0

(e) Are the events C and D independent? Explain.

If the events are independent then P(D|C) = P(D).

• P(D|C) was shown in (b) and it equals 0.03

• P(D) = P(C and D) +P(C and D) =0.02+0.04 = 0.06

Since these two answers are different, the events C and D are not independent.
Video Solution for Q4.1

Q4.2
A company has submitted a bid for each of two separate government contracts: A and B.
The company feels it has a 50% chance of winning contract A, a 30% chance of winning
contract B and a 20% chance of winning both contracts.
(a) Which approach do you think was used to assign probabilities to the above events –
theoretical, relative frequency or subjective? Explain your answer.

Subjective. Usually contracts that a firm bids for are all different, so there is unlikely to
be a history of similar bids from which long run relative frequency could be calculated.
Especially since the company only “feels” it has these probabilities, we conclude a
subjective approach was used.

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(b) Is a tree or a table the most convenient way to represent the given information? Why?
Construct the appropriate tree or table.

Marginal and joint probabilities are given. These can be placed directly in a table.
Therefore a table is the most convenient.

B Not B Total
A 0.2 0.3 0.5
Not A 0.1 0.4 0.5
Total 0.3 0.7 1

(c) Calculate the probability of each of the following events. Show your working.
(i) The probability that the company will win at least one of the contracts.
P( A or B)  P( A and B)  P( A and B )  P( A and B)
 0.2  0.3  0.1
 0.6
OR P(A or B) = P(A) + P(B) – P(A and B) = 0.5+0.3-0.2=0.6
(ii) The probability that the company will win neither of the contracts.

P( A and B )  0.4

(iii) The probability that the company will fail to win contract B, given that it does win
contract A.
P( B and A) 0.3
P( B | A)    0.6
P( A) 0.5

(iv) The probability that the company will win one contract.
P (one contract) = 𝑃(𝐴̅ ∩ 𝐵) + 𝑃(𝐴 ∩ 𝐵̅ ) = 0.1 + 0.3 = 0.4

Video solution for Q4.2

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Q4.3
From experience, a retailer has determined that the number of broken light bulbs, X, in a box
containing 10 dozen Super brand light bulbs has the following probability distribution:

X 0 1 2 3
Probability 0.80 0.10 0.05 0.05

Suppose that the retailer has just received 15 boxes of Super light bulbs. Let Y be the
number of boxes with no broken light bulbs.

(a) What kind of probability distribution does Y have? State the values of the parameters.

Y has a binomial distribution with n  15 and p  0.8

(b) What is the probability that there are no more than 13 but at least 6 boxes with no broken
light bulbs? (USE EXCEL)
P(6≤Y≤13) = P(Y≤13) – P(Y≤5) = 0.8329-0.0001=0.8328
EXCEL FUNCTION: "=BINOM.DIST(13,15,0.8,TRUE) - BINOM.DIST(5,15,0.8,TRUE)"

(c) What is the expected number of boxes with no broken light bulbs?
E(Y) = µ = np = 15 X 0.8 = 12

(d) What is the standard deviation of number of boxes with no broken light bulbs?
Var(Y) = np(1-p) = 12(1-0.8) = 2.4
Std dev(Y) = √2.4 = 1.549

Video solution for Q4.3

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Further practice
Q4.4
Consider a binomial experiment with 12 trials, which results in X successes. To complete the
following question you may wish to refer to a number line:
0 1 2 3 4 5 6 7 8 9 10 11 12
For each phrase in the first column, write down the corresponding inequality or inequalities,
and the list of numbers specified by this phrase. Then write the probability that X satisfies
this condition in terms of cumulative probabilities, i.e. probabilities of the form P( X  a) . As
an example, the first two are completed.

X is at least 7 X≥7 7, 8, 9, 10, 11, 12 1-P(X ≤ 6)

X is at most 7 X≤7 0,1,2,3,4,5,6,7 P(X ≤ 7)
X is less than 7 X 7 0,1,2,3,4,5,6 P( X  6)
X is no more than 3 X 3 0,1,2,3 P( X  3)
X is more than 3 X 3 4,5,6,7,8,9,10,11,12 1  P( X  3)
X is 9 or more X 9 9,10,11,12 1  P( X  8)
X is at least 3 but 3 X 9 3,4,5,6,7,8 P( X  8)  P( X  2)
less than 9
X is no less than 8 X 8 8,9,10,11,12 1  P( X  7)
X is between 4 and 4 X 8 4,5,6,7,8 P( X  8)  P( X  3)
8 (inclusive of both)

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Business Statistics

Q4.5
From experience, a retailer has determined that the number of broken light bulbs, X, in a box
containing 10 dozen Super brand light bulbs has the following probability distribution:

X 0 1 2 3
Probability 0.80 0.10 0.05 0.05

(a) What is the probability that in a randomly selected box of Super light bulbs, there is
more than one broken light bulb?
Let X=number of broken light bulbs
P(X > 1) = P(X=2)+P(X=3) = 0.05+0.05 = 0.1

(b) What is the expected value of the random variable X ?

E(X)=( 0X 0.80) + (1 X0.10) + (2X0.05) + (3X 0.05) = 0.35

(c) What is the standard deviation of the random variable X ?

Var(X)= (0- 0.35)2 X 0.80 + (1- 0.35)2 X 0.10 + (2- 0.35)2 X0.05 + (3- 0.35)2 X 0.05
= 0.098 + 0.04225 + 0.136125 + 0.351125 = 0.6275
So Standard deviation = √ 0.6275 = 0.792

Q4.6
Among households in which at least one child is attending a private school, it is found that
the total number of tablets (iPad, Kindle, etc.) owned by members of the household has the
following probability distribution:

Number of tablets X 0 1 2 3 4 5 6 or
more
Probability P( X ) 0.33 0.25 0.22 0.12 0.07 0.01 0.00

(a) Set up a table in Excel as follows.

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Business Statistics

P( X ) X  P( X ) P( X )  ( X   ) 2
0 0.33 0 0.6285
1 0.25 0.25 0.0361
2 0.22 0.44 0.0845
3 0.12 0.36 0.3149
4 0.07 0.28 0.4805
5 0.01 0.05 0.1310
Total 1.38 1.6756

(b) Use the table above to calculate the mean  and standard deviation  of the number of
tablets. Also find the median number of tablets.

Mean number = 1.38

Standard deviation = √1.6756 = 1.29
Median = 1 (refer to cumulative column in the table below- and look for the 50th
percentile. Therefore it’s located in the second row of the table where X=1. )

Cumulative
P( X ) probability
0 0.33 0.33
1 0.25 0.58
2 0.22 0.80
3 0.12 0.92
4 0.07 0.99
5 0.01 1.00
Total