Applied

Statistics
in Business and Economics
Fourth Edition

David P. Doane
Oakland University

Lori E. Seward
University of Colorado

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APPLIED STATISTICS IN BUSINESS AND ECONOMICS

Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221.
Avenue of the Americas, New York, NY, 10020. Copyright 2013, 2011, 2009, 2007 by
The McGraw-Hill Companies, Inc. All rights reserved. Printed in the United States of America.
No part of this publication may be reproduced or distributed in any form or by any means,
or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill
Companies, Inc., including, but not limited to, in any network or other electronic storage or
transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 3 2
ISBN 978-0-07-352148-0
MHID 0-07-352148-5
Vice president and editor-in-chief: Brent Gordon
Publisher: Tim Vertovec
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Library of Congress Cataloging-in-Publication Data
Doane, David P.
Applied statistics in business and economics / David P. Doane, Lori E. Seward. 4th ed.
p. cm.
1. Commercial statistics. 2. ManagementStatistical methods. 3. EconomicsStatistical methods.
4. Statistics. I. Seward, Lori Welte, 1962- II. Title.
HF1017.D55 2013
519.5dc23
2011042028

www.mhhe.com

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ABOUT THE AUTHORS

David P. Doane
David P. Doane is a Certified Professional Statistician (PStatTM) by the American Statistical Association. He is a professor of quantitative methods in Oakland Universitys Department of Decision and Information Sciences. He earned his Bachelor
of Arts degree in mathematics and economics at the University of Kansas and his
PhD from Purdue Universitys Krannert Graduate School. His research and teaching interests include applied statistics, forecasting, and statistical education. He is
corecipient of three National Science Foundation grants to develop software to
teach statistics and to create a computer classroom. He is a longtime member of the
American Statistical Association, serving in 2002 as president of the Detroit ASA
chapter, where he remains on the board. He has consulted with government, health
care organizations, and local firms. He has published articles in many academic journals and is the author of LearningStats (McGraw-Hill, 2003, 2007) and co-author of
Visual Statistics (McGraw-Hill, 1997, 2001).

Lori E. Seward
Lori E. Seward is a senior instructor of Operations Management in The Leeds School
of Business at the University of Colorado in Boulder. She earned her Bachelor of Science and Master of Science degrees in Industrial Engineering at Virginia Tech. After
several years working as a reliability and quality engineer in the paper and automotive
industries, she earned her PhD from Virginia Tech and joined the faculty at The Leeds
School in 1998. She has been the coordinator of the undergraduate core business statistics course and currently teaches the core MBA statistics course. She is also responsible
for coordinating the undergraduate program in Operations Management. She served as
the chair of the INFORMS Teachers Workshop for the annual 2004 meeting. Her teaching interests focus on developing pedagogy that uses technology to create a collaborative learning environment in large undergraduate and MBA statistics courses. Her most
recent article, co-authored with David Doane, was published in the Journal of Statistics
Education (2011).

DEDICATION
To Robert Hamilton Doane-Solomon

David
To all my students who challenged me to make statistics relevant to their lives.

Lori
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FROM THE
How often have you heard people/students say about a particular subject, Ill never use this in the real world?
I thought statistics was a bit on the math-geeky side at first. Imagine my horror when I saw , R2, and correlations on several financial reports at my current job (an intern position at a financial services company). I
realized then that I had better try to understand some of this stuff.
Jill Odette (an introductory statistics student)
As recently as a decade ago our students used to ask us, How do I use statistics? Today wemore often hear, Why
should I use statistics? Applied Statistics in Business and Economics has attempted to provide real meaning to the
use of statistics in our world by using real business situations and real data and appealing to your need to know why
rather than justhow.
With over 50 years of teaching statistics between the two of us, we feel we have something to offer. Seeing how
students have changed as the new century unfolds has required us to adapt and seek out better ways of instruction. So
we wrote Applied Statistics in Business and Economics to meet four distinct objectives.
Objective 1: Communicate the Meaning of Variation in a Business Context Variation exists everywhere in the world
around us. Successful businesses know how to measure variation. They also know how to tell when variation should
be responded to and when it should be left alone. Well show how businesses do this.
Objective 2: Use Real Data and Real Business Applications Examples, case studies, and problems are taken from
published research or real applications whenever possible. Hypothetical data are used when it seems the best way to
illustrate a concept. You can usually tell the difference by examining the footnotes citing the source.
Objective 3: Incorporate Current Statistical Practices and Offer Practical Advice With the increased reliance on
computers, statistics practitioners have changed the way they use statistical tools. Well show the current practices and
explain why they are used the way they are. We will also tell you when each technique should not be used.
Objective 4: Provide More In-Depth Explanation of the Why and Let the Software Take Care of the How It is critical to
understand the importance of communicating with data. Todays computer capabilities make it much easier to summarize
and display data than ever before. We demonstrate easily mastered software techniques using the common software available.
We also spend a great deal of time on the idea that there are risks in decision making and those risks should be quantified
and directly considered in every business decision.
Our experience tells us that students want to be given credit for the experience they bring to the college classroom.
We have tried to honor this by choosing examples and exercises set in situations that will draw on students already vast
knowledge of the world and knowledge gained from other classes. Emphasis is on thinking about data, choosing appropriate analytic tools, using computers effectively, and recognizing limitations of statistics.

Whats New in This Fourth Edition?

In this fourth edition we have listened to you and have made many changes that you asked for. We sought advice from
students and faculty who are currently using the textbook, objective reviewers at a variety of colleges and universities,
and participants in focus groups on teaching statistics with technology. At the end of this preface is a detailed list of
chapter-by-chapter improvements, but here are just a few of them:
Step-by-step instructions and many new screen shots on using Excel 2010 for descriptive statistics, histograms, scatter
plots, line charts, fitting trends, and probability calculations.
Appendix Ja new reference tool for Excel 2010 functions using standard textbook notation.
Substantially updated exercises with emphasis on compatibility with Connect.
Well-indexed exercises, quizzes, and test bank questions matched with topics and learning objectives.
Addition of topics requested by reviewers, including stem-and-leaf displays, weighted mean, finite populations,
and logistic regression.
Lots of updated exercises and skill-focused business context exercises.
Rewritten instructors manual with step-by-step solutions.
New and updated Mini Cases for economics and business.
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AUTHORS
Improved explanations of data types, random sampling, probability, and distributions.
Improved discussion and visuals for quartiles, percentiles, outliers, and boxplots.
Reorganized and expanded discussion of sampling error and estimating from finite populations.
Streamlined sections on Types I and II error, hypothesis formulation, and decision rules.
More focus on one-factor ANOVA and interpreting ANOVA results.
Better articulated learning objectives for regression with new visuals, improved notation, and intuitive explanations of
error assumptions, residual tests, and categorical variables.
Excels CHISQ.TEST function and new exercises on the multinomial and Poisson GOF tests.
New treatment of Wilcoxon rank sum test (MannWhitney test) with illustration of two versions.
Condensed material on quality management with more focus on tools and service quality.
Updated treatment of simulation based on new Excel functions and new @Risk software.
End of each chapter guides to downloads from the Online Learning Center (simulations,
demonstrations, tips, and video tutorials for Excel, MegaStat, and MINITAB).

Software
Excel is used throughout this book because it is available everywhere. Some calculations are illustrated using MegaStat,
an Excel add-in whose Excel-based menus and spreadsheet format offer more capability than Excels Data Analysis Tools.
MINITAB menus and examples are also included to point out similarities and differences of these tools. To assist students
who need extra help or catch up work, the text website contains tutorials or demonstrations on using Excel, MINITAB,
or MegaStat for the tasks of each chapter. At the end of each chapter is a list of LearningStats demonstrations thatillustrate
the concepts from the chapter. These demonstrations can be downloaded from the text website (www.mhhe.com/doane4e).

Math Level
The assumed level of mathematics is pre-calculus, though there are rare references to calculus where it might help
the better-trained reader. All but the simplest proofs and derivations are omitted, though key assumptions are stated
clearly. The learner is advised what to do when these assumptions are not fulfilled. Worked examples are included
for basic calculations, but the textbook does assume that computers will do the calculations after the statistics class
is over, so, interpretation is paramount. End-of-chapter references and suggested websites are given so that interested
readers can deepen their understanding.

Exercises
Simple practice exercises are placed within each section. End-of-chapter exercises tend to be more integrative or to be
embedded in more realistic contexts. Attention has been given to revising exercises so that they have clear-cut answers
that are matched to specific learning objectives. A few exercises invite short answers rather than just quoting a formula.
Answers to most odd-numbered exercises are in the back of the book (all of the answers are in the instructors manual).

LearningStats
LearningStats is a downloadable collection of Excel spreadsheets, Word documents, and PowerPoints for each chapter. It
is intended to let students explore data and concepts at their own pace, ignoring material they already know and focusing
on things that interest them. LearningStats includes explanations on topics that are not covered in other software packages, such as how to write effective reports, how to perform calculations, or how to make effective charts. It also includes
topics that did not appear prominently in the textbook (e.g., partial F-test, DurbinWatson test, sign test, bootstrap
simulation, and logistic regression). Instructors can use LearningStats PowerPoint presentations in the classroom, but
students can also use them for self-instruction. No instructor can cover everything, but students can be encouraged to
explore LearningStats data sets and/or demonstrations perhaps with an instructors guidance.
David P. Doane
Lori E. Seward
vii

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HOW ARE CHAPTERS ORGANIZED

Chapter Contents
Each chapter begins with a short list of
section topics that are covered in the
chapter.

CHAPTER CONTENTS

Chapter Learning Objectives

Each chapter includes a list of learning objectives students should be able
to attain upon reading and studying the
chapter material. Learning objectives
give students an overview of what is expected and identify the goals for learning.
Learning objectives also appear next to
chapter topics in the margins.

Section Exercises

1.1

What Is Statistics?

1.2

Why Study Statistics?

1.3

Uses of Statistics

1.4

Statistical Challenges

1.5

Critical Thinking

CHAPTER LEARNING
OBJECTIVES
When you nish this chapter you should be able to
LO 1-1 Dene statistics and explain some of its uses in business.
LO 1-2 List reasons for a business student to study statistics.
LO 1-3 State the common challenges facing business professionals using statistics.
LO 1-4 List and explain common statistical pitfalls.

SECTION EXERCISES

Multiple section exercises are found

throughout the chapter so that students
can focus on material just learned.

4.34 Scores on an accounting exam ranged from 42 to 96, with quartiles Q1 5 61, Q2 5 77, and
Q3 5 85. (a) Sketch a simple boxplot (5-number summary without fences) using a nicely
scaled X-axis. (b) Describe its shape (skewed left, symmetric, skewed right).
4.35 In 2007, total compensation (in thousands of dollars) for 40 randomly chosen CEOs ranged
from 790 to 192,920, with quartiles Q1 5 3,825, Q2 5 8,890, and Q3 5 17,948. (a) Sketch
a simple boxplot (5-number summary without fences) using a nicely scaled X-axis. (b) Describe its shape (skewed left, symmetric, skewed right).
4.36 The Comer-Correr Taco Wagon is only open from 11:00 a.m. to 2:00 p.m. on Saturday. The
owner kept track of the number of customers served on Saturday for 60 weeks. (a)Visually
estimate the quartiles Q1, Q2, Q3. (b) Approximately how many customers were served on the
busiest day? The slowest day? (c) Is the distribution symmetric?
Customers

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10

Mini Cases

20

30

40
Customers per Day

50

70

4.7

Mini Case

Every chapter includes two or three mini

cases, which are solved applications. They
show and illlustrate the analytical application of specific statistical concepts at a
deeper level than the examples.

60

Vail Resorts Customer Satisfaction

Figure 4.35 is a matrix showing correlations between several satisfaction variables from
a sample of respondents to a Vail Resorts satisfaction survey. The correlations are all
positive, suggesting that greater satisfaction with any one of these criteria tends to be
associated with greater satisfaction with the others (positive covariance). The highest
correlation (r 5 0.488) is between SkiSafe (attention to skier safety) and SkiPatV
(Ski Patrol visibility). This makes intuitive sense. When a skier sees a ski patroller, you
would expect increased perception that the organization is concerned with skier safety.
While many of the correlations seem small, they are all statistically significant (as you
will learn in Chapter 12).

FIGURE 4.35
doa21485_ch04_110-171.indd 150

Correlation Matrix of Skier Satisfaction Variables (n 5 502)

VailGuestSat
LiftOps

LiftWait

TrailVar

SnoAmt

GroomT

SkiSafe

LiftOps

1.000

LiftWait

0.180

1.000

TrailVar

0.206

0.128

1.000

SnoAmt

0.242

0.227

0.373

1.000

GroomT

0.271

0.251

0.221

0.299

1.000

SkiSafe

0.306

0.196

0.172

0.200

0.274

1.000

SkiPatV

0.190

0.207

0.172

0.184

0.149

0.488

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SkiPatV

1.000

viii

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TO PROMOTE STUDENT LEARNING?

Figures and Tables
Throughout the text, there are hundreds of charts, graphs, tables, and spreadsheets to illustrate statistical concepts
being applied. These visuals help stimulate student interest and clarify the text explanations.

FIGURE 4.19
Center versus Variability
Machine B
Variability is acceptable, but
process is incorrectly centered

Actual

12

Desired

Actual

10

15

Percent

Percent

20

Machine A
Process is correctly centered,
but variation is excessive

10
5

Desired

8
6
4
2

0
4.988

4.992

4.996 5.000 5.004

Diameter of Hole

5.008

4.992 4.994 4.996 4.998 5.000 5.002 5.004

Diameter of Hole

5.012

TABLE 4.7
JetBlue Airlines Revenue
(millions of dollars)
JetBlue

Year

Revenue

2006
2007
2008
2009
2010

2,361
2,843
3,392
3,292
3,779

Source: http://money.msn.com. Data are for December 31 of each year.

Examples

U.S. Trade
USTrade

Figure 3.15 shows the U.S. balance of trade. The arithmetic scale shows that
growth has been exponential. Yet, although exports and imports are increasing in
absolute terms, the log graph suggests that the growth rate in both series may be
slowing because the log graph is slightly concave. On the log graph, the recently
increasing trade deficit is not relatively as large. Regardless how it is displayed, the
trade deficit remains a concern for policymakers, for fear that foreigners may no
longer wish to purchase U.S. debt instruments to finance the trade deficit.

FIGURE 3.15
Comparison of Arithmetic and Log Scales

USTrade

U.S. Balance of Trade, 19802010

U.S. Balance of Trade, 19802010

3,000

10,000
Exports

2,500

Imports

Exports
Billions of Dollars

doa21485_ch04_110-171.indd 134

EXAMPLE 3.2

Billions of Dollars

Examples of interest to
students are taken from
published research or real
applications to illustrate
the statistics concept. For
the most part, examples
are focused on business,
but there are also some
that are more general and
dont require any prerequisite knowledge. And
there are some that are
based on student projects.

2,000
1,500
1,000
500
0
1980

1985

1990

1995

2000

2005

2010

Imports

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1,000

100

10
1980

1985

1990

1995

2000

2005

2010

Source: Economic Report of the President, 2011, Table B24.

Data Set Icon

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A data set icon is used throughout the text to identify data sets used in the figures, examples,
and exercises that are included on the Online Learning Center (OLC) for the text.
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USTrade
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HOW DOES THIS TEXT REINFORCE

Chapter Summary

CHAPTER SUMMARY

Chapter summaries provide

an overview of the material
covered in the chapter.

For a set of observations on a single numerical variable, a stem-and-leaf plot or a dot plot displays
the individual data values, while a frequency distribution classifies the data into classes called bins for
a histogram of frequencies for each bin. The number of bins and their limits are matters left to your
judgment, though Sturges Ruleoffers advice on the number of bins. The line chart shows values of
one or more time series variables plotted against time. A log scale is sometimes used in time series
charts when data vary by orders of magnitude. The bar chart or column chart shows a numerical data
value for each category of an attribute. However, a bar chart can also be used for a time series. A
scatter plot can reveal the association (or lack of association) between two variables X and Y. The
pie chart (showing a numerical data value for each category of an attribute if the data values are parts
of a whole) is common but should be used with caution. Sometimes a simple table is the best visual
display. Creating effective visual displays is an acquired skill. Excel offers a wide range of charts from
which to choose. Deceptive graphs are found frequently in both media and business presentations,
and the consumer should be aware of common errors.

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Key Terms

KEY TERMS

Key terms are highlighted

and defined within the text.
They are also listed at the
ends of chapters, along with
chapter page references, to
aid in reviewing.

Commonly Used
Formulas

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Center
geometric mean, 123
mean, 113
median, 115
midhinge, 145
midrange, 124
mode, 116
trimmed mean, 124
weighted mean, 152

Shape
bimodal
distribution, 118
kurtosis, 155
leptokurtic, 155
mesokurtic, 155
multimodal
distribution, 118
negatively
skewed, 118
platykurtic, 155
positively skewed, 118

Variability
Chebyshevs
Theorem, 134
coefficient of
variation, 130
Empirical Rule, 134
mean absolute
deviation, 131
outliers, 135
population
variance, 128
range, 127

Other
box plot, 143
covariance, 148
five-number
summary, 143
interquartile
range, 140
method of
medians, 141
quartiles, 140
sample correlation
coefficient, 147

Commonly Used Formulas in Descriptive Statistics

Sample mean:

Some chapters provide a

listing of commonly used
formulas for the topic under
discussion.

Geometric mean:
Growth rate:
Range:
Midrange:

1
x 5 __
n
__

O
n

xi

i 51

__________

G 5 x1x2 . . . xn
GR 5

___
xn
___
21

n21

x1

Range 5 xmax 2 xmin

xmax 1 xmin
Midrange 5 __________
2

___________
n
__

(xi 2 x )2

Sample standard deviation:

s5

i 51
___________

n21

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Chapter Review
Each chapter has a list of
questions for student selfreview or for discussion.

CHAPTER REVIEW
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1. Define (a) random process; (b) random variable; (c) discrete random variable; and (d) probability distribution.

11/29/11 3:50 PM

2. Without using formulas, explain the meaning of (a) expected value of a random variable;
(b)actuarial fairness; and (c) variance of a random variable.
3. What is the difference between a PDF and a CDF? Sketch a picture of each.
4. (a) What are the two parameters of a uniform distribution? (b) Why is the uniform distribution
the first one considered in this chapter?
5. (a) Describe a Bernoulli experiment and give two examples. (b) What is the connection between
a Bernoulli experiment and a binomial distribution?

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STUDENT LEARNING?
Chapter Exercises

4.85 (a) Sort the data and find Xmin and Xmax. (b) Choose a data set and prepare a brief, descriptive
report. You may use any computer software you wish (e.g., Excel, MegaStat, MINITAB).
Include relevant worksheets or graphs in your report. If some questions do not apply to
your data set, explain why not. Make a histogram. Describe its shape. (c) Calculate the mean
and median. Are the data skewed? (d) Calculate the standard deviation. (e) Standardize the
data and check for outliers. (f) Calculate the quartiles and make a box plot. Describe its
appearance.

Exercises give students an opportunity to test their understanding of the chapter material.
Exercises are included at the
ends of sections and at the ends
of chapters. Some exercises contain data sets, identified by data
set icons. Data sets can be accessed on the Online Learning
Center and used to solve problems in the text.

DATA SET A

Advertising Dollars as Percent of Sales in Selected

Industries (n 5 30)
Ads
Industry

Percent

0.9
5.5
7.4

Accident and health insurance

Apparel and other nished products
Beverages

1.9
1.8
11.3

Steel works and blast furnaces

Tires and inner tubes
Wine, brandy, and spirits

Source: George E. Belch and Michael A. Belch, Advertising and Promotion, pp. 219220. Copyright 2004 Richard D. Irwin.
Used with permission of McGraw-Hill Companies, Inc.

Online Learning
Resources
LearningStats, included on the
Online Learning Center (OLC:
www.mhhe.com/doane4e), provides a means for students to
explore data and concepts at
their own pace. Applications
that relate to the material in the
chapter are identified by topic at
the ends of chapters under Online Learning Resources.

CHAPTER 3

Online Learning Resources

The Online Learning Center (OLC) at www.mhhe.com/doane4e has several LearningStats demonstrations to help you understand visual data displays. Your instructor may assign one or
more of them, or you may decide to download the ones that sound interesting.

Topic

LearningStats Demonstrations

Effective visual displays

Presenting DataI
Presenting DataII
EDA Graphics

How to make an Excel chart

Excel Charts: Step-by-Step

Pivot Tables: Step-by-Step
Using MegaStat
Excel Charts: Histograms
Using MINITAB

Applications

Bimodal Data
Sturges Rule
Stem-and-Leaf Plots

Screen Cam Tutorials

Excel Basics
Making Excel Histograms
Making Scatter Plots

Key:

=PowerPoint

=Word

=Excel

=Screen Cam Tutorials

doa21485_ch04_110-171.indd 166

Exam Review Questions

At the end of a group of chapters, students can review the
material they covered in those
chapters. This provides them
with an opportunity to test
themselves on their grasp of the
material.

EXAM REVIEW
QUESTIONS FOR
CHAPTERS 57

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1. Which type of probability (empirical, classical, subjective) is each of the following?

a. On a given Friday, the probability that Flight 277 to Chicago is on time is 23.7%.
b. Your chance of going to Disney World next year is 10%.
c. The chance of rolling a 3 on two dice is 1y8.
2. For the following contingency table, find (a) P(H T ); (b) P(S | G); (c) P(S)
R

10

50

30

Row Total
90

20

50

40

110

Col Total

30

100

70

200

3. If P(A) 5 .30, P(B) 5 .70, and P(A B) 5 .25, are A and B independent events? Explain.
4. Which statement is false? Explain.
a. If P(A) 5 .05, then the odds against event As occurrence are 19 to 1.
b. If A and B are mutually exclusive events, then P(A B) 5 0.
c. The number of permutations of 5 things taken 2 at a time is 20.

xi

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WHAT TECHNOLOGY CONNECTS STUDENTS

McGraw-Hill Connect
Business Statistcs

business statistics

McGraw-Hill Connect Business Statistics is an online assignment and assessment solution that connects students with

the tools and resources theyll need to achieve success through faster learning, higher retention, and more efficient
studying. It provides instructors with tools to quickly pick content and assignments according to the topics they want
to emphasize.
Connect Business Statistics
helps students learn more efficiently by providing practice material and feedback when they are
needed. Connect grades homework automatically
and provides feedback on any questions that students may have missed.
Online Assignments.

A convenient feature is the inclusion of an Excel data file link in

many problems using data files in their calculation.
The link allows students to easily launch into Excel,
work the problem, and return to Connect to key in
the answer.
Integration of Excel Data Sets.

Student Resource Library. The Connect Business Statistics Student Library is the place for students to access addi-

tional resources. The Student Library provides quick access to recorded lectures, practice materials, eBooks, data files,
PowerPoint files, and more.

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TO SUCCESS IN BUSINESS STATISTICS?

Guided Examples. These narrated video walkthroughs provide students with step-by-

step guidelines for solving selected exercises similar to those contained in the text. The
student is given personalized instruction on how to solve a problem by applying the concepts presented in the chapter. The narrated voiceover shows the steps to take to work
through an exercise. Students can go through each example multiple times if needed.

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WHAT TECHNOLOGY CONNECTS STUDENTS

Simple Assignment Management and Smart Grading. When it comes to studying, time is precious. Connect Business

Statistics helps students learn more efficiently by providing feedback and practice material when they need it, where
they need it. When it comes to teaching, your time also is precious. The grading function enables you to:
Have assignments scored automatically, giving students immediate feedback on their work and side-by-side
comparisons with correct answers.
Access and review each response; manually change grades or leave comments for students to review.
Student Reporting. Connect Business Statistics
keeps instructors informed about how each student,
section, and class is performing, allowing for more
productive use of lecture and office hours. The
progress-tracking function enables you to:
View scored work immediately and track individual or group performance with assignment
and grade reports.
Access an instant view of student or class performance relative to learning objectives.
Collect data and generate reports required
by many accreditation organizations, such as
AACSB.

Instructor Library. The Connect Business Statistics Instructor Library is your repository for additional resources to
improve student engagement in and out of class. You can select and use any asset that enhances your lecture. The
Connect Business Statistics Instructor Library includes:
eBook
PowerPoint presentations
Test Bank
Instructors Solutions Manual
Digital Image Library

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TO SUCCESS IN BUSINESS STATISTICS?

McGraw-Hill Connect Plus
Business Statistcs

business statistics

Connect Plus Business Statistics includes a seamless integration of an eBook and

Connect Business Statistics, Connect with rich functionality integrated into the product.
Media-Rich eBook. An integrated
media-rich eBook allows students to access media
in context with each chapter. Students can highlight, take notes, and access shared instructor highlights/notes to learn the course material.

Integrated

Dynamic links provide a connection between the problems or questions you assign to your students and the location in the eBook
where that problem or question is covered.
Dynamic Links.

Powerful Search Function. A powerful search

function pinpoints and connects key concepts in a
snap. This state-of-the-art, thoroughly tested system
supports you in preparing students for the world
that awaits. For more information about Connect,
go to www.mcgrawhillconnect.com or contact your
local McGraw-Hill sales representative.

Tegrity Campus:
Lectures 24/7
Tegrity Campus is a service that makes class time available 24/7. With Tegrity, you can
automatically capture every lecture in a searchable format for students to review when
they study and complete assignments. With a simple one-click start-and-stop process,
you capture all computer screens and corresponding audio. Students can replay any part
of any class with easy-to-use browser-based viewing on a PC or Mac.
Educators know that the more students can see, hear, and experience class resources, the
better they learn. In fact, studies prove it. With Tegrity Campus, students quickly recall
key moments by using Tegrity Campuss unique search feature. This search helps students efficiently find what they need, when they need it, across an entire semester of class
recordings. Help turn all your students study time into learning moments immediately
supported by your lecture. To learn more about Tegrity, watch a two-minute Flash demo
at http://tegritycampus.mhhe.com.

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WHAT SOFTWARE IS AVAILABLE FOR USE WITH THIS TEXT?

The following software tools are available to assist students in understanding concepts and solving problems.

LearningStats
LearningStats allows students to explore data and
concepts at their own pace. It includes demonstrations, simulations, and tutorials that can be downloaded from the Online Learning Center www.mhhe
.com/doane4e.

MegaStat for Excel

CD (ISBN: 0077496442)
Access Card (ISBN: 0077426274)
MegaStat is a full-featured Excel add-in that is available with this text. It performs statistical analyses within an Excel
workbook. It does basic functions such as descriptive statistics, frequency distributions, and probability calculations
as well as hypothesis testing, ANOVA, and regression.
MegaStat output is carefully formatted, and ease-of-use features include Auto Expand for quick data selection and
Auto Label detect. Since MegaStat is easy to use, students can focus on learning statistics without being distracted
by the software. MegaStat is always available from Excels main menu. Selecting a menu item pops up a dialog box.
Descriptive statistics screens are shown here. MegaStat works with all recent versions of Excel including Excel 2010
for Windows and Excel 2011 for Macintosh.

FPO
Minitab SV14 (ISBN: 007305237X)
SPSS SV18 (ISBN: 0077327144)
JMP SE8 (ISBN: 007739030X)
MINITAB Student Version 14, SPSS Student Version 18, and JMP Student Edition version 8 are software tools
that are available to help students solve the business statistics exercises in the text. Each is available in the student version and can be packaged with any McGraw-Hill business statistics text.
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WHAT RESOURCES ARE AVAILABLE FOR INSTRUCTORS?

Online Learning Center:

www.mhhe.com/doane4e
The Online Learning Center (OLC) provides the instructor with a complete Instructors Manual in Word
format, the complete Test Bank in both Word files
and computerized EZ Test format, Instructor PowerPoint slides, text art files, an introduction to ALEKS,
an introduction to McGraw-Hill Connect Business
Statistics, access to the eBook, and more.

Online
All test bank questions are available in an EZ
Test electronic format. Included are a number of
multiple-choice, truefalse, and short-answer questions and problems. The answers to all questions are
given, along with a rating of the level of difficulty,
topic, chapter learning objective, Blooms taxonomy
question type, and AACSB knowledge category.

Online Course Management

No matter what online course management system you use (WebCT, Blackboard, or eCollege), we
have a course content ePack available for your course. Our new ePacks are specifically designed to
make it easy for students to navigate and access content online. For help, our online Digital Learning Consultants are ready to assist you with your online course needs. They provide training and will
answer any questions you have throughout the life of your adoption.
McGraw-Hill Higher Education and Blackboard have teamed up. What does this mean for you?
1. Single sign-on. Now you and your students can access McGraw-Hills Connect and Create right from within
your Blackboard courseall with one single sign-on.
2. Integration of content and tools. You get a single sign-on with Connect and Create, and you also get integration of McGraw-Hill content and content engines right into Blackboard. Whether youre choosing a book for
your course or building Connect assignments, all the tools you need are right where you want theminside of
Blackboard.
3. One grade book. Keeping several grade books and manually synchronizing grades into Blackboard is no longer necessary. When a student completes an integrated Connect assignment, the grade for that assignment automatically
(and instantly) feeds your Blackboard grade center.
4. A solution for everyone. Whether your institution is already using Blackboard or you just want to try Blackboard
on your own, we have a solution for you. McGraw-Hill and Blackboard can now offer you easy access to industryleading technology and content, whether your campus hosts it, or we do. Be sure to ask your local McGraw-Hill
representative for details.

McGraw-Hill Customer Experience Information

For Customer Support, call 800-331-5094 or visit www.mhhe.com/support. One of our customer experience team members will be able to assist you in a timely fashion.

xvii

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WHAT RESOURCES ARE AVAILABLE FOR STUDENTS?

CourseSmart

(ISBN: 0077416848)

CourseSmart is a new way to find and buy eTextbooks. CourseSmart has the largest selection of eTextbooks available anywhere, offering thousands of the most commonly adopted textbooks from a wide variety of higher education
publishers. CourseSmart eTextbooks are available in one standard online reader with full text search, notes and highlighting, and e-mail tools for sharing notes between classmates. Visit www.CourseSmart.com for more information on
ordering.

Online Learning Center: www.mhhe.com/doane4e

The Online Learning Center (OLC) provides resources for students including quizzes, powerpoint, data sets, screencam tutorials, and learning stats.

Student Study Guide (ISBN: 0077416880)

This supplement has been created to help students master the course content.
It highlights the important ideas in the text and provides opportunities for
students to review the worked-out solutions, review terms and concepts, and
practice. The Study Guide is available through Primis Online at www.mhhe
.com/primis. Instructors can order the Study Guide in either print or eBook
format for their students.

ALEKS is an assessment and learning system that provides individualized

instruction in business statistics.Available from McGraw-Hill/Irwin over the
World Wide Web, ALEKS delivers precise assessments of students knowledge, guides them in the selection of appropriate new study material, and records their progress toward mastery of goals.
ALEKS interacts with students much as a skilled human tutor would, moving between explanation and practice as needed, correcting and analyzing errors, defining terms, and changing topics on request.
By accurately assessing their knowledge, ALEKS focuses precisely on what to learn next, helping them
master the course content more quickly and easily.

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ACKNOWLEDGMENTS
The authors would like to acknowledge some of the many people who have helped with this book. Thomas W. Lauer and
Floyd G. Willoughby permitted quotation of a case study. Morgan Elliott, Karl Majeske, Robin McCutcheon, Kevin
Murphy, John Sase, T.J. Wharton, and Kenneth M. York permitted questionnaires to be administered in their classes.
Mark Isken, Ron Tracy, and Robert Kushler gave generously of their time as expert statistical consultants. Jonathan G.
Koomey of E.O. Lawrence Berkeley National Laboratory offered valuable suggestions on visual data presentation.
Mark Isken has reliably provided Excel expertise and has suggested health care applications for examples and case
studies. John Seeley and Jeff Whitbey provided regression databases. John Savio and the Michigan State Employees Credit Union provided ATM data. The Siena Research Institute has made its poll results available. J.D. Power
and Associates generously provided permission to use vehicle quality data. The Public Interest Research Group of
Michigan (PIRGIM) has generously shared data from its field survey of prescription drug prices.
We owe special thanks to Aaron Kennedy and Dave Boennighausen of Noodles & Company, to Mark Gasta,
Anja Wallace, and Clifton Pacaro of Vail Resorts, to Jim Curtin and Gordon Backman of Ball Corporation, and to
Santosh Lakhan from The Verdeo Group for providing suggestions and access to data for mini cases and examples.
For reviewing the material on quality, we wish to thank Kay Beauregard, administrative director at William Beaumont
Hospital, and Ellen Barnes and Karry Roberts of Ford Motor Company.
A special debt of gratitude is due to Steve Schuetz for his direction and support and Wanda Zeman for coordinating the project. Thanks to Lloyd Jasingh, Morehead State University, for updating the PowerPoint slides and Mary
Beth Camp, Indiana University, for writing an excellent Study Guide. Special thanks to the accuracy checkers: Kevin
Schaub, University of Colorado; Paul Kuzdrall, Akron University; and David Meyer, Akron University. Thanks to the
many reviewers who provided such valuable feedback including criticism that made the book better, some of whom
reviewed several drafts of the manuscript. Any remaining errors or omissions are the authors responsibility. Thanks
too, to the participants in our focus groups and symposia on teaching business statistics, who have provided so many
teaching ideas and insights into their particular students and courses. We hope you will be able to see in the book and
the teaching package consideration of those ideas and insights.
Sung Ahn, Washington State University
Mostafa Aminzadeh, Towson University
Scott Bailey, Troy University
Hope Baker, Kennesaw State University
Saad Taha Bakir, Alabama State University
Katherine Broneck, Pima Community
CollegeDowntown
Mary Beth Camp, Indiana University
Bloomington
Alan Cannon, University of TexasArlington
Deborah Carter, Coahoma Community College
Michael Cervetti, University of Memphis
Alan Chesen, Wright State University
Chia-Shin Chung, Cleveland State University
Joseph Coleman, Wright State University
Dayton
Robert Cutshall, Texas A&M University
Corpus Christi
Terry Dalton, University of Denver
Douglas Dotterweich, East Tennessee
State University
Michael Easley, University of New Orleans
Mark Farber, University of Miami
Soheila Kahkashan Fardanesh,
Towson University
Mark Ferris, St. Louis University
Stergios Fotopoulos, Washington
State University
Vickie Fry, Westmoreland County
Community College
Joseph Fuhr, Widener University
Bob Gillette, University of Kentucky
Don Gren, Salt Lake City Community College

Clifford Hawley, West Virginia University

Natalie Hegwood, Sam Houston State
University
Alam M. Imam, University of Northern Iowa
Marc Isaacson, Augsburg College
Kishen Iyengar, University of Colorado
Boulder
Christopher Johnson, University of North
Florida
Jerzy Kamburowski, University of Toledo
Bob Kitahara, Troy University
Drew Koch, James Madison University
Bob Lynch, University of Northern Colorado
Bradley McDonald, Northern Illinois
University
Richard McGowan, Boston College
Larry McRae, Appalachian State University
Kelly McKillop, University of Massachusetts
Robert Mee, University of Tennessee
Knoxville
John Miller, Sam Houston State University
James E. Moran, Jr., Oregon State University
Geraldine Moultine, Northwood University
Joshua Naranjo, Western Michigan University
Anthony Narsing, Macon State College
Pin Ng, Northern Arizona University
Thomas Obremski, University of Denver
Mohammad Reza Oskoorouchi, California
State UniversitySan Marcos
Mahour Mellat Parast, University of North
CarolinaPembroke
Eddy Patuwo, Kent State University

John Pickett, University of Arkansas

Little Rock
James Pokorski, Virginia Polytechnic Institute &
State University
Stephan Pollard, California State University
Los Angeles
Tammy Prater, Alabama State University
Michael Racer, University of Memphis
Azar Raiszadeh, Chattanooga State
Community College
Sue Schou, Idaho State University
Sankara N. Sethuraman, Augusta
State University
Thomas R. Sexton, Stony Brook University
Murali Shanker, Kent State University
Gary W. Smith, Florida State University
Courtenay Stone, Ball State University
Paul Swanson, Illinois Central College
Deborah Tesch, Xavier University
Dharma S. Thiruvaiyaru, Augusta
State University
Jesus M. Valencia, Slippery Rock University
Rachel Webb, Portland State University
Simone A. Wegge, City University of New York
Alan Wheeler, University of Missouri
St. Louis
Blake Whitten, University of Iowa
Charles Wilf, Duquesne University
Janet Wolcutt, Wichita State University
Ye Zhang, Indiana UniversityPurdue
University Indianapolis
Mustafa R. Yilmaz, Northeastern University

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ENHANCEMENTS FOR DOANE/

Many changes were motivated by advice from dozens of reviewers and users of the textbook. We wanted to make chapter material easier for students to understand and to sharpen our focus on essential concepts. Besides thousands of small edits, six changes were common to all chapters:

Reorganized and streamlined presentations of key topics with simple visuals and intuitive explanations.
Thorough coverage of new Excel functions with updated screen
shots and examples in each chapter.
Updated data sets, new practice exercises, and exercises matched to
chapter learning objectives.

Chapter 1Overview of Statistics

Revised material on motivation, business ethics,
critical thinking, and communication.
Revised Vail Resorts and NASA Mini Cases.
Three new critical thinking exercises, one deleted
exercise.
Five revised exercises to match learning objective and Connect.
Updated references (delete three, add two).

New Appendix J with detailed comparison of old and new Excel

statistical functionsan outstanding reference tool.
Closer compatibility of exercises with Connect Plus online homework assignments.
Updated Related Readings and Web Sources for students who want
to dive deeper.

Four new exercises (home sales, civil service

exams, power outages, package weights).

Updated three examples and one Mini Case

with current data.

Chapter 4Descriptive Statistics

Updated four figures with Excel 2010

screenshots.

New common terminology (center, variability).

Updated all Excel functions for Excel 2010.

Updated data sets (e.g., vehicle defects,

SuperBowl scores, microprocessor speed,
weighted means, tax preparation time).

Three deleted exercises and 15 revised or updated exercises.

Two deleted figures, 13 revised figures.

Chapter 2Data Collection

Rewritten quartiles and percentiles with new

Excel functions and simplified exercises.

Clarified definitions of categorical and numerical data.

More on variance and covariance with new

and old Excel functions compared.

Eleven new exercises, seven updated exercises,

and 10 deleted exercises.

New visuals for quartiles, IQR, and fences.

Consolidated discussion on time series data,

simplified discussion on random sampling,
and deletion of redundant figures and tables
resulting in a more concise chapter.

Six updated exercises, seven deleted exercises,

and 13 revised exercises.
Exercise content more closely matched with
learning objectives and Connect.

Delete three figures to reduce clutter.

Ten new exercises.
Clarified discussion and examples for compound events.
Clarified description of covariance.
Chapter7Continuous Probability
Distributions
Enhanced definitions throughout chapter.
New tables showing important normal areas.
Clarified step-by-step solutions for examples.

Emphasized difference between random and

nonrandom sampling.

Ten new exercises (e.g., days on market, civil

service exams, fuel economy, unusual observations, quartiles, boxplots, Chebychev).

Modifications in one figure and two examples

for the exponential distribution.

New Mini Case Pricing Accuracy.

Updated chapter references.

Added a new application for triangular

distribution.

Chapter 3Describing Data Visually

Chapter 5Probability

New common terminology (center, variability).

Clarified notation on calculating relative

frequencies.

Added stem-and-leaf plots, with illustrations

and practice exercises, as requested by several
reviewers.

Two new figures illustrating coin flips and

conditional probabilities.

Reorganized material on dotplots, pie charts,

and deceptive graphs.

Six new exercises on recognizing probability

types, odds, and independent events.

Updated examples (price/earnings, school

spending, medical school applicants by gender, U.S. trade balance).

Expanded discussion of Law of Addition and

Law of Multiplication and one new example.

Updated Mini Case on U.S. business cycles

with discussion of the latest recession.
Twenty new Excel screen shots (histograms,
line and bar charts, scatter plots, pivot tables).
Updated MegaStat and Minitab screen shots
to reflect latest versions.
Updated exercises (e.g., J.D. Power vehicle
defects, LCD shipments, Rose Bowl scores,
U.S. gas prices, petroleum and energy use).
Delete four exercises and three figures to
reduce clutter and condense the material.

New boxed format for most formulas.

Clarified and reorganized discussion on independent events.
Consolidated discussion of disjoint events
and deleted five figures and tables to reduce
clutter.

Added a new LearningStats module for Rule

of 10 for normal-binomial equivalency.
Twelve new exercises on standard normal,
finding areas, inverse normal, and normal
approximations to discrete probabilities.
Five revised exercises and two deleted exercises.
New figures, tables, and Excel 2010 screen
shots on normal probabilities.
New Excel 2010 functions.
Chapter 8Sampling Distributions and
Estimation
Reorganized and expanded discussion of
sampling error.
New section on estimating from finite
populations.

Ten revised exercises and five deleted

exercises.

Rewritten discussion on how to deal with

outliers and messy data.

Chapter 6Discrete Probability Distributions

Clarified interpretation of confidence intervals for proportions.

Improved notation for variance of a random

variable.

Three revised examples and two new examples.

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SEWARD ASBE 4E
Olympic 100m times, U.S. federal budget,
Boston Marathon, student pilots, Coca Cola.

Two new exercises on the standard error and

sampling distributions.

Chapter 12Simple Regression

Two new exercises on calculating a confidence interval for  with  known.

Expanded introduction with a new figure and

a new example.

Updated Mini Case on the U.S. trade deficit.

Two new Students t practice exercises on

confidence intervals for .

More intuitive description of correlation.

Clarified interpretation of linear model.

New Excel 2010 screen shots, updated chapter references, and updated examples.

Rewritten discussion of population model.

Chapter 15Chi-Square Tests

Improved notation for regression statistics.

Added discussion on how to use Excels

CHISQ.TEST function.

Four new exercises using the FPCF.

Three new end-of-chapter exercises for confidence intervals.
One new student MiniProject on sampling
NYSE stock prices for IPOs.
Deleted two figures and revised one figure.
Deleted six exercises and revised seven exercises.
Updated all Excel functions for Excel 2010.

Better articulated learning objectives.

Expanded discussion of most formulas.

New illustration for regression parameters
and error assumptions.
Rewritten section on residual tests to enhance
diagnostic steps.
One new example and two revised examples.

Chapter 9One-Sample Hypothesis Tests

Reorganized and streamlined sections on
Types I and II error, hypothesis formulation.
Consistent use of five steps in hypothesis testing in examples.
Improved visuals for decision rules.
Coverage of new Excel functions with updated screen shots and examples.
Nine new exercises (TypesI and II error, formulating H0 and H1, critical z and t values,
p-values) and six revised exercises.
New Mini Case showing how Ball Corporation
uses statistics to compare metal suppliers.
Chapter 10Two-Sample Hypothesis Tests
Reorganized hypothesis testing presentation for tests of means in two independent
samples.
Consistent use of five-step hypothesis testing
method with updates for new Excel functions.

Two new exercises on interpreting the regression line, four new exercises on unusual
residuals, and two new exercises on residual
assumptions.
Three new end-of-chapter data sets, five revised exercises, and four deleted exercises.
Updated figures and functions for Excel 2010.
Chapter 13Multiple Regression
Rewritten introduction to provide more intuitive motivation for topic.
Better definitions of technical terms and motivation for using F test.

Supreme

Court

Deleted two figures and one table.

Reorganized section 15.6.
Added three new exercises on the multinomial GOF test.
Added one new exercise on the Poisson GOF
test and revised two exercises.
Chapter 16Nonparametric Tests
New treatment of Wilcoxon rank sum test
(Mann-Whitney test) with restaurant quality
illustration of two versions of the test.
Two new exercises (Mann-Whitney test for
salaries in two industries, rank correlation in
movie review ratings).
New data for EU fertility rates.

Chapter 17Quality Management

Clarified discussion of categorical predictors.

Deleted two sections and merged content

with existing sections.

Replaced Mini Cases 13.3 and 13.5 with current data.

New figure illustrating nonlinear relationship.

Added discussion on logistic regression.

Improved visuals for paired t-tests and four

new exercises, as requested by reviewers.

Two new exercises on nonlinear and interaction terms.

Added two new exercises on independent

means and deleted four exercises.

One new exercise on leverage, one on error

assumptions, and added two new data sets to
end of chapter.

Chapter 11Analysis of Variance

Consistent use of five-step method of hypothesis testing.

on

Improved notation for regression statistics.

Deleted two figures and one Mini Case (JASA).

Two new practice exercises that focus on setting up Tukey and Hartley tests.

Updated example
appointees.

Updated chapter references.

Modified section 13.8 to reduce redundancy

with section 12.8.

Four new exercises on interpreting ANOVA

results rather than working from raw data.

Updated Excel or MegaStat screen shots and

new content for one figure.

Added formula for standard error of regression coefficients.

New Mini Case on greenhouse gas emissions

from pneumatic controllers.

Simplified chapter introduction with visuals

that focus on one-factor ANOVA.

Deleted four exercises and added one exercise.

Chapter 14Time-Series Analysis

New examples for labor market participation, dollar exchange rates, Amazon sales,
hospital costs, and space launches.
New data for exercises on work stoppages,
new car dealerships, Swiss watch exports, TV
viewing, voter participation, consumer credit,
beverage consumption, PepsiCo, JetBlue,

Rewritten discussions on productivity, types

of variation, and statisticians roles in quality
improvement.
Condensed discussion of quality experts.
Added discussion on service quality tools.
New figure illustrating process capability.
Added four exercises on definitions and six
exercises on quality programs and tools.
Chapter 18Simulation
Updated treatment of random data generation based on new Excel functions.
Updated @Risk discussion corresponding to
newer software version.
Ten new @Risk and Excel screen shots based
on newer software versions.
Updated chapter references and Web links
for simulation and queuing software (e.g.,
Visio, Arena, YASAI, XLMiner).

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BRIEF CONTENTS
CHAPTER ONE

CHAPTER FOURTEEN

Overview of Statistics

Time-Series Analysis

CHAPTER TWO

CHAPTER FIFTEEN

Data Collection

Chi-Square Tests 648

22

CHAPTER THREE

CHAPTER SIXTEEN

Describing Data Visually

56

Nonparametric Tests

CHAPTER FOUR
Descriptive Statistics

690

CHAPTER SEVENTEEN

110

Quality Management

CHAPTER FIVE
Probability

600

720

CHAPTER EIGHTEEN

172

Simulation (Online Learning Center

www.mhhe.com/doane4e)

CHAPTER SIX
Discrete Probability Distributions

APPENDIXES

214

CHAPTER SEVEN
Continuous Probability Distributions

254

Binomial Probabilities

Poisson Probabilities

764
766

C-1 Standard Normal Areas

769

C-2 Cumulative Standard Normal

Distribution 770

CHAPTER EIGHT
Sampling Distributions and Estimation

CHAPTER NINE
One-Sample Hypothesis Tests

340

CHAPTER TEN
Two-Sample Hypothesis Tests

CHAPTER ELEVEN
Analysis of Variance

438

CHAPTER TWELVE
Simple Regression

488

390

294

Students t Critical Values

Chi-Square Critical Values 773

Critical Values of F.10

Solutions to Odd-Numbered
Exercises 782

Answers to Exam Review

Questions 808

Writing and Presenting Reports

Excel Statistical Functions

772

774

810

815

PHOTO CREDITS 818

INDEX 819

CHAPTER THIRTEEN
Multiple Regression

546

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CONTENTS
CHAPTER ONE

CHAPTER FIVE

Overview of Statistics
1.1
1.2
1.3
1.4
1.5

Probability

What Is Statistics? 3
Why Study Statistics? 5
Uses of Statistics 7
Statistical Challenges 10
Critical Thinking 14
Chapter Summary 17
Chapter Exercises 18

5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8

CHAPTER TWO
Data Collection
2.1
2.2
2.3
2.4
2.5
2.6

22

Definitions 23
Level of Measurement 27
Sampling Concepts 31
Sampling Methods 35
Data Sources 43
Surveys 45
Chapter Summary 49
Chapter Exercises 50

CHAPTER THREE
Describing Data Visually
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9

56

Stem-and-Leaf Displays and Dot Plots 57

Frequency Distributions and Histograms 63
Excel Charts 73
Line Charts 75
Bar Charts 80
Pie Charts 84
Scatter Plots 86
Tables 91
Deceptive Graphs 95
Chapter Summary 98
Chapter Exercises 99

CHAPTER FOUR
Descriptive Statistics
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8

Random Experiments 173

Probability 175
Rules of Probability 179
Independent Events 184
Contingency Tables 188
Tree Diagrams 196
Bayes Theorem 198
Counting Rules 204
Chapter Summary 208
Chapter Exercises 209

CHAPTER SIX
Discrete Probability Distributions
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8

214

Discrete Distributions 215

Uniform Distribution 222
Bernoulli Distribution 224
Binomial Distribution 225
Poisson Distribution 231
Hypergeometric Distribution 237
Geometric Distribution (Optional) 242
Transformations of Random Variables
(Optional) 243
Chapter Summary 246
Chapter Exercises 248

CHAPTER SEVEN
Continuous Probability Distributions
7.1
7.2
7.3
7.4
7.5
7.6
7.7

110

Numerical Description 111

Measures of Center 113
Measures of Variability 127
Standardized Data 134
Percentiles, Quartiles, and Box Plots 139
Correlation and Covariance 147
Grouped Data 152
Skewness and Kurtosis 154
Chapter Summary 158
Chapter Exercises 160
Exam Review Questions for Chapters 14 168

172

254

Describing a Continuous Distribution 255

Uniform Continuous Distribution 257
Normal Distribution 260
Standard Normal Distribution 262
Normal Approximations 275
Exponential Distribution 278
Triangular Distribution (Optional) 284
Chapter Summary 286
Chapter Exercises 288
Exam Review Questions for Chapters 57 292

CHAPTER EIGHT
Sampling Distributions and Estimation
8.1
8.2
8.3
8.4

294

Sampling Variation 295

Estimators and Sampling Error 296
Sample Mean and the Central Limit
Theorem 299
Confidence Interval for a Mean ()
with Known  306
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xxiv Contents

8.5

Confidence Interval for a Mean () with

Unknown  310
8.6 Confidence Interval for a Proportion () 317
8.7 Estimating from Finite Populations 325
8.8 Sample Size Determination for a Mean 326
8.9 Sample Size Determination for a Proportion 329
8.10 Confidence Interval for a Population
Variance,  2 (Optional) 331
Chapter Summary 333
Chapter Exercises 335

CHAPTER NINE
One-Sample Hypothesis Tests
9.1
9.2
9.3
9.4
9.5
9.6
9.7

340

Logic of Hypothesis Testing 341

Statistical Hypothesis Testing 347
Testing a Mean: Known Population Variance 350
Testing aMean: Unknown Population
Variance 358
Testing a Proportion 364
Power Curves and OC Curves (Optional) 373
Tests for One Variance (Optional) 380
Chapter Summary 383
Chapter Exercises 385

CHAPTER TEN
Two-Sample Hypothesis Tests

390

10.1 Two-Sample Tests 391

10.2 Comparing Two Means: Independent Samples 393
10.3 Confidence Interval for the Difference of Two
Means, 1 2 2 401
10.4 Comparing Two Means: Paired Samples 404
10.5 Comparing Two Proportions 410
10.6 Confidence Interval for the Difference of Two
Proportions, 1 2 2 418
10.7 Comparing Two Variances 419
Chapter Summary 426
Chapter Exercises 428
Exam Review Questions for Chapters 810 436

CHAPTER ELEVEN
Analysis of Variance

438

11.1 Overview of ANOVA 439

11.2 One-Factor ANOVA (Completely Randomized
Model) 442
11.3 Multiple Comparisons 451
11.4 Tests for Homogeneity of Variances 453
11.5 Two-Factor ANOVA without Replication
(Randomized Block Model) 457
11.6 Two-Factor ANOVA with Replication
(Full Factorial Model) 465
11.7 Higher-Order ANOVA Models (Optional) 474
Chapter Summary 478
Chapter Exercises 479

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CHAPTER TWELVE
Simple Regression
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10

488

Visual Displays and Correlation Analysis 489

Simple Regression 495
Regression Terminology 497
Ordinary Least Squares Formulas 500
Tests for Significance 505
Analysis of Variance: Overall Fit 512
Confidence and Prediction Intervals for Y 516
Residual Tests 519
Unusual Observations 525
Other Regression Problems
(Optional) 530
Chapter Summary 534
Chapter Exercises 536

CHAPTER THIRTEEN
Multiple Regression
13.1
13.2
13.3
13.4
13.5
13.6
13.7
13.8
13.9

546

Multiple Regression 547

Assessing Overall Fit 553
Predictor Significance 556
Confidence Intervals for Y 560
Categorical Predictors 563
Tests for Nonlinearity and Interaction 571
Multicollinearity 575
Violations of Assumptions 579
Other Regression Topics 586
Chapter Summary 588
Chapter Exercises 590
Exam Review Questions for Chapters 1113 598

CHAPTER FOURTEEN
Time-Series Analysis
14.1
14.2
14.3
14.4
14.5
14.6
14.7
14.8

600

Time-Series Components 601

Trend Forecasting 605
Assessing Fit 618
Moving Averages 620
Exponential Smoothing 623
Seasonality 628
Index Numbers 634
Forecasting: Final Thoughts 636
Chapter Summary 637
Chapter Exercises 639

CHAPTER FIFTEEN
Chi-Square Tests 648
15.1
15.2
15.3
15.4
15.5

Chi-Square Test for Independence 649

Chi-Square Tests for Goodness-of-Fit 660
Uniform Goodness-of-Fit Test 663
Poisson Goodness-of-Fit Test 667
Normal Chi-Square Goodness-of-Fit Test 672

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Contents

15.6 ECDF Tests (Optional) 677

Chapter Summary 678
Chapter Exercises 680

CHAPTER SIXTEEN
Nonparametric Tests
16.1
16.2
16.3
16.4
16.5
16.6
16.7

690

Why Use Nonparametric Tests? 691

One-Sample Runs Test 692
Wilcoxon Signed-Rank Test 695
Wilcoxon Rank Sum Test 698
Kruskal-Wallis Testfor Independent Samples 701
Friedman Test for Related Samples 706
Spearmans Rank Correlation Test 708
Chapter Summary 712
Chapter Exercises 714

CHAPTER SEVENTEEN
Quality Management
17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.8
17.9
17.10

720

Quality and Variation 721

Pioneers in Quality Management 723
Quality Improvement 725
Control Charts: Overview 729
Control Charts for a Mean 730
Control Charts for aRange 738
Other Control Charts 739
Patterns in Control Charts 744
Process Capability 746
Additional Quality Topics (Optional) 749
Chapter Summary 753
Chapter Exercises 755

doa21485_fm_i-xxvi_001.indd xxv

xxv

CHAPTER EIGHTEEN
Simulation (Online Learning Center
www.mhhe.com/doane4e)

APPENDIXES
A

Binomial Probabilities

Poisson Probabilities

764
766

C-1 Standard Normal Areas

769

C-2 Cumulative Standard Normal

Distribution 770
D

Students t Critical Values

Chi-Square Critical Values 773

Critical Values of F.10

Solutions to Odd-Numbered Exercises 782

Answers to Exam Review Questions

Writing and Presenting Reports

Excel Statistical Functions

772

774
808

810

815

PHOTO CREDITS 818

INDEX 819

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