Preface 

xi  
PART I 


Data and Business Decisions 


1  (18) 

The Importance of Data Analysis and Decision Modeling 


2  (1) 

Types and Sources of Business Data 


3  (7) 


6  (4) 

Measurement and Statistics 


10  (3) 


12  (1) 


13  (1) 


14  (3) 

Excel addins: PHStat, Crystal Ball, and TreePlan 


15  (1) 


15  (2) 


17  (1) 


18  (1) 

Displaying and Summarizing Data 


19  (38) 

Displaying Data with Charts and Graphs 


20  (10) 


23  (2) 


25  (3) 


28  (1) 


29  (1) 


29  (1) 

Summary of graphical display methods 


30  (1) 


30  (13) 

Frequency distributions and histograms 


32  (2) 

Measures of central tendency 


34  (2) 


36  (2) 


38  (1) 


38  (1) 

Excel's descriptive statistics tool 


38  (3) 

Data profiles and proportions 


41  (2) 

Visual Display of Statistical Measures 


43  (5) 


43  (3) 


46  (2) 

Statistical Relationships 


48  (3) 

Case Study: Using Descriptive Statistics for the Malcolm Baldrige National Quality Award 


51  (3) 


54  (1) 


54  (3) 

Random Variables and Probability Distributions 


57  (40) 


58  (5) 


58  (1) 


59  (1) 

Probability distributions 


59  (3) 

Expected value and variance of a random variable 


62  (1) 

Discrete Probability Distributions 


63  (3) 

Bernoulli and binomial distributions 


63  (2) 


65  (1) 

Continuous Probability Distributions 


66  (12) 


67  (1) 


68  (3) 


71  (1) 


72  (2) 

Probability distributions in PHStat 


74  (1) 

Other useful distributions 


75  (3) 

Random Sampling from Probability Distributions 


78  (8) 


78  (1) 

Sampling from probability distributions 


79  (1) 

Sampling from probability distributions in Excel 


80  (3) 

Sampling distributions and sampling error 


83  (3) 


86  (1) 


87  (2) 

Appendix: Introduction to Crystal Ball 


89  (8) 

Specifying input information 


90  (4) 


94  (3) 

Sampling and Statistical Analysis for Decision Making 


97  (43) 


98  (5) 


99  (1) 


100  (2) 


102  (1) 

Sampling from finite populations 


103  (1) 

Statistical Analysis of Sample Data 


103  (1) 


103  (8) 


103  (2) 


105  (1) 

Confidence intervals for the mean 


106  (4) 

Confidence intervals for proportions 


110  (1) 

Confidence intervals and sample size 


110  (1) 


111  (14) 


112  (1) 


113  (1) 


114  (2) 


116  (3) 

Twosample hypothesis tests for means 


119  (1) 

Ftest for testing variances 


119  (3) 


122  (2) 


124  (1) 

Anova: Testing Differences of Several Means 


125  (2) 

ChiSquare Test for Independence 


127  (2) 


129  (2) 


131  (2) 

Appendix: Distribution Fitting 


133  (7) 

Distribution fitting with Crystal Ball 


137  (3) 

Statistical Quality Control 


140  (27) 

The Role of Statistics and Data Analysis in Quality Control 


141  (1) 

Statistical Process Control 


142  (10) 


143  (1) 


144  (4) 


148  (4) 

Control Charts for Attributes 


152  (2) 

Statistical Issues in the Design of Control Charts 


154  (1) 

Process Capability Analysis 


155  (2) 


157  (1) 


158  (9) 
PART II 



167  (36) 


170  (3) 


170  (3) 

Measuring Variation about the Regression Line 


173  (5) 

Coefficient of determination and correlation coefficient 


176  (1) 

Standard error of the estimate and confidence bands 


176  (2) 

Regression as Analysis of Variance 


178  (3) 

Assumptions of Regression Analysis 


181  (1) 

Application of Regression Analysis to Investment Risk 


182  (3) 

Multiple Linear Regression 


185  (3) 

Interpreting results from multiple linear regression 


187  (1) 

Building Good Regression Models 


188  (3) 

Using Adjusted R+2 to evaluate fit 


188  (1) 

Correlation and multicollinearity 


189  (1) 


190  (1) 

Regression with Ordinal and Nominal Independent Variables 


191  (3) 

Regression Models with Nonlinear Terms 


194  (4) 


198  (1) 


199  (4) 


203  (31) 

Qualitative and Judgmental Methods 


204  (5) 


205  (1) 


205  (1) 

Applying the Delphi method 


206  (2) 


208  (1) 

Statistical Forecasting Models 


209  (11) 


210  (2) 

Error metrics and forecast accuracy 


212  (4) 

Exponential smoothing models 


216  (1) 

Incorporating trend and seasonality into exponential smoothing models 


217  (3) 


220  (3) 

Incorporating seasonality in regression models 


222  (1) 

The Practice of Forecasting 


223  (3) 


226  (1) 


227  (2) 


229  (5) 

Selection Models and Risk Analysis 


234  (42) 

Decision Criteria and Selection 


235  (14) 

Decisions involving a single alternative 


236  (1) 


237  (2) 

Decisions involving mutually exclusive alternatives 


239  (2) 

Decisions involving nonmutually exclusive alternatives 


241  (1) 

Decisions involving uncertainty 


242  (7) 

Monte Carlo Simulation for Risk Analysis 


249  (4) 

Applications of Monte Carlo Simulation 


253  (6) 


253  (4) 

BudgetConstrained product selection 


257  (2) 

Case Study: Simulation and Risk Analysis in New Product Screening at Cinergy Corporation 


259  (4) 


263  (1) 


263  (8) 

Appendix: Additional Crystal Ball Options 


271  (5) 


271  (1) 


271  (1) 


272  (1) 


272  (1) 


272  (4) 

Introduction to Optimization 


276  (39) 


278  (1) 

Types of Optimization Problems 


279  (5) 

Linear optimization example: transportation problem 


280  (2) 

Integer optimization example: project selection 


282  (1) 

Nonlinear optimization example: hotel pricing 


283  (1) 


284  (2) 

Solving the optimal pricing problem 


285  (1) 

Solving Linear Optimization Models 


286  (5) 

Interpreting Solver reports 


288  (2) 


290  (1) 

Solving Integer Optimization Models 


291  (1) 

Solving Nonlinear Optimization Models 


292  (2) 

Risk Analysis of Optimization Results 


294  (2) 

Combining Optimization and Simulation 


296  (8) 

A portfolio allocation model 


296  (1) 


297  (6) 


303  (1) 


303  (1) 


304  (1) 


304  (11) 
APPENDIX 

315  (10) 

Table A.1 The Standardized Normal Distribution 


316  (1) 

Table A.2 The Cumulative Standard Normal Distribution 


317  (2) 

Table A.3 Critical Values of t 


319  (2) 

Table A.4 Critical Values of F 


321  (4) 
Index 

325  