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Cath.
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Good Afternoon Sir,
I have this question in the Kaplan exam kit and I would like to find out where I can read / learn a bit more about it.
“On investigating the labour efficiency variance an organisation has found that there is typically a favourable variance of mean of £60,000 and a standard deviation of $5,000.
The probability that the variance is less than $45,000 is……….% (answer to 2 decimal places)This is the only example in the kit and there is nothing about it in my text book, so I was wondering where to find more information, as only for this one example I couldn’t get my head around the answer.
Thanks
Cath
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Hi – Thanks for your question.
There is a section on standard deviation in the Open Tuition notes. This is definitely on the syllabus.
You can find out more about this topic from our notes -and it is also covered in sufficient depth by chapter 14 of Kaplan text book.
I wanted to have a better look at the example you gave to see if I could suggest some similar practice exercises from past CIMA papers – however I cant actually find the question that you are referring to in my Kaplan exam kit. If youd like further help – please can you confirm the question number and / or page.
Many Thanks
Cathedit
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Hi,
It’s Q 205 on page 60.
Some standard deviation is covered in the opentuition cima p1 notes, but I couldn’t find anything that would help me solve this particular type of question.
I’m using the BPP text book and whilst it has some standard deviation, nothing to help me with this, though. I don’t even know how to start answering it. The kaplan exam kit does give an answer but I need to read a bit more / do more questions to actually get it.
Thanks a lot!!!
Cath
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Hi,
Im afraid this isn’t in my version of the CIMA P1 exam kit – which perhaps suggests it has been removed for a reason.Although standard deviation is on the syllabus- I think that this question has gone beyond what you are required to know for this exam.
I will investigate further and post back if I find this would be examinable.
Kind Regards
Cathedit
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Hello Cath,
Thank you so much for putting so much effort into answering all questions!
I initially concluded the same, as this was the only Q in the kit and nothing in the book. But I started panicking when I did the Pearson Vue free exam practice and the very last question is exactly the same type:
The returns from a project are normally distributed with a mean of £220,000 and a standard deviation of £160,000. If the project loses more than £80,000 the company will be in financial difficulties. What is the probability of the project losing more than £80,000?
What do you think? Maybe it was part of the old exam and some of it were left in the practice kits by accident??
Cath
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This requires use of the normal distribution table which is provided in the exam.
You need to calculate a Z score:
Z=(x-µ)/?
where µ is the mean and ? is the standard deviation of X
In this case the mean (µ) is $220,000, standard deviation (?) is $160,000 and variable (x) is -$80,000.
Therefore the calculation is: Z=( -80000 – 220,000) / 160,000 which is 1.875.If you look up in the tables for 1.875 std deviations you will then have the probability.
This works out asProbability of the project losing more than $80,000 is the area under the left hand side of the curve of 0.5 less the figure from the table which is -0.4699 = 0.0301. In percentage there is a probability of 3% that the project is losing more than $80,000.
Im not able to view the Pearson test at the moment – but hopefully this answer matches theirs. I still think if there is little about this in the BPP text then that means its an unlikely exam question.
Kind Regards
Cath
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