Second Statistics Help?
Determine the mean and standard deviation of errors in accounting entries.
Mean =
SD =
Though the answer would be nice, am more interested in how to do the actual calculation…
Thanks in advance…
Favorite Answer
Let X be the number of entries with an error. X has the binomial distribution. n, the number of trials is 2 000 000 and the success probability, the probability that an entry has an error is 0.027.
the mean of the binomial is n * p = 2 000 000 * 0.027 = 54000
the variance of the binomial is n * p * (1-p) = 2 000 000 * 0.027 * 0.973 = 52542
the standard deviation is the square root of the variance = 229.22
——
now if you have to do any calculations to find probabilities it would be nice to use the normal approximation to the binomial.
if you have n * p > 10 and n* (1-p) > 10 then the binomial can be approximated by the normal distribution with mean n*p and variance n*p*(1-p)
there is also a continuity correction that you must use with this. Please let me know if you want more info on this topic.
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