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Unit 1: Statistics

2. Planning of production: After a business is launched, the businessman has to plan its Notes
production so that he is able to meet the demand of its product and incurs minimum losses
on account of over or under production. For this he has to estimate the pattern of demand
of the product by conducting various market surveys. Based upon these surveys, he might
also forecast the demand of the product at various points of time in future. In addition to
this, the businessman has to conduct market surveys of various resources that will be used
in the production of the given output. This may help him in the organisation of production
with minimum costs.
3. Inventory control: Sometimes, depending upon the fluctuations in demand and supply
conditions, it may not be possible to keep production in pace with demand of the product.
There may be a situation of no demand resulting in over production and consequently the
firm might have to discontinue production for some time. On the other hand, there may
be a sudden rise in the demand of the product so that the firm is able to meet only a part
of the total demand. Under such situations the firm may decide to have an inventory of the
product for the smooth running of its business. The optimum limits of inventory, i.e., the
minimum and maximum amount of stock to be kept, can be decided by the statistical
analysis of the fluctuations in demand and supply of the product.

4. Quality control: Statistical techniques can also be used to control the quality of the product
manufactured by a firm. This consists of the preparation of control charts by means of the
specification of an average quality. A control chart shows two limits, the lower control
limit and the upper control limit for variation in the quality of the product. The samples
of output, being produced, are taken at regular intervals and their quality is measured. If
the quality falls outside the control limits, steps are taken to rectify the manufacturing
process.
5. Accounts writing and auditing: Every business firm keeps accounts of its revenue and
expenditure. All activities of a firm, whether big or small, are reflected by these accounts.
Whenever certain decisions are to be taken or it is desired to assess the performance of the
firm or of its particular section or sections, these accounts are required to be summarised
in a statistical way. This may consist of the calculation of typical measures like average
production per unit of labour, average production per hour, average rate of return on
investment, etc. Statistical methods may also be helpful in generalising relationships
between two or more of such variables.

Further, while auditing the accounts of a big business, it may not be possible to examine
each and every transaction. Statistics provides sampling techniques to audit the accounts
of a business firm. This can save a lot of time and money.
6. Banks and Insurance companies: Banks use statistical techniques to take decisions regarding
the average amount of cash needed each day to meet the requirements of day to day
transactions. Furthermore, various policies of investment and sanction of loans are also
based on the analysis provided by statistics.

The business of insurance is based on the studies of life expectancy in various age groups.
Depending upon these studies, mortality tables are constructed and accordingly the rates of
premium to be charged by an insurance company are decided. All this involves the use of
statistical principles and methods.

Did u know? The science of statistics received contributions from notable economists such
as Augustin Cournot (1801 - 1877), Leon Walras (1834 - 1910), Vilfredo Pareto (1848 - 1923),
Alfred Marshall (1842 - 1924), Edgeworth, A.L. Bowley, etc. They gave an applied form to
the subject.

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