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Study On Compensation factor of Industrial Distribution (ID)

SECTION A GROUP-9 SUBMISSION DATE: 21/09/2012

NAMES:

Vikash Kumar (45) Nikhil Tajindar Vipul Sheikh

CASE
For the last 10 years Industrial Distribution has been tracking compensation of industrial distribution (ID) professionals. Results for the 358 respondents in the 1997 Annual Salary Survey showed that 27% of the respondents work for companies with sales over $40 million, with the typical ID professional working for a $12 million firm. Those who work for small to mid-sized companies (between $6 million and $20 million) report higher earnings than those in larger firms. The lowest paid employees work for firms with sales of less than $1 million. The typical outside salesperson made $50,000 in 1996 and the typical inside salesperson earned just $30,000 (Industrial Distribution, Nov 1997).Suppose that a local chapter of ID professionals in the greater San Francisco area conducted a survey of its membership to study the relationship, if any, between the years of experience and salary for individuals employed in outside and inside sales positions. On the survey, respondents were asked to specify one of the three levels of years of experience: low (1-10 years); medium (11-20 years); and high (21 or more years). A portion of the data obtained is as follows and the complete data set consisting of 120 observations is available.

DETAILS:
Goal: Use descriptive statistics to summarize the data. -We have used the technique of descriptive statistics which is the science of describing important aspects of a set of measurements. We have found out mean, median, mode, standard deviation, variance, skewness, range, minimum observation, maximum observation. Mean is sensitive to every score in the array, whereas median and mode are not sensitive. Mean becomes distorted by extreme values whereas median remains unaffected. This data set is positively skewed with skewness as 0.487. Variance represents dispersion of scores which is very small. Salary ($)
1200000 1000000 800000 600000 400000 200000 0 Inside Outside Inside Outside Inside Outside High Low Medium Total

Summary

Mean Standard Error Median Mode Standard Deviation Sample Variance Kurtosis Skewness Range Minimum Maximum Sum Count

Salary spread
13% 24% 21% 13% 13% High Inside High Outside Low Inside Low Outside Medium Inside Medium Outside 16%

39925.47 5 989.4309 47 36489.5 28464 10838.67 298 11747683 1.9 1.114580475 0.486828 349 40109 23621 63730 4791057 120

Aim: Develop a 95% confidence interval estimate of the mean annual salary for all salespersons, regardless of years of experience and type of position.

-The 95% confidence interval of the mean annual salary for all salespersons is (37966.3, 41884.65). This implies that we are 95% confident and sure that the mean annual salary for all salespersons lies in (37966.3, 41884.65). Develop a 95% confidence interval estimate of the mean salary for outside salespersons. Compare results with the national value reported by Industrial Distribution.

- The 95% confidence interval of the mean salary for outside salespersons is (46783.72, 50877.15). This implies we are 95% confident that the mean salary for outside salespersons lies in (46783.72, 50877.15). The national value reported by Industrial Distribution is typically around $50,000 which lies in the confidence interval which means that the assumptions made for the survey are correct and the findings that 27% of respondents work for companies with sales over $40 million with the typical ID professional working for $12 million firm. The lowest paid employees work for firms with sales of less than $1 million. Aim: Develop a 95% confidence interval estimate of the mean salary for inside salespersons. Compare results with the national value reported by Industrial Distribution.

-The 95% confidence interval of mean salary for inside salespersons is (31020.52, 30093.17). This means that we are 95% confident and sure that the mean salary for inside salespersons lies in (31020.52, 30093.17). The national value reported by Industrial Distribution for inside salesperson is $30,000 which lies in the interval which means that the assumptions made for this survey are correct.

Aim: Ignoring the years of experience, develop a 95% confidence interval estimate of the mean difference between the annual salary for outside salespersons and the mean annual salary for inside salespersons. What is our conclusion? - The 95% confidence interval of the mean difference between the annual salary for outside salespersons and the mean annual salary for inside salespersons is: = ((48830.43-46783.72)-1.96(214780.8452+1046221.586)^1/2,(48830.4346783.72)+1.96(214780.8452+1046221.586)^1/2) = (2046.71-1.96(1122.94), 2046.71+1.96(1122.94)) = (2046.71-2200.96, 2046.71+2200.96) = (-154.25, 4247.67)

This implies that we are 95% confident and sure that the mean difference between the annual salary for outside salespersons and the mean annual salary for inside salespersons lies in (-154.25, 4247.67). Aim: Use analysis of variance to test for any significant differences due to position. Use a .05 level of significance and for now, ignore the effect of years of experience. - Ho: Distributions of the two populations are identical. H1: Distribution of one population has shifted to the right or left of the other population. First, we check the normality. Looking at the Normal Q-Q Plots for both inside salespersons and outside salespersons, we infer that population is not normal. We use the non-parametric test i.e. Mann-Whitney test. p-value= 0.000 <0.05 We reject Ho. There are differences in mean salaries due to position i.e. distribution of one population has shifted to the right or left of the other population.

Aim: Use analysis of variance to test for any significant differences due to Years of experience. Use a .05 level of significance and for now, ignore the effect of position. - First, we check the normality. By looking at the Normal Q-Q Plots for low, medium, high levels of experience, we infer that the population is not normal. We perform the nonparametric test. Ho: The populations are identical H1: at least two populations are different in years of experience. By Kruskal-Wallis H test, p-value = .015 < .05 We reject Ho. We conclude that at least two populations are different. Aim: At the .05 level of significance test for any significant differences due to position, years of experience, and interaction. Use inferences about individual treatment means where appropriate. - Due to position: Ho: No differences exist between the mean salaries of outside and inside salespersons. H1: Differences exist between the mean salaries of outside and inside salespersons. Tabulated F-value < 250 Calculated F-value =751.36 Calculated F-value > Tabulated F-value We reject Ho. Mean salaries of outside and inside salespersons are different. Due to years of experience: Ho: No differences exist between mean salaries of people lying in different categories of years of experience. H1: Differences exist between mean salaries of people in different categories of years of experience.

Tabulated F-value < 20 Calculated F-value= 65.856 Calculated F-value >Tabulated F-value We reject Ho. Mean salaries of people in different categories of years of experience are different. We perform Tukey HSD. First for High and Low years of experience people. Ho: Mean salaries of people with high and low years of experience are same. H1: Mean salaries of people with high and low years of experience are different. p-value =.015 < .05 We reject Ho. Mean difference between high and low=6519.05 Mean salary of people with high years of experience is greater than mean salary of people with low years of experience. Second for High and Medium years of experience people. Ho: Mean salaries of people with high and medium years of experience are same. H1: Mean salaries of people with high and medium years of experience are different. p-value=0.582 > 0.05 We may accept Ho. For Medium and Low years of experience people. Ho: Mean salaries of people with medium and low years of experience are same. H1: Mean salaries of people with medium and low years of experience are different. p-value=.001 < .05 We reject Ho.

Mean difference between people with medium and low years of experience=8798.5 People with medium years of experience > people with low years of experience. Due to interaction: Ho: No interaction exists between the factors years of experience and position. H1: Interaction exists between the factors years of experience and position. Calculated F-value= 53.379 Tabulated F-value < 20 Calculated F-value > Tabulated F-value We reject Ho. There is no interaction between the factors years of experience and position.

DATA

Observation 1 2 3 4 5 6 7 8 9 10 11 12 13

Salary ($) 28,938 27,694 45,515 27,031 37,283 32,718 54,081 23,621 47,835 29,768 27,282 30,632 38,856

Position Inside Inside Outside Inside Outside Inside Outside Inside Outside Inside Inside Inside Outside

Experience Medium Medium Low Medium Low Low High Low High Medium Medium Low Low

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

26,827 26,948 31,588 43,858 38,478 58,846 34,253 28,464 58,176 35,949 27,833 47,914 58,040 39,288 39,562 27,644 30,959 63,730 52,683 31,339 46,345 38,799 53,074 40,546 34,057 41,024 34,457 54,383 36,128 29,122 53,710 33,814 34,276 50,869 32,549 51,762

Inside Inside Inside Outside Outside Outside Inside Inside Outside Inside Inside Outside Outside Outside Inside Inside Inside Outside Outside Inside Outside Inside Outside Outside Inside Outside Inside Outside Outside Inside Outside Inside Inside Outside Inside Outside

Medium Low Medium Low Low Medium High Low Medium High Low High Medium Low High High Low Medium Medium High Low Low High Low Medium Low High Medium Low Low High Low Low Medium Medium Medium

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85

35,993 38,362 28,231 37,115 31,080 28,392 36,299 28,894 57,794 31,990 52,403 53,936 29,282 53,850 29,592 31,461 49,389 24,422 61,692 52,356 33,055 52,820 52,801 33,053 53,169 43,560 41,320 42,237 37,225 33,866 52,311 51,863 56,750 33,749 27,638 37,675

Outside Inside Inside Inside Inside Inside Outside Inside Outside Inside Outside Outside Inside Outside Inside Inside Outside Inside Outside Outside Inside Outside Outside Inside Outside Outside Outside Outside Outside Inside Outside Outside Outside Inside Inside Inside

Low Medium High High Medium Medium Low High Medium Low High High Medium Medium High Low High Low Medium High Medium High High Medium Medium Low High Low Low High High High Medium High Medium Medium

86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120

26,027 37,881 50,791 36,680 34,768 31,568 57,622 50,326 32,719 32,366 32,670 27,072 43,569 56,526 57,059 49,374 26,119 55,696 31,352 52,622 44,142 42,603 35,561 26,246 29,891 62,090 30,482 28,464 33,568 33,080 53,702 58,131 32,788 28,070 35,259

Inside Outside Outside Outside Inside Inside Outside Outside Inside Inside Inside Inside Outside Outside Outside Outside Inside Outside Inside Outside Outside Outside Outside Inside Inside Outside Inside Inside Inside Inside Outside Outside Inside Inside Outside

High Low High Low High High Medium High High High Low Low High Medium Medium High Low Medium Low High Low High Low Medium Low Medium High Low Medium High Medium Medium High Medium Low

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