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CMA Intermediate · Financial Management and Business Data Analytics · Data Analysis and Modelling

A dataset of 5,000 invoices of a Pune manufacturer has values with mean ₹80,000 and standard deviation ₹10,000. Using the z-score rule that flags |z| greater than 3, which invoice would be flagged as an outlier?

The invoice of ₹1,12,000 is flagged. With mean ₹80,000 and standard deviation ₹10,000, the z-score limits are ₹50,000 and ₹1,10,000. Its z-score is 3.2, beyond 3, while the other invoices have z-scores of 2.5, 2.9 and -2.5.

  1. A₹1,05,000
  2. B₹1,12,000Correct
  3. C₹1,09,000
  4. D₹55,000

Explanation

Flag if the value is outside 80,000 ± 3×10,000, i.e. below 50,000 or above 1,10,000. 1,12,000 has z = 3.2, so it is flagged. 1,05,000 has z = 2.5, 1,09,000 has z = 2.9 and 55,000 has z = -2.5, all within limits.

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