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CMA Foundation · Fundamentals of Business Mathematics and Statistics · Measures of Central Tendency and Dispersion

Firm A's daily output has mean 50 units and standard deviation 6 units. Firm B's daily output has mean 80 units and standard deviation 8 units. Which statement is correct about relative variability?

Firm B is more consistent. Its coefficient of variation is 8/80 × 100 = 10%, lower than Firm A's 6/50 × 100 = 12%. Relative variability, not absolute standard deviation, is the right basis when the means differ, and a smaller CV means more consistency.

  1. AFirm B is more consistent because its CV is 10% against 12% for Firm ACorrect
  2. BFirm A is more consistent because its standard deviation is smaller
  3. CFirm A is more consistent because its CV is 12% against 10% for Firm B
  4. DBoth are equally consistent because the SD to mean ratios are the same

Explanation

CV of A = 6/50 × 100 = 12%. CV of B = 8/80 × 100 = 10%. A lower CV means greater consistency, so B is more consistent. Comparing only absolute SDs ignores the difference in means.

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