You have compared the coefficients of variation between like departments in the

Question

You have compared the coefficients of variation between like departments in the same large manufacturer. My department’s coefficient of variation is 1.45 and this compares to three other departments that are 1.21, .95, and 1.08 respectively. You suggest that it will be more difficult to forecast my workers compensation losses than these other departments. I complain that my actual dollar losses were less than each of these other departments so how could this be possible. Explain to me the reason why it is more difficult to predict the workers compensation losses in my department.

Explanation / Answer

Coefficient of variation is calculated as the ratio of standard deviation to the mean of the sample. It is measure of dispersion of data points around the mean. As the coefficient of variation increases, the dispersion or variability of data relative to mean also increases and it becomes difficult to predict the data. Hence in your case, though the compensation losses are less in your department they are more variable compared to other department’s losses due to high coefficient of variation. Hence the compensation losses are more difficult to predict in your department. Other departments have lower coefficient of variation and hence less variability in terms of compensation losses which makes their losses more predictable.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.