Question: How many decimal places should I have in my (business subject) answer?
Answer: Always carry business calculations to one more significant figure (or decimal place) than is present in the smallest number in the calculation. Then round the answer to the same number of significant figures as is in the smallest number in the calculation.
If you have more digits than the least number not only is it misleading as to accuracy but is wrong as it implies a degree of precision not there and could cause serious loss, be misleading or even fraudulent. And in business you should go one step further and apply some common sense – you may have to round up to whole numbers if you are dealing with staff numbers for example or may intentionally want to use fewer significant digits for clarity. And if dealing with currency amounts then carry all digits that are significant and material.
Examples:
1. What does it cost to mark the papers for 121 students each writing 2 exams that can be marked at a standard of 18 min each and it costs 29.58 $/hr for a marker?
Acceptable answers: $2147.51; $2100 and about 2 k$ depending on the context.
2. What should be budgeted next year for labour if the fully burdened costs for an engineer are 125,000 $, each works 1510 hours and there is an estimated 56214 hours of work. How many FTE do we need?
Answer: 56214/1510 = 37.22 FTE or 38 FTE.
Cost is $4,750,000 or 4.8 M$
3. If the height of basketball players is normally distributed and the average height is 2.5 meters, what is the range in height that would include 99% of all players if the standard deviation is 0.2 meters?
99% à z= +/- 2.575 or 2.58
Upper limit is 2.5 + (2.58 x .2) or 3.0 meters
Lower limit is 2.5 – (2.58 x.2) or 2.0 meters.
Simple? K
MGTC 74 Significant Digits