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First Exam
Dr. Jooh Lee
Name:_______________*
___25. The term "EPPI" represents the maximum amount that should be paid for information that completely eliminates
the uncertainty?
Answer: True 2, 3, 4, 6, 7, 11, 13, 17, 18, 20, 22,
** MULTIPLE CHOICE QUESTIONS (60 points: 3 pts. each)
___ 1. Iso-profit line represents all possible combinations of:
a. the decision variables which will produce a given profit. c. the constraints which will produce a given profit.
b. the objective function which will produce a given profit. d. the solution points in the feasible solution area.
___ 2. Which of the following is used to used to obtain the best linear trend line in a linear regression analysis?
a. Scatter diagram. b. Correlation of coefficient.
c. Least square method.
d. Coefficient of determination.
___ 3. Which of the following is an appropriate sequence of steps in the decision making process?
a. problem - criteria - model - alternatives - action
b. problem - model - criteria - alternatives - action
c. criteria - problem - model - alternatives action
d. criteria - model - alternatives - analysis - problem
___ 4. The term opportunity loss (regrets) is most closely associated with:
a. minimax
b. maximax
c. maximin
___ 5. Some assumptions of the general L.P. model are:
a. linearity, divisibility, certainty, nonnegativity.
c. certainty, linearity, feasibility, nonnegativity.
d. Laplace
a. cyclical factor
b. seasonal factor
___15. If the minimum expected regret is computed, it indicates to a decision maker the:
a. expected value of perfect information.(EVPI)
b. expected payoff under certainty (EPPI).
c. expected monetary value (EMV).
d. expected payoff under risk (EOL).
___16. The theoretical limit on the number of decision variables that can be handled by the simplex method is:
a. 1
b. 2
c. 3
d. unlimited
___17. The mean absolute deviation (MAD) or mean squared error (MSE) are used to:
a. estimate the trend line. b. eliminate forecast errors. c. measure forecast accuracy. d. seasonally adjust
forecast.
___18. The maximum amount of money that decision maker would be willing to pay to obtain any additional information
in order to eliminate uncertainty is represented by the:
a. expected value of perfect information (EVPI).
b. expected payoff with perfect information (EPPI).
c. highest expected monetary value (EMV).
d. highest expected opportunity loss (EOL).
___19. Which of the following methods is closely related to the opinion/judgmental forecasting?
a. Regression analysis.
b. Exponential Smoothing. c. Delphi techniques
d. Least square method.
___20. In a simple linear regression model, Y = a + b X, which term (s) is (are) the predictor(S) variable (s)?
a. Y
b. X
c. a
d. b
Answer: 1-A, 2-C, 3-A, 4-A, 5-A, 6-B, 7-A, 8-C, 9-A, 10-D, 11-B, 12-B, 13-A, 14-C, 15-A, 16-D, 17-C, 18-A, 19-C
20-B
e. None
___ 2. Which of the choices below constitutes a simultaneous solution to these equations:
(1) 3X + 4Y = 10 and (2) 5X + 4Y = 14 ?
a. X = 2, Y = 0.5
b. X = 4, Y = -0.5
c. X = 2, Y = 1
d. X = 1, Y = 2
e. None
___ 3. What combination of X and Y will yield the optimum for this problem ?
Maximize Z = 10X + 30Y
subject to: (1) 4X + 6Y 12 and
a. X = 2.0, Y = 0.0
b. X = 1.5, Y = 1.0
c. X = 0.0, Y = 2.0
e. None
(2) 8X + 4Y 16.
d. X = 3.0, Y = 2.0
___ 4. What combination of X and Y will provide a minimum for this problem ?
Minimize Z = X + 3Y
subject to: (1) 2X + 4Y 12 and (2) 5X + 2Y 10
a. X = 6.0, Y = 0.0
b. X = 5.0, Y = 0.0
c. X = 1.0, Y = 2.5
d. X = 2.5, Y = 1.0
e. None
___ 5. A paper mill department has fixed costs of $200,000/ year, variable costs of $15/unit, and annual revenue of
$960,000 at a volume of 48,000 units. The break-even volume(units) is:
a. 20,000
b. 30,000
c. 40,000
d. 50,000 units
e. None
___ 6. If alpha() is 0.2 and the current demand is 200, the forecast for the current period was 175 and for the last period
was 150; what is the forecast for the next period ?
a. 160
b. 180
c. 190
d. 195
e. None
Ft = F t-1 +
(A t-1 - F t-1)
___ 7. A firm has two plants(X and Y) producing the same product which sells for $12 each. Fixed costs are
$5,000/year at plant X and $7,000/year at plant Y and variable costs are $3.00/unit and $2.00/unit for X and Y,
respectively. The total profit at X and Y are equal when the volume of each plant(units) is:
a. 500
b. 1,000
c. 1,500
d. 2,000
e. None
(8-11) The LEE's Publishing Company intends to publish a textbook in Operations Management. Fixed costs are
$20,000 per year, variable cost per unit is 50 percent of their $20 per-unit selling price. Give your answers
about the following questions.
___ 8. If annual sales are 3,000 units, what are the annual profits?
a. $10,000
b. $20,000
c. $30,000
d. $40,000
e. None
___ 9. What variable cost per unit would result in $30,000 annual profits if annual sales are 4,000 units?
a. $7.00
b. $7.50
c. $8.00
d. $8.50
e. None
___ 10 How much annual revenue is required to breakeven ?
a. 20,000
b. 30,000
None
c. 40,000
d. 50,000
e.
___11. What price must book be sold for to obtain a yearly profit of $30,000, assuming that estimated demand would be
realized at the break-even ?
a. $10
b. $30
c. $35
d. $40
e. None
* (12-15) Using the data below, give your answers for following questions.
Period Demand
Feb.
50
Mar.
40
Apr.
45
May.
35
___12. Forecast demand for June using the Naive approach.
a. 25
b. 35
c. 40
None
d. 50
e.
___13. Forecast demand for June using a weighted moving average with weights of 1, 2, and 3 where the heaviest weight
for the most recent period.
a. 39.17
b. 45.83
c. 43.33
d. 40.83
e.
None
___14. Following linear equation is used to predict monthly sales:
Yt = 20 + 10 t. What is the forecast for June if t = 0 in Feb. of this year?
a. 60
b. 50
c. 55
d. 40
e. None
___15. Given an actual demand of 45, a forecasting value of 40 for Apr. and an alpha of 0.5, what would the forecast for
the next time period (June) be using exponential smoothing?
a. 37.5
b. 38.75
c. 42.5
d. 35.25
e. None
Ft = F t-1 +
(A t-1 - F t-1)
* Next five questions(16-20) are based on the following information.
State of nature
--------------------------------------------------------------
Rent
50
40
20
Lease
60
50
-(30)
-------------------------------------------------------------* Each value represents profit.
___16. The MINIMAX strategy would be:
a. High
b. Moderate
c. Low
d. Buy
e. Rent
f. Lease
___17. If P(High) is 0.2, P(moderate) is 0.5, and P(low) is 0.3, the choice for the maximum expected value would be:
a. Buy
b. Rent
c. Lease
d. High
e. Moderate
f. Low
___18. The maximin strategy would be:
a. High
b. Moderate
c. Low.
d.Buy
e. Rent
c. $30
d. $70
e. $ 50
c. $22
d. 20
e. None
f. Lease
Answer: 1-B, 2-C, 3-C, 4-A, 5-C, 6-B, 7-D, 8-A, 9-B, 10-C, 11-C, 12-B, 13-A, 14-A, 15-B, 16-D, 17-A, 18-E, 19-E, 20-A