## Question 1. A plant manager is considering buying additional stamping machines to accommodate increasing demand.

Question 1. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000’s) based on the different scenarios faced by the manager.

Alternative

Bid Accepted

Bid Rejected

Buy 1 machine

$10

$5

Buy 2 machine

$30

$4

Buy 3 machine

$40

$2

Using the information above, which alternative should be chosen based on the maximax criterion?

Buy 1 machine

Buy 2 machines

Buy 3 machines

Question 2. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000’s) based on the different scenarios faced by the manager.

Alternative Bid Accepted Bid Rejected

Buy 1 machine $10 $5

Buy 2 machines $30 $4

Buy 3 machines $40 $2

Refer to the information above. Assume that based on historical bids with the defense contractor, the plant manager believes that there is a 65% chance that the bid will be accepted and a 35% chance that the bid will be rejected.

What is the expected value under certainty?

a. 1.05

b. 1.95

c. 17.25

d. 27.75

Question 3. “The probability of event B, given that event A has occurred” is known as a __________ probability.

continuous

marginal

simple

joint

conditional

Question 4. Assume that you have an urn containing 10 balls of the following description:

4 are white (W) and lettered (L)

2 are white (W) and numbered (N)

3 are yellow (Y) and lettered (L)

1 is yellow (Y) and numbered (N)

If you draw a numbered ball (N), the probability that this ball is white (W) is 0.60.

True

False

Question 5. What is the formula for the break-even point of a simple profit model?

Fixed cost / variable cost per unit

(Selling price per unit — variable cost per unit) / fixed cost

Fixed cost / (selling price per unit —variable cost per unit)

Fixed cost / (variable cost per unit —selling price per unit)

Selling price per unit — (fixed cost / variable cost per unit)

Question 6. Arrivals in a university advising office during the week of registration are known to follow a Poisson distribution with an average of four people arriving each hour. What is the probability that exactly four people will arrive in the next hour?

0.1813

0.1865

0.1923

0.1954

P(X=4) = 0.1954

Question 7. The economic order quantity (EOQ) formula assumes that all input data are known with certainty.

True

False

Question 8. The use of “expert opinion” is one way to approximate subjective probability values.

True

False

Question 9. Properties of the normal distribution include:

a continuous bell-shaped distribution.

a discrete probability distribution.

the number of trials is known and is either 1, 2, 3, 4, 5, etc.

the random variable can assume only a finite or limited set of values.

use in queuing.

Question 10. Expressing profits through the relationship among unit price, fixed costs, and variable costs is an example of:

a sensitivity analysis model.

a quantitative analysis model.

a postoptimality relationship.

a parameter specification model.

none of the above.

Question 11. A bakery buys sugar in 15-pound bags. The bakery uses 5000 bags of sugar each year. Carrying costs are $20 per bag per year. Ordering costs are estimated at $5 per order. Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags. It takes 5 days for each order of sugar to be filled. What are the total annual holding costs?

a. $500

b. $1000

c. $20

d. $750

e. $250

Question 12. A plant manager is considering buying additional stamping machines to accommodate increasing demand. The alternatives are to buy 1 machine, 2 machines, or 3 machines. The profits realized under each alternative are a function of whether their bid for a recent defense contract is accepted or not. The payoff table below illustrates the profits realized (in $000’s) based on the different scenarios faced by the manager.

Alternative

Bid Accepted

Bid Rejected

Buy 1 machine

$10

$5

Buy 2 machine

$30

$4

Buy 3 machine

$40

$2

Using the information above, which alternative should be chosen based on the Laplace criterion?

Buy 1 machine

Buy 2 machines

Buy 3 machines

Question 13. Determining the average payoff for each alternative and choosing the one with the best payoff is the approach called:

maximax

maximin

Laplace

minimax regret

expected monetary value

Question 14. Bob White is conducting research on monthly expenses for medical care, including over-the-counter medicine. His dependent variable is monthly expenses for medical care while his independent variable is number of family members. Below is his Excel output.

*Regression Statistics*

Multiple R

0.8590

R Square

0.7379

Adjusted R Square

0.7182

Standard Error

952.3605

Observations

18

ANOVA

df

SS

MS

F

Significance F

Regression

3

1.32E+08

43977657

48.48745

1.21E-07

Residual

14

12697866

906990.4

Total

17

1.45E+08

Intercept

Coefficients

Standard Error

t Stat

P-value

X1

144.91

1025.911

0.141246

0.889688

X2

11.63

1.247247

9.330762

2.19E-07

X3

-13.70

8.786907

-1.55916

0.141272