Question 1

The maximax approach is a pessimistic strategy.

Accepted Answer

A) True 
 B)False

Question 2

Consider the following decision scenario:
 
*PV for profits ($000)
The maximin strategy would be:

Accepted Answer

A) buy. 
B) lease. 
C) rent. 
D) rent or lease. 
E) buy low. 
A) buy. 
B) lease. 
C) rent. 
D) rent or lease. 
E) buy low.

Question 3

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Accepted Answer

A) 100. 
B) 2,000. 
C) 500. 
D) 1,000. 
E) 800. 
A) 100. 
B) 2,000. 
C) 500. 
D) 1,000. 
E) 800.

Question 4

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
 
If he uses the Laplace criterion, which kind of dwellings will he decide to build?

Accepted Answer

A) single family 
B) apartments 
C) condos 
D) either single family or apartments 
E) either apartments or condos 
A) single family 
B) apartments 
C) condos 
D) either single family or apartments 
E) either apartments or condos

Question 5

One local hospital has just enough space and funds currently available to start either a cancer or heart research lab. If administration decides on the cancer lab, there is a 20 percent chance of getting $100,000 in outside funding from the American Cancer Society next year, and an 80 percent chance of getting nothing. If the cancer research lab is funded the first year, no additional outside funding will be available the second year. However, if it is not funded the first year, then management estimates the chances are 50 percent it will get $100,000 the following year, and 50 percent that it will get nothing again. If, however, the hospital's management decides to go with the heart lab, then there is a 50 percent chance of getting $50,000 in outside funding from the American Heart Association the first year and a 50 percent chance of getting nothing. If the heart lab is funded the first year, management estimates a 40 percent chance of getting another $50,000 and a 60 percent chance of getting nothing additional the second year. If it is not funded the first year, then management estimates a 60 percent chance for getting $50,000 and a 40 percent chance for getting nothing in the following year. For both the cancer and heart research labs, no further possible funding is anticipated beyond the first two years.
What would be the total payoff if the heart lab were funded in both the first and second years?

Accepted Answer

A) $100,000 
B) $60,000 
C) $50,000 
D) $40,000 
E) $20,000 
A) $100,000 
B) $60,000 
C) $50,000 
D) $40,000 
E) $20,000

Question 6

Which of the following is not a stage in the decision-making process?

Accepted Answer

A) Select the best alternative. 
B) Develop suitable alternatives. 
C) Analyze and compare alternatives. 
D) Monitor the competition. 
E) Specify objectives. 
A) Select the best alternative. 
B) Develop suitable alternatives. 
C) Analyze and compare alternatives. 
D) Monitor the competition. 
E) Specify objectives.

Question 7

Sensitivity analysis is useful because:

Accepted Answer

A) payoffs and probabilities are estimates. 
B) most decisions will affect employees. 
C) expected payoffs are sensitive to the time value of money. 
D) it is the second step in the decision model. 
E) with the passage of time, small decisions get bigger. 
A) payoffs and probabilities are estimates. 
B) most decisions will affect employees. 
C) expected payoffs are sensitive to the time value of money. 
D) it is the second step in the decision model. 
E) with the passage of time, small decisions get bigger.

Question 8

Allowances for which of these factors would be subtracted from design capacity when calculating effective capacity?

Accepted Answer

A) personal time 
B) equipment maintenance 
C) scheduling problems 
D) changing the mix of products 
E) All of these choices are correct 
A) personal time 
B) equipment maintenance 
C) scheduling problems 
D) changing the mix of products 
E) All of these choices are correct

Question 9

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. How many prisoners would they have to process annually to break even at this new location?

Accepted Answer

A) 5,000 
B) 8,000 
C) 2,000 
D) 4,000 
E) 6,000 
A) 5,000 
B) 8,000 
C) 2,000 
D) 4,000 
E) 6,000

Question 10

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. How many prisoners would they have to process annually to make a profit of $100,000 at this new location?

Accepted Answer

A) 5,000 
B) 8,000 
C) 2,000 
D) 4,000 
E) 6,000 
A) 5,000 
B) 8,000 
C) 2,000 
D) 4,000 
E) 6,000

Question 11

The dean of a college wants to determine which of two new classes to offer for the upcoming semester. Due to facility constraints only one class can be offered at this time. The dean feels that the first class has an 80 percent chance of earning the college about $75,000, but a 20 percent chance of losing $35,000. If the class is successful, then its next level class will be offered, with a 75 percent chance of earning $60,000, but a 25 percent chance of losing $30,000. Weighing the options, the dean feels that the second class has a 60 percent chance of earning $85,000, but a 40 percent chance of losing $40,000. If the second class is successful, then its next level class will be offered with a 50 percent chance of earning $80,000, but a 50 percent chance of losing $45,000. If both classes are not successful, neither of their next level classes will be offered to the students.What is the expect value for the optimum decision alternative?

Accepted Answer

A) $90,000 
B) $83,000 
C) $75,500 
D) $50,000 
E) $45,500 
A) $90,000 
B) $83,000 
C) $75,500 
D) $50,000 
E) $45,500

Question 12

Given the following information, what would utilization be?
Effective capacity = 20 units per day
Design capacity = 60 units per day
Actual output = 15 units per day

Accepted Answer

A) 25% 
B) 33% 
C) 50% 
D) 75% 
E) none of these 
A) 25% 
B) 33% 
C) 50% 
D) 75% 
E) none of these

Question 13

Consider the following decision scenario:
 
*PV for profits ($000)
If P(high)is 0.60, the choice for maximum expected value would be:

Accepted Answer

A) buy. 
B) lease. 
C) rent. 
D) high. 
E) low. 
A) buy. 
B) lease. 
C) rent. 
D) high. 
E) low.

Question 14

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows:
 
If he feels the chances of declining, stable, and growing population trends are 40 percent, 50 percent, and 10 percent, respectively, which kind of houses will he decide to build?

Accepted Answer

A) single family 
B) apartments 
C) condos 
D) either single family or apartments 
E) either apartments or condos 
A) single family 
B) apartments 
C) condos 
D) either single family or apartments 
E) either apartments or condos

Question 15

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Accepted Answer

A) improve 
B) support 
C) identify 
D) elevate 
E) modify 
A) improve 
B) support 
C) identify 
D) elevate 
E) modify

Question 16

Which of the following is a key question in capacity planning?

Accepted Answer

A) Should we make the product in-house or outsource it? 
B) Where do we need the capacity? 
C) When do we need the capacity? 
D) Who will pay for the capacity change? 
E) Should we change capacity all at once, or through several small changes? 
A) Should we make the product in-house or outsource it? 
B) Where do we need the capacity? 
C) When do we need the capacity? 
D) Who will pay for the capacity change? 
E) Should we change capacity all at once, or through several small changes?

Question 17

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Accepted Answer

A) payback. 
B) net present value. 
C) internal rate of return. 
D) queuing. 
E) cost-volume. 
A) payback. 
B) net present value. 
C) internal rate of return. 
D) queuing. 
E) cost-volume.

Question 18

The operations manager for a local bus company wants to decide whether he should purchase a small, medium, or large new bus for his company. He estimates that the annual profits (in $000)will vary depending upon whether passenger demand is low, medium, or high, as follows:
 
If he feels the chances of low, medium, and high demand are 30 percent, 30 percent, and 40 percent respectively, what is the expected annual profit for the bus that he will decide to purchase?

Accepted Answer

A) $15,000 
B) $61,000 
C) $69,000 
D) $72,000 
E) $87,000 
A) $15,000 
B) $61,000 
C) $69,000 
D) $72,000 
E) $87,000

Question 19

The operations manager for a well-drilling company must recommend whether to build a new facility, expand his existing one, or do nothing. He estimates that long-run profits (in $000)will vary with the amount of precipitation (rainfall)as follows:
 
If he feels the chances of low, normal, and high precipitation are 30 percent, 20 percent, and 50 percent respectively, what are expected long-run profits for the alternative he will select?

Accepted Answer

A) $140,000 
B) $170,000 
C) $285,000 
D) $305,000 
E) $475,000 
A) $140,000 
B) $170,000 
C) $285,000 
D) $305,000 
E) $475,000

Question 20

A Virginia county is considering whether to pay $50,000 per year to lease a prisoner transfer facility in a prime location near Washington, D.C. They estimate it will cost $50 per prisoner to process the paperwork at this new location. The county is paid a $75 commission for each new prisoner they process. If the holding area at this new location has design and effective capacities of 10,000 and 7,500 prisoners processed annually, respectively, and 5,000 prisoners will be processed per year, what will be the utilization of the holding area?

Accepted Answer

A) 0 percent 
B) 30 percent 
C) 50 percent 
D) 60 percent 
E) 100 percent 
A) 0 percent 
B) 30 percent 
C) 50 percent 
D) 60 percent 
E) 100 percent

The maximax approach is a pessimistic strategy.

Consider the following decision scenario: *PV for profits ($000) The maximin strategy would be:

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

The construction manager for Acme Construction, Inc., must decide whether to build single-family homes, apartments, or condominiums. He estimates annual profits (in $000)will vary with the population trend as follows: If he uses the Laplace criterion, which kind of dwellings will he decide to build?

Which of the following is not a stage in the decision-making process?

Sensitivity analysis is useful because:

Allowances for which of these factors would be subtracted from design capacity when calculating effective capacity?

Given the following information, what would utilization be? Effective capacity = 20 units per day Design capacity = 60 units per day Actual output = 15 units per day

Consider the following decision scenario: *PV for profits ($000) If P(high)is 0.60, the choice for maximum expected value would be:

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Which of the following is a key question in capacity planning?

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Process Selection and Facility Layout

Work Design and Measurement

Location Planning and Analysis

Management of Quality

Quality Control

Aggregate Planning and Master Scheduling

Inventory Management

MRP and ERP

Jit and Lean Operations

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters

Exam 5: Strategic Capacity Planning for Products and Services

The maximax approach is a pessimistic strategy.

Consider the following decision scenario: *PV for profits ($000) The maximin strategy would be:

An alternative will have fixed costs of $10,000 per month, variable costs of $50 per unit, and revenue of $70 per unit. The break-even point volume is:

Which of the following is not a stage in the decision-making process?

Sensitivity analysis is useful because:

Allowances for which of these factors would be subtracted from design capacity when calculating effective capacity?

Given the following information, what would utilization be? Effective capacity = 20 units per day Design capacity = 60 units per day Actual output = 15 units per day

Consider the following decision scenario: *PV for profits ($000) If P(high)is 0.60, the choice for maximum expected value would be:

The first, and perhaps most important, step in constraint management is to ____________ the most pressing constraint.

Which of the following is a key question in capacity planning?

The method of financial analysis which focuses on the length of time it takes to recover the initial cost of an investment is:

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Process Selection and Facility Layout

Work Design and Measurement

Location Planning and Analysis

Management of Quality

Quality Control

Aggregate Planning and Master Scheduling

Inventory Management

MRP and ERP

Jit and Lean Operations

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters