# GBA440 Midterm Exam Latest 2018

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

-9.11

1.166068

7.810781

1.81E-06

Referring to the information above, based on his model, each additional family member increases the predicted costs by how much?

$110.47

$16.83

$93.64

$127.30

Question 15. A controllable variable is also called:

a parameter.

a decision variable.

a mathematical model.

a measurable quantity.

none of the above.

Question 16. A seasonal index of __________ indicates that the season is average.

10

100

0.5

0

1

Question 17. In the exponential smoothing with trend adjustment forecasting method, missing something is the:

slope of the trend line.

new forecast.

Y-axis intercept.

independent variable.

trend smoothing constant.

Question 18. 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 lettered ball (L), the probability that this ball is white (W) is 0.571.

True

False

Question 19. The condition of improper data yielding misleading results is referred to as:

garbage in, garbage out.

break-even point.

uncontrollable variable.

postoptimality.

none of the above.

Question 20. 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.

Click here to view an Excel version of this output

Referring to the information above, what percent of the variation in medical expenses is explained by the size of the family?

48.3%

49.6%

50.6%

51.3%

Question 21. Our department store is having a sale on personal computers, of which three are in stock (no rain checks). There is a certain probability of selling none. The probability of selling one is twice as great as the probability of selling none. The probability of selling two is three times the probability of selling none. Finally, the probability of selling all the personal computers is four times as great as the probability of selling none.

Using the above information, what is the probability of selling no personal computers? Hint: Let the probability of selling none equal x.

0.05

0.08

0.1

0.2

Question 22. A medium-term forecast is considered to cover what length of time?

2-4 weeks

1 month to 1 year

2-4 years

5-10 years

20 years

Question 23. If two events are mutually exclusive, then:

their probabilities can be added.

they may also be collectively exhaustive.

the joint probability is equal to 0.

if one occurs, the other cannot occur.

All of the above

Question 24. Arrivals at a fast-food restaurant follow a Poisson distribution with a mean arrival rate of 16 customers per hour. What is the probability that in the next hour there will be exactly 12 arrivals?

0.0000

0.0661

0.7500

0.1322

None of the above

Question 25. The Department of Motor Vehicles (DMV) can service customers at a rate of 20 per hour (or 1/3 per minute) when it comes to license renewals. The service time follows an exponential distribution. What is the probability that it will take less than three minutes for a particular customer to get a license renewal?

0.5

0

1

0.368

0.632

Question 26. Demand for soccer balls at a new sporting goods store is forecasted using the following regression equation: Y = 98 + 2.2X where X is the number of months that the store has been in existence.Let April be represented by X= 4. April is assumed to have a seasonality index of 1.15. What is the forecast for soccer ball demand for the month of April (rounded to the nearest integer)?

123

107

100

115

None of the above

Question 27. The best model is a statistically significant model with a high r-square and few variables.

True

False

Question 28. Historical data indicates that only 20% of cable customers are willing to switch companies. If a binomial process is assumed, then in a sample of 20 cable customers, what is the probability that no more than three customers would be willing to switch their cable?

0.85

0.15

0.20

0.411

0.589

Question 29. A seasonal index of 1 means that the season is average.

True

False

Question 30. Which of the following is true regarding a regression model with multicollinearity, a high r2 value, and a low F-test significance level?

The model is not a good prediction model.

The high value of r2 is due to the multicollinearity.

The interpretation of the coefficients is valuable.

The significance level tests for the coefficients are not valid.

The significance level for the F-test is not valid.

Question 31. 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.

Click here to view an Excel version of this output

Referring to the information above, the significance F-test, is this model a good prediction equation?

Yes

No

Question 32. The length of time that it takes the tollbooth attendant to service each driver can typically be described by the:

normal distribution.

uniform distribution.

exponential distribution.

Poisson distribution.

None of the above

Question 33. Time-series models attempt to predict the future by using historical data.

True

False

Question 34. Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15, 12, 18, 14, 12, 13, 15 (listed from oldest to most recent). Forecast sales for the next day using a two-day weighted moving average where the weights are 3 and 1 are:

14.5

13.5

14

12.25

12.75

Question 35. Our department store is having a sale on personal computers, of which three are in stock (no rain checks). There is a certain probability of selling none. The probability of selling one is twice as great as the probability of selling none. The probability of selling two is three times the probability of selling none. Finally, the probability of selling all the personal computers is four times as great as the probability of selling none.

Using the above information, what is the probability of selling all three personal computers? Hint: Let the probability of selling none equal x.

0.4

0.32

0.36

0.44

Question 36. 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

0.695

R Square

0.483

Adjusted R Square

0.474

Standard Error

55.275

Observations

21

ANOVA

df

SS

MS

F

Significance F

Regression

1

99929.47

99929.47

32.70311

0.00016

Residual

19

58057.48

3055.657

Total

20

157987

Coefficients

Standard Error

t Stat

P-value

Intercept

110.47

35.53407

3.109087

0.0057

X

16.83

0.819024

5.718663

0.00016

Referring to the information above, what is the value of the correlation coefficient?

55.278

0.695

0.483

0.474

Question 37. Loss of goodwill must be included in stockout costs.

True

False

Question 38. The probability, P, of any event or state of nature occurring is greater than or equal to 0 and less than or equal to 1.

True

False

Question 39. As one increases the number of periods used in the calculation of a moving average:

greater emphasis is placed on more recent data.

less emphasis is placed on more recent data.

the emphasis placed on more recent data remains the same.

it requires a computer to automate the calculations.

one is usually looking for a long-term prediction.

Question 40. Which of the following methods tells whether the forecast tends to be too high or too low?

MAD

MSE

MAPE

Decomposition

Bias

Question 41. A moving average forecasting method is a causal forecasting method.

True

False

Question 42. One purpose of regression is to understand the relationship between variables.

True

False

Question 43. When demand is constant, the Reorder point (ROP) is a function of demand and lead time.

True

False

Question 44. Which of the following is not classified as a qualitative forecasting model?

Exponential smoothing

Delphi method

Jury of executive opinion

Sales force composite

Consumer market survey

Question 45. Consider the following gasoline data:

Click here to view an Excel version of this table.

Referring to the information above, what is the seasonal index for fourth quarter?

1.017

1.175

.977

.899

Question 46. The classical method of determining probability is:

subjective probability.

marginal probability.

objective probability.

joint probability.

conditional probability.

Question 47. A consulting firm has received two Super Bowl tickets from one of its clients. To be fair, the firm is randomly selecting two different employee names to “win” the tickets. There are six secretaries, five consultants and four partners in the firm. Which of the following statements is false?

The probability of a secretary winning a ticket on the first draw is 6/15.

The probability of a secretary winning a ticket on the second draw given that a consultant won a ticket on the first draw is 6/15.

The probability of a consultant winning a ticket on the first draw is 1/3.

The probability of two secretaries winning both tickets is 1/7.

The probability of a partner winning a ticket on the second draw given that a secretary won a ticket on the first draw is 4/14.

Question 48. The EMV that a person is willing to give up in order to avoid the risk associated with a gamble is referred to as the:

risk premium.

certainty equivalent.

EVPI.

EVwPI.

EVSI.

Question 49. Enrollment in a particular class for the last four semesters has been 120, 126, 110, and 130 (listed from oldest to most recent). What is the enrollment forecast for next semester using exponential smoothing with an alpha = 0.2. Assume that an initial forecast for the first semester was 120 (so the forecast and the actual were the same).

118.96

121.17

130

120

None of the above

Question 50. An urn contains seven blue and three yellow chips. If the drawing of chips is done with replacement, what is the probability of drawing a blue chip on the second draw given that a yellow chip was drawn on the first draw?

a. 0.027

b. 0.210

c. 0.300

d. 0.700