Question 1

When computing Z for a break-even analysis: as σ increases, Z decreases.

Accepted Answer

A) True 
 B)False

Question 2

Loss/unit when sales are below the break-even point is equal to

Accepted Answer

A) (total revenue - total cost)/number of units. 
B) selling price. 
C) price/unit minus variable cost per unit. 
D) EOL. 
A) (total revenue - total cost)/number of units. 
B) selling price. 
C) price/unit minus variable cost per unit. 
D) EOL.

Question 3

Using EOL requires one to identify the loss per unit when sales are below the break-even point.

Accepted Answer

A) True 
 B)False

Question 4

The computed EOL will be the same as the computed

Accepted Answer

A) EMV. 
B) unit normal loss. 
C) break-even point. 
D) EVPI. 
A) EMV. 
B) unit normal loss. 
C) break-even point. 
D) EVPI.

Question 5

Given the following opportunity loss function, determine the loss when 400 units are sold. Opportunity loss = 5 (800 - X)for X ≤ 800, otherwise 0.

Accepted Answer

A) -1,200 
B) 2,000 
C) 0 
D) 1,800 
A) -1,200 
B) 2,000 
C) 0 
D) 1,800

Question 6

A Z score of 0.5 means that the observation equals the mean.

Accepted Answer

A) True 
 B)False

Question 7

The sales team projects that the annual demand for their new and improved Mediocrity Plus™ product will be normally distributed with a mean of 143,000,000 units and a standard deviation of 27,500,000.The break-even point is 123,000,000 units and for each unit sold less that that number, the company will lose $875.What is the expected opportunity loss?

Accepted Answer

EOL = Kσ N(D)= $875(

Question 8

Don Loprie takes out tiny classified ads in newspapers across the nation.His fixed cost is $13,000, variable cost is $25.50, and selling price, $38.75.To what value must he reduce his variable cost if he wants a break-even point of 900 units?

Accepted Answer

Variable cost = (900

Question 9

Given the following opportunity loss function, determine the loss when 7,000 units are sold.Opportunity loss: 6(9,000 - X)for X ≤ 9,000.

Accepted Answer

OL = 6(9,0

Question 10

If D = 1.00, then N(1.00)is approximately

Accepted Answer

A) 0.69000. 
B) 1.00000. 
C) 0.08332. 
D) 0.35090. 
A) 0.69000. 
B) 1.00000. 
C) 0.08332. 
D) 0.35090.

Question 11

A positive Z score for customer demand means that the company will realize a profit.

Accepted Answer

A) True 
 B)False

Question 12

Average demand is estimated at 1,200 units/month.It is believed there is a 20% chance for demand to be higher than 1,800.Determine the μ and σ of a normal distribution that estimates demand.

Accepted Answer

μ = 1200,

Question 13

Demand is estimated to be 800 units.If Z is taken to be 1.5, when the estimated average demand is 400 units, determine σ for these data.

Accepted Answer

A) 71,111 
B) -71,111 
C) 266 
D) -266 
A) 71,111 
B) -71,111 
C) 266 
D) -266

Question 14

μ has a greater impact on the shape of the normal distribution than σ.

Accepted Answer

A) True 
 B)False

Question 15

σ describes the dispersion or spread of the normal distribution.

Accepted Answer

A) True 
 B)False

Question 16

If variable cost/unit falls, the fixed cost rises, and the selling price/unit remains constant, the break-even point

Accepted Answer

A) stays the same. 
B) decreases. 
C) increases. 
D) Unable to say without more information. 
A) stays the same. 
B) decreases. 
C) increases. 
D) Unable to say without more information.

Question 17

In many business decisions, there are numerous states of nature and/or alternatives.These problems are best handled by

Accepted Answer

A) constructing a large decision table and using Excel. 
B) constructing a large decision tree. 
C) using the normal distribution. 
D) using the integral loss distribution. 
A) constructing a large decision table and using Excel. 
B) constructing a large decision tree. 
C) using the normal distribution. 
D) using the integral loss distribution.

Question 18

For volumes greater than the break-even point, the opportunity loss function is

Accepted Answer

A) a function of K, the loss per unit. 
B) 0. 
C) dependent on how much the volume is greater than the break-even point. 
D) halved. 
A) a function of K, the loss per unit. 
B) 0. 
C) dependent on how much the volume is greater than the break-even point. 
D) halved.

Question 19

σ has a greater impact on the shape of the normal distribution than μ.

Accepted Answer

A) True 
 B)False

Question 20

An Asian fusion cafe sells an average of 1240 wasabi lattes with a standard deviation of 80.What level of customer demand represents the 65th percentile for wasabi lattes?

Accepted Answer

A) 1209 
B) 1253 
C) 1271 
D) 1293 
A) 1209 
B) 1253 
C) 1271 
D) 1293

Exam 18: Decision Theory and the Normal Distribution

When computing Z for a break-even analysis: as σ increases, Z decreases.

Loss/unit when sales are below the break-even point is equal to

Using EOL requires one to identify the loss per unit when sales are below the break-even point.

The computed EOL will be the same as the computed

Given the following opportunity loss function, determine the loss when 400 units are sold. Opportunity loss = 5 (800 - X)for X ≤ 800, otherwise 0.

A Z score of 0.5 means that the observation equals the mean.

Don Loprie takes out tiny classified ads in newspapers across the nation.His fixed cost is $13,000, variable cost is $25.50, and selling price, $38.75.To what value must he reduce his variable cost if he wants a break-even point of 900 units?

Given the following opportunity loss function, determine the loss when 7,000 units are sold.Opportunity loss: 6(9,000 - X)for X ≤ 9,000.

If D = 1.00, then N(1.00)is approximately

A positive Z score for customer demand means that the company will realize a profit.

Average demand is estimated at 1,200 units/month.It is believed there is a 20% chance for demand to be higher than 1,800.Determine the μ and σ of a normal distribution that estimates demand.

Demand is estimated to be 800 units.If Z is taken to be 1.5, when the estimated average demand is 400 units, determine σ for these data.

μ has a greater impact on the shape of the normal distribution than σ.

σ describes the dispersion or spread of the normal distribution.

If variable cost/unit falls, the fixed cost rises, and the selling price/unit remains constant, the break-even point

In many business decisions, there are numerous states of nature and/or alternatives.These problems are best handled by

For volumes greater than the break-even point, the opportunity loss function is

σ has a greater impact on the shape of the normal distribution than μ.

An Asian fusion cafe sells an average of 1240 wasabi lattes with a standard deviation of 80.What level of customer demand represents the 65th percentile for wasabi lattes?

Introduction to Quantitative Analysis

Probability Concepts and Applications

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Regression Models

Forecasting

Inventory Control Models

Linear Programming Models: Graphical and Computer Methods

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Integer Programming, Goal Programming, and Nonlinear Programming

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Markov Analysis

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Mathematical Tools: Determinants and Matrices

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Linear Programming: The Simplex Method

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