Question 1

In determining the EOL with the normal distribution,as D increases,the unit normal loss integral,N(D),also increases.

Accepted Answer

A) True 
 B)False

Question 2

The unit normal loss integral can be used to compute EOL.

Accepted Answer

A) True 
 B)False

Question 3

Jack Spratt makes candlesticks.His fixed cost is $5,000,variable cost is $3.50,and selling price,$8.50.To what value must he reduce his variable cost if he wants a break-even point of 900 units?

Accepted Answer

Variable c

Question 4

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. 
E) None of the above 
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. 
E) None of the above

Question 5

If the break-even volume doubles,this suggests that

Accepted Answer

A) variable cost has increased. 
B) fixed cost has increased. 
C) selling price has decreased. 
D) Any of the above 
E) None of the above 
A) variable cost has increased. 
B) fixed cost has increased. 
C) selling price has decreased. 
D) Any of the above 
E) None of the above

Question 6

Complete this mathematical statement: ________ = P(demand > break-even).

Accepted Answer

The answer of Complete this mathematical statement: ________ = P(demand...

Question 7

Cost volume analysis deals only with costs while break-even analysis deals with both costs and revenues.

Accepted Answer

A) True 
 B)False

Question 8

In terms of fixed costs,variable cost/unit,and the selling price/unit,what is the break-even point?

Accepted Answer

break-even point = f

Question 9

Tony B.is attempting to start a landscaping business.He estimates that to break-even,he will need about 140 customers.He believes he will lose approximately $500 per customer for each customer fewer than the 140.At the moment,he believes that there is an 80% probability that he will be able to secure at least 130 customers and that there is a 50/50 chance that demand will be greater than 150 customers.He has several marketing research firms offering (for a price,of course)to conduct a survey that will provide additional information regarding the probability of demand.How much should he be willing to spend if he decides to have a survey made?

Accepted Answer

A) ≅ $4,000 
B) ≅ $3,000 
C) ≅ $5,000 
D) ≅ $2,700 
E) None of the above 
A) ≅ $4,000 
B) ≅ $3,000 
C) ≅ $5,000 
D) ≅ $2,700 
E) None of the above

Question 10

σ describes the dispersion or spread of the normal distribution.

Accepted Answer

A) True 
 B)False

Question 11

If D = 0.75,s = 500,K = 6,and the selling price/unit = 5,determine EOL.

Accepted Answer

EOL = Kσ N(D)= 6 (50

Question 12

Briefly describe the opportunity loss function.

Accepted Answer

a function that rela

Question 13

If D = 1.01,s = 900,K = 10,and the selling price is $11,the EOL is

Accepted Answer

A) ≅ 10,000. 
B) ≅ 9,100. 
C) ≅ 736. 
D) ≅ 810. 
E) None of the above 
A) ≅ 10,000. 
B) ≅ 9,100. 
C) ≅ 736. 
D) ≅ 810. 
E) None of the above

Question 14

When using the normal distribution to approximate demand,which of the following is not true?

Accepted Answer

A) We assume demand is normally distributed. 
B) We assume demand is a random variable. 
C) We assume 50 percent of the time demand is less than the mean. 
D) We assume the fixed cost follows a normal distribution. 
E) All of the above are true. 
A) We assume demand is normally distributed. 
B) We assume demand is a random variable. 
C) We assume 50 percent of the time demand is less than the mean. 
D) We assume the fixed cost follows a normal distribution. 
E) All of the above are true.

Question 15

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. 
E) None of the above 
A) (total revenue - total cost)/number of units. 
B) selling price. 
C) price/unit minus variable cost per unit. 
D) EOL. 
E) None of the above

Question 16

The IRU Company manufactures traditional wooden pencils.They have determined their variable cost/unit to be $0.012/pencil.Fixed costs,however,are quite high because of old processing equipment and costly packaging.The fixed costs are estimated at $140,000/month.IRU sells their pencils at a price of $13.248/gross.(There are 144 pencils in a gross. )How many grosses of pencils must be sold annually to break even?

Accepted Answer

selling price/pencil = 13.248/

Question 17

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,σ

Question 18

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) None of the above 
E) Unable to say without more information 
A) stays the same. 
B) decreases. 
C) increases. 
D) None of the above 
E) Unable to say without more information

Question 19

Given the following opportunity loss function,determine the loss when 400 units are sold. Opportunity loss = 3 (1,000 - X)for X ≤ 1,000,otherwise 0.

Accepted Answer

A) 1,200 
B) 0 
C) 600 
D) 3 
E) 1,800 
A) 1,200 
B) 0 
C) 600 
D) 3 
E) 1,800

Question 20

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 
E) None of the above 
A) 71,111 
B) -71,111 
C) 266 
D) -266 
E) None of the above

Exam 18: Decision Theory and the Normal Distribution

In determining the EOL with the normal distribution,as D increases,the unit normal loss integral,N(D),also increases.

The unit normal loss integral can be used to compute EOL.

Jack Spratt makes candlesticks.His fixed cost is $5,000,variable cost is $3.50,and selling price,$8.50.To what value must he reduce his variable cost if he wants a break-even point of 900 units?

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

If the break-even volume doubles,this suggests that

Complete this mathematical statement: ________ = P(demand > break-even).

Cost volume analysis deals only with costs while break-even analysis deals with both costs and revenues.

In terms of fixed costs,variable cost/unit,and the selling price/unit,what is the break-even point?

σ describes the dispersion or spread of the normal distribution.

If D = 0.75,s = 500,K = 6,and the selling price/unit = 5,determine EOL.

Briefly describe the opportunity loss function.

If D = 1.01,s = 900,K = 10,and the selling price is $11,the EOL is

When using the normal distribution to approximate demand,which of the following is not true?

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

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.

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

Given the following opportunity loss function,determine the loss when 400 units are sold. Opportunity loss = 3 (1,000 - X)for X ≤ 1,000,otherwise 0.

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.

Introduction to Quantitative Analysis

Probability Concepts and Applications

Decision Analysis

Regression Models

Forecasting

Inventory Control Models

Linear Programming Models: Graphical and Computer Methods

Linear Programming Applications

Transportation,assignment,and Network Models

Integer Programming,goal Programming,and Nonlinear Programming

Project Management

Waiting Lines and Queuing Theory Models

Simulation Modeling

Markov Analysis

Statistical Quality Control

Analytic Hierarchy Process

Dynamic Programming

Game Theory

Mathematical Tools: Determinants and Matrices

Calculus-Based Optimization

Linear Programming: The Simplex Method

Transportation, Assignment, and Network Algorithms

Filters