Exam 1: Introduction to Managerial Decision Making

Which of the following statements is False regarding possible problems in developing decision models?

If a decision model has one variable with a certain/deterministic input value and another variable with a random/probabilistic input,then the outcome of this model which is based on both variables will be probabilistic.

Which of the following models is a picture or drawing of reality?

A professor that teaches Management Science assigns the final grade based on three examinations.To earn an A,the overall average on the three exams must be at least 89%.Suppose that you score 80% and 79% on exams 1 and 2,respectively.Using Goal Seek,what is the minimum score that you need to earn on exam 3 to get an A?

The break-even volume (BEP)occurs at the point where:

A quantitative model can still yield acceptable results even if the input data is unreliable.

One possible problem in decision modeling is for analysts to have conflicting viewpoints.

In dealing with business models,managers need to consider only quantitative data while making decisions in practice.

Jim and Shirley Irvin,a newly married couple,will be filing a joint tax return for the first year.Because both work as independent contractors (both are soccer coaches),their income is subject to some variability.However,because their earnings are not taxed at the source,they know that they have to pay estimated income taxes on a quarterly basis,based on their estimated taxable income for the year.To help calculate this tax,the Irvins would like to set up a spreadsheet-based decision model.Assume that they have the following information available: Their only source of income is from their jobs as soccer coaches.The would like to put away 3% of their total income in a retirement account,up to a maximum of $4,000.Any amount the put in that account can be deducted from their total income for tax purposes.They are entitled to a personal exemption of $3,300 each.There is a standard deduction for married couples of $11,500,meaning this amount is free from any taxes and can be deducted from total joint income.Jim makes an estimated $41,000 and Shirley makes an estimated $36,000.The tax brackets are 9% for up to $17,000,14% for $17,001 to $70,000,and 21% for $70,001 to $140,000.What are the estimated taxes per quarter that Jim and Shirley will have to pay?

The order of the three sequential steps involved in decision modeling is: formulation,solution,and interpretation.

Which of the following variables is considered to be quantitative?

At the break-even point (BEP),total profit is typically greater than zero.

If all the values of the input variables in a decision model are random in nature,then the model is considered to be probabilistic.

Identifying the key decision variables in a decision model is considered to be part of "model solution."

A decision model has the following input variables: projected sales data and historical advertising budget.This model is considered to be deterministic.

If all the variables in a model are under the control of the decision maker,then the model is considered to be:

The ABC Corporation is considering introducing a new product,which will require buying new equipment for a monthly payment of $5,000.Each unit produced can be sold for $20.00.ABC incurs a variable cost of $10.00 per unit.How many units must ABC sell each month to break even?

Determining how much the solution will change if there are changes in the input data of the model is referred to as sensitivity analysis.

A hotel typically incurs a cost of $45 to clean each room before guest arrival.Each room generates revenue of $155.00 per night.Using Goal Seek,how many rooms must be occupied nightly in order to realize a daily profit of $20,000?

Which of the following is an equation to determine the break-even point in dollars?