Question 1

The most widely used decision-making criterion for situations with risk is expected value.

Accepted Answer

A) True 
 B)False

Question 2

A family business is considering making an investment in its manufacturing operation.Three decisions are under consideration: (1)a large investment; (2)a medium investment;and (3)a small investment.The business believes that there are three possible future outcomes for its product: (1)increasing demand; (2)stable demand;and (3)decreasing demand.The business believes that the probability for increasing,stable and decreasing product demand are 0.4,0.5,and 0.1,respectively.The following payoff table describes the decision situation.
 
The expected value of perfect information for the family business is

Accepted Answer

A) $602,500 
B) $540,000 
C) $62,500 
D) $25,000 
A) $602,500 
B) $540,000 
C) $62,500 
D) $25,000

Question 3

A family business is considering making an investment in its manufacturing operation.Three decisions are under consideration: (1)a large investment; (2)a medium investment;and (3)a small investment.The business believes that there are three possible future outcomes for its product: (1)increasing demand; (2)stable demand;and (3)decreasing demand.The business believes that the probability for increasing,stable and decreasing product demand are 0.4,0.5,and 0.1,respectively.The following payoff table describes the decision situation.
 
The expected value for the large investment decision is

Accepted Answer

A) $700,000 
B) $540,000 
C) $330,000 
D) $165,000 
A) $700,000 
B) $540,000 
C) $330,000 
D) $165,000

Question 4

A family business is considering making an investment in its manufacturing operation.Three decisions are under consideration: (1)a large investment; (2)a medium investment;and (3)a small investment.The business believes that there are three possible future outcomes for its product: (1)increasing demand; (2)stable demand;and (3)decreasing demand.The business believes that the probability for increasing,stable and decreasing product demand are 0.4,0.5,and 0.1,respectively.The following payoff table describes the decision situation.
 
The expected value for the small investment decision is

Accepted Answer

A) $540,000 
B) $400,000 
C) $330,000 
D) $165,000 
A) $540,000 
B) $400,000 
C) $330,000 
D) $165,000

Question 5

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand.The following payoff table describes the company's decision situation.
 
The value of the Hurwicz decision criterion for subcontract production when the coefficient of optimism is 0.30 is

Accepted Answer

A) $92,500 
B) $182,500 
C) $250,000 
D) $275,000 
A) $92,500 
B) $182,500 
C) $250,000 
D) $275,000

Question 6

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand.The following payoff table describes the company's decision situation.
 
The best decision for the manufacturer using the maximax decision criterion is to

Accepted Answer

A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) select high demand 
A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) select high demand

Question 7

A family business is considering making an investment in its manufacturing operation.Three decisions are under consideration: (1)a large investment; (2)a medium investment;and (3)a small investment.The business believes that there are three possible future outcomes for its product: (1)increasing demand; (2)stable demand;and (3)decreasing demand.The following payoff table describes the decision situation.
 
The best decision for the business using the minimax regret decision criterion would be to

Accepted Answer

A) make the large investment 
B) make the medium investment 
C) make the small investment 
D) choose decreasing demand 
A) make the large investment 
B) make the medium investment 
C) make the small investment 
D) choose decreasing demand

Question 8

The outcome of a decision in referred to as a payoff.

Accepted Answer

A) True 
 B)False

Question 9

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand,with probabilities of 0.6 and 0.4,respectively.The following payoff table describes the company's decision situation.
 
The expected value for the acquire competitor decision is

Accepted Answer

A) $250,000 
B) $160,000 
C) $700,000 
D) $1,200,000 
A) $250,000 
B) $160,000 
C) $700,000 
D) $1,200,000

Question 10

Quantitative methods are tools available to operations managers to help make a decision or recommendation.

Accepted Answer

A) True 
 B)False

Question 11

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand,with probabilities of 0.6 and 0.4,respectively.The following payoff table describes the company's decision situation.
 
The expected value of perfect information for the small parts manufacturer is

Accepted Answer

A) $1,210,000 
B) $700,000 
C) $510,000 
D) $312,500 
A) $1,210,000 
B) $700,000 
C) $510,000 
D) $312,500

Question 12

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand.The following payoff table describes the company's decision situation.
 
The best decision for the manufacturer using the maximin decision criterion is to

Accepted Answer

A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) select high demand 
A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) select high demand

Question 13

A sequential decision tree is a graphical method for analyzing decision situations that require a sequence of decisions over time.

Accepted Answer

A) True 
 B)False

Question 14

When probabilities can be assigned to the occurrence of states of nature in the future,the situation is referred to as

Accepted Answer

A) decision making under risk 
B) decision making under certainty 
C) decision making under uncertainty 
D) none of the above 
A) decision making under risk 
B) decision making under certainty 
C) decision making under uncertainty 
D) none of the above

Question 15

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand,with probabilities of 0.6 and 0.4,respectively.The following payoff table describes the company's decision situation.
 
The expected value for the subcontract production decision is

Accepted Answer

A) $250,000 
B) $160,000 
C) $700,000 
D) $1,200,000 
A) $250,000 
B) $160,000 
C) $700,000 
D) $1,200,000

Question 16

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand.The following payoff table describes the company's decision situation.
 
The best decision for the manufacturer using the Hurwicz decision criterion with a coefficient of optimism equal to 0.3 is to

Accepted Answer

A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) make no decision 
A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) make no decision

Question 17

A family business is considering making an investment in its manufacturing operation.Three decisions are under consideration: (1)a large investment; (2)a medium investment;and (3)a small investment.The business believes that there are three possible future outcomes for its product: (1)increasing demand; (2)stable demand;and (3)decreasing demand.The business believes that the probability for increasing,stable and decreasing product demand are 0.4,0.5,and 0.1,respectively.The following payoff table describes the decision situation.
 
If the expected value criterion is used then the best decision would be to

Accepted Answer

A) make the large investment 
B) make the medium investment 
C) make the small investment 
D) choose the stable demand 
A) make the large investment 
B) make the medium investment 
C) make the small investment 
D) choose the stable demand

Question 18

A small parts manufacturer has just engineered a new product for the automotive industry.In order to produce the part the company can expand existing facilities,acquire a competitor,or subcontract production.The company believes the product will either experience high market demand or low market demand.The following payoff table describes the company's decision situation.
 
The best decision for the manufacturer using the equal likelihood criterion is to

Accepted Answer

A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) select high demand 
A) expand facilities 
B) acquire competitor 
C) subcontract production 
D) select high demand

The most widely used decision-making criterion for situations with risk is expected value.

The outcome of a decision in referred to as a payoff.

Quantitative methods are tools available to operations managers to help make a decision or recommendation.

A sequential decision tree is a graphical method for analyzing decision situations that require a sequence of decisions over time.

When probabilities can be assigned to the occurrence of states of nature in the future,the situation is referred to as

Operations Management

Quality Management

Statistical Quality Control

Product Design

Service Design

Processes and Technology

Scheduling

Capacity and Facilities

Human Resources

Project Management

Supply Chain Management: Strategy and Design

Global Supply Chain Procurement and Distribution

Forecasting

Inventory Management

Operational Decision-Making Tools: Simulation

Operational Decision-Making Tools: Linear Programming

The Sales and Operations Planning Process

Resource Planning

Lean Systems

Operational Decision-Making Tools: Acceptance Sampling

Decision-Making Tools: Facility Location Models

Operational Decision-Making Tools: Work Measurement

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Exam 18: Operational Decision-Making Tools: Decision Analysis

The most widely used decision-making criterion for situations with risk is expected value.

The outcome of a decision in referred to as a payoff.

Quantitative methods are tools available to operations managers to help make a decision or recommendation.

A sequential decision tree is a graphical method for analyzing decision situations that require a sequence of decisions over time.

When probabilities can be assigned to the occurrence of states of nature in the future,the situation is referred to as

Operations Management

Quality Management

Statistical Quality Control

Product Design

Service Design

Processes and Technology

Scheduling

Capacity and Facilities

Human Resources

Project Management

Supply Chain Management: Strategy and Design

Global Supply Chain Procurement and Distribution

Forecasting

Inventory Management

Operational Decision-Making Tools: Simulation

Operational Decision-Making Tools: Linear Programming

The Sales and Operations Planning Process

Resource Planning

Lean Systems

Operational Decision-Making Tools: Acceptance Sampling

Decision-Making Tools: Facility Location Models

Operational Decision-Making Tools: Work Measurement

Filters