Deck 18: Appendix: Quantitative Module

Question 1

The decision tree shows the profit outcomes for a sandwich shop in a strong and a weak economy.The shop is likely to make $105,000, the sum of both projections.

Answer 1

False

Question 2

This regret matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.The maximum regrets for this table are S1 = 5, S2 = 9, S3 = 12.
CA1 CA2 CA3
S1 5 5 3
S2 9 6 1
S3 10 12 5

Answer 2

True

Question 3

A manager uses break-even analysis to find out how many units of a product he needs to sell to make a profit of zero.

Answer 3

True

Question 4

This regret matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.A minimax Bigg manager would choose S2 because it has the smallest maximum regret of 1.
CA1 CA2 CA3
S1 5 5 3
S2 9 6 1
S3 10 2 5

Question 5

Regret is computed by subtracting the value of a possible strategy from the greatest value in the entire matrix.

Question 6

This payoff matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.From Bigg's point of view, the S3 maximum regret is 1.
CA1 CA2 CA3
S1 8 5 12
S2 9 14 3
S3 16 13 20

Question 7

An optimistic manager will typically follow a maximax choice.

Question 8

With choice S1, a manager sees gains of $10 million and $6 million.With choice S2, a manager sees gains of $12 million and $8 million.Only a pessimistic manager would choose S1.

Question 9

The decision tree shows the profit outcomes for a sandwich shop in a strong and a weak economy.Overall, the shop is expected to make $32,000.

Question 10

This regret matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.A minimax Bigg manager choosing S3 would have a greatest possible regret of 2.
CA1 CA2 CA3
S1 5 5 3
S2 9 6 1
S3 10 2 5

Question 11

The break-even point is computed by the formula BE = TFC/(P - VC)].

Question 12

With choice S1, a manager sees gains of $10 million and $6 million.With choice S2, a manager sees gains of $12 million and $3 million.The manager chooses S2, so she must be optimistic.

Question 13

This payoff matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.From Bigg's point of view, the S1 maximum regret for CA1 is 8.
CA1 CA2 CA3
S1 8 5 12
S2 9 14 3
S3 16 13 20

Question 14

This payoff matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.From Bigg's point of view, the S1 maximum regret for CA2 is 8.
CA1 CA2 CA3
S1 8 5 12
S2 9 14 3
S3 16 13 20

Question 15

With choice S1, a manager sees gains of $10 million and $6 million.With choice S2, a manager sees gains of $12 million and $8 million.S2 might be the choice of a pessimistic manager.

Question 16

The decision tree shows the profit outcomes for a sandwich shop in a strong and a weak economy.If the economy is weak, the shop is likely to make 60 percent of a $25,000 profit, or $15,000.

Question 17

This payoff matrix gives values for strategies S1, S2, and S3 for the Bigg Company and competitive strategies CA1, CA2, and CA3 for the Large Company.From Bigg's point of view, the S2 maximum regret is 9.
CA1 CA2 CA3
S1 8 5 12
S2 9 14 3
S3 16 13 20

Question 18

The decision tree shows the profit outcomes for a sandwich shop in a strong and a weak economy.If the economy is strong, the shop is likely to make an $80,000 profit.

Question 19

A pessimistic manager will typically follow a minimin choice.

Question 20

Decision trees are unreliable for making pricing decisions.

Question 21

In the economic order quantity (EOQ)model, decreasing the order size will increase carrying costs.

Question 22

A company is worried about meeting its interest expenses, so it should pay close attention to its times interest earned.

Question 23

An organization with a high leverage ratio has usually been overly cautious and conservative in its borrowing.

Question 24

The goal of the economic order quantity (EOQ)model is to maximize the total costs that are categorized as carrying costs and ordering costs.

Question 25

Using a fixed-point reordering system, a business might order new inventory when it is down to about one-third of its maximum stock.

Question 26

A queuing theory analysis for bank teller windows comes up with a value of 0.10 for P, indicating that customers are likely to wait about 10 minutes for each transaction.

Question 27

Production data for Streaks is shown.Using linear programming, the maximum number of running shoes that the plant can make is 250.
Monthly Product

Question 28

Production data for Streaks is shown.Using linear programming, if the plant makes 100 pairs of running shoes and 100 pairs of soccer shoes, it ends up with $3600 in profit.
Monthly Product

Question 29

Return on investment measures the ratio of total profits to total assets.

Question 30

A current ratio of 1.5 to 1 for an organization suggests that the organization will not be able to meet its short-term debt obligations.

Question 31

In the economic order quantity (EOQ)model, the optimum order quantity is obtained by identifying where the total cost curve and the ordering costs curve intersect.

Question 32

Another term for queuing theory is "waiting line" theory.

Question 33

Liquidity is a measure of an organization's ability to access cash to meet its debt obligations.

Question 34

In the economic order quantity (EOQ)model, increasing the order size will decrease ordering costs.

Question 35

In the economic order quantity (EOQ)model, one of the costs that gets considered for analysis is the carrying costs of tying up money with inventory.

Question 36

The greater the ratio of TFC to (P - VC)is means that the business needs to sell fewer units to make a profit.

Question 37

Reducing the value of VC in a break-even analysis means that the business needs to sell fewer units to turn a profit.

Question 38

Production data for Streaks is shown.Using linear programming, if running shoes are represented by R and soccer shoes by S, 5R + 3S < 750 is the correct constraint equation for design.
Monthly Product

Question 39

Production data for Streaks is shown.Using linear programming, the maximum number of soccer shoes that the plant can make is 250.
Monthly Product

Question 40

Production data is shown for the number of hours required per unit for the Running and Soccer versions of Streaks, custom made athletic shoes.Using linear programming, if running shoes are represented by R and soccer shoes by S, the expression $16R + $20S is equal to the maximum profit that can be made.
Monthly Product

Question 41

Which role does uncertainty typically play in how managers function?

A)Uncertainty limits the amount of information that is available.
B)Uncertainty increases the amount of information that is available.
C)Uncertainty improves the quality of information that is available.
D)Uncertainty enhances the information that is available.

Question 42

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.What is the maximum regret value for S1? CA1 CA2 CA3
S1 13 14 7
S2 7 17 12
S3 31 29 4
S4 20 12 21

A)18
B)15
C)14
D)12

Question 43

Which of the following best defines regret in a payoff matrix?

A)Regret refers to the difference of the sum of the values in a chosen strategy and the sum of the best strategy.
B)Regret refers to the difference of the sum of the values in a chosen strategy and the sum of the worst strategy.
C)Regret refers to the sum total of the sum of the values in a chosen strategy and the sum of the best strategy.
D)Regret refers to the extra amount of money that could have been made had the person chosen a different strategy.

Question 44

A manager is worried that if he chooses the wrong investment strategy, his company could lose out on a great deal of money.Which strategy should he follow?

A)a maximax orientation
B)a minimin orientation
C)a maximin orientation
D)a minimax orientation

Question 45

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.What is the maximum regret value for S2? CA1 CA2 CA3
S1 13 14 7
S2 7 17 12
S3 31 29 4
S4 20 12 21

A)24
B)15
C)5
D)0

Question 46

In a decision tree, which of the following is true?

A)The probabilities of all of the outcomes must be equal.
B)The sum of the probabilities of all of the outcomes must equal 1.0.
C)No outcome can have a probability that is less to 1.0.
D)The sum of the probabilities of all of the outcomes must be greater than 1.0.

Question 47

The purchase price of a product has no influence on calculating EOQ.

Question 48

This regret matrix gives potential dollar values in thousands for strategies S1, S2, S3, and S4 for Al's Fish Fry and competitive strategies CA1, CA2, and CA3 for Sal's Fish Bake.If Al chooses S3, what kind of strategy is he using? CA1 CA2 CA3
S1 3 15 9
S2 12 10 12
S3 8 9 17
S4 13 16 3

A)minimax
B)maximin
C)maximax
D)minimin

Question 49

The decision tree shows the profit outcomes for a coffee shop in a strong and a weak economy for next year.What is the probability that the economy will be weak in the coming year?

A)0)73
B)27 percent
C)50 percent
D)7)3

Question 50

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.If Sam chooses S3, how is he feeling about the business climate? CA1 CA2 CA3
S1 13 14 7
S2 7 17 12
S3 31 29 4
S4 20 12 21

A)Sam is feeling pessimistic because he has chosen a maximax strategy.
B)Sam is feeling pessimistic because he has chosen a minimax strategy.
C)Sam is feeling optimistic because he has chosen a maximax strategy.
D)Sam is feeling optimistic because he has chosen a maximin strategy.

Question 51

Which of the following would a manager choose who wants to minimize her maximum regret?

A)the smallest maximum regret value
B)the smallest minimum regret value
C)the smallest difference maximum regret value and the minimum regret value
D)the greatest difference maximum regret value and the minimum regret value

Question 52

Which psychological orientation would be typical of a manager who is optimistic about her business environment?

A)a maximin orientation
B)a minimin orientation
C)a maximax orientation
D)a minimax orientation

Question 53

This regret matrix gives potential dollar values in thousands for strategies S1, S2, S3, and S4 for Al's Fish Fry and competitive strategies CA1, CA2, and CA3 for Sal's Fish Bake.If Al wants to minimize his maximum regret, which strategy should he choose? CA1 CA2 CA3
S1 3 15 9
S2 12 10 12
S3 8 9 17
S4 13 16 3

A)S4
B)S3
C)S2
D)S1

Question 54

This payoff matrix gives potential dollar gain values in millions for strategies S1, S2, S3, and S4 for the Bent Fork National Bank and competitive strategies CA1, CA2, and CA3 for the Straight Spoon Bank.If Bent Fork is pessimistic, which strategy will it choose? CA1 CA2 CA3
S1 3 24 17
S2 15 16 14
S3 8 19 10
S4 20 2 11

A)S1
B)S2
C)S3
D)S4

Question 55

In a decision tree, each possible outcome ________.

A)gets assigned a probability value between 0 and 1.0
B)gets assigned a probability value of 50 percent
C)gets assigned a probability value between 0 and 50 percent
D)gets assigned a probability value between 0.5 and 1.0

Question 56

This payoff matrix gives potential dollar gain values in millions for strategies S1, S2, S3, and S4 for the Bent Fork National Bank and competitive strategies CA1, CA2, and CA3 for the Straight Spoon Bank.If Bent Fork is optimistic, which strategy will it choose? CA1 CA2 CA3
S1 3 24 17
S2 15 16 14
S3 8 19 10
S4 20 2 11

A)S1
B)S2
C)S3
D)S4

Question 57

Which psychological orientation would be typical of a manager who is pessimistic about her business environment?

A)a maximin orientation
B)a minimin orientation
C)a maximax orientation
D)a minimax orientation

Question 58

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.If Sam chooses S4, how is he feeling about the business climate? CA1 CA2 CA3
S1 13 14 7
S2 7 17 12
S3 31 29 4
S4 20 12 21

A)Sam is feeling optimistic because he has chosen a maximax strategy.
B)Sam is feeling pessimistic because he has chosen a maximin strategy.
C)Sam is feeling optimistic because he has chosen a maximin strategy.
D)Sam is feeling pessimistic because he has chosen a maximax strategy.

Question 59

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.If Sam chooses S1, how is he feeling about the business climate? CA1 CA2 CA3
S1 13 14 7
S2 7 17 12
S3 31 29 4
S4 20 12 21

A)Sam is feeling pessimistic because he has chosen a maximax strategy.
B)Sam is feeling optimistic because he has chosen a maximin strategy.
C)Sam is feeling neither pessimistic nor optimistic because he has chosen neither a maximin nor a maximax strategy.
D)Sam is feeling both pessimistic and optimistic because he has chosen both a maximin and a maximax strategy.

Question 60

This payoff matrix gives potential dollar gain values in thousands for strategies S1, S2, S3, and S4 for Sam's Pizza and competitive strategies CA1, CA2, and CA3 for Pam's Pizza.What is the maximum regret value for S4? CA1 CA2 CA3
S1 13 14 7
S2 7 17 12
S3 31 29 4
S4 20 12 21

A)13
B)7
C)2
D)17

Question 61

Production data for the number of hours required per unit for making the Droid and iPhone versions of cell phone components by Bizzer, a high-tech manufacturing firm, is given below.What is the maximum number of units that the factory can make of either type of phone component? Monthly Product

A)2500
B)2000
C)500
D)1000

Question 62

Fixed costs for a product are $30,000.The product itself sells for $3.00 and it costs $1.50 to make each product.How can the plant decrease the break-even point by 5000 units?

A)Increase P, the price of the item, by $0.50.
B)Increase TFC, the fixed costs for item, by $5000.
C)Decrease P, the price of the item, by $0.50.
D)Decrease TFC, the fixed costs for item, by $5000.

Question 63

Production data for the number of hours required per unit for making the Droid and iPhone versions of cell phone components by Bizzer, a high-tech manufacturing firm, is given below.What is the maximum number of iPhone units that the factory can make? Monthly Product

A)625
B)1000
C)5000
D)800

Question 64

The decision tree shows the profit outcomes for a toy store in a strong and a weak economy for next year.What is the expected value of the store's profit in a strong economy?

A)$10,500
B)$15,000
C)$16,000
D)$30,000

Question 65

The decision tree shows the profit outcomes for a coffee shop in a strong and a weak economy for next year.Suppose a third outcome is considered in which a moderate economy is 33 percent likely to occur.With this added outcome, how does the probability of a weak economy change?

A)A weak economy is now 73 percent likely.
B)A weak economy is also 33 percent likely.
C)A weak economy is now 40 percent likely.
D)A weak economy is now 0 percent likely.

Question 66

The decision tree shows the profit outcomes for a toy store in a strong and a weak economy for next year.If the economy turns out to be weak, how much profit is the store likely to lose out?

A)$14,000
B)$16,000
C)$30,000
D)$15,000

Question 67

A company has a current ratio of of 0.85 to 1.What should a manager in the company worry about?

A)The company has too many assets and is not using them efficiently.
B)The company has too much inventory.
C)The company may start to have trouble paying salaries.
D)The company is paying salaries that are too high.

Question 68

Decision trees show the profit outcomes for the plans for two doughnut stores in two different locations in a strong and a weak economy for the future.If the investor interested in building a store is optimistic, in which location should she build?

A)She should build Store 1, because it has a lower minimum profit.
B)She should build Store 2, because it has a greater maximum profit.
C)She should build Store 1, because it has a greater maximum profit.
D)She should build Store 2, because it has a greater minimum profit.

Question 69

Decision trees show the profit outcomes for the plans for two doughnut stores in a strong and a weak economy for the future.Which store is expected to have the greater expected profit?

A)Store 1 has a $27,900 greater profit.
B)Store 1 has a $1200 greater profit.
C)Store 2 has a $26,700 greater profit.
D)Store 2 has a $1200 greater profit.

Question 70

Which of the following would cause a well-run company to become highly leveraged?

A)when the money that the company can earn investing the money that it borrows is equal to the cost of borrowing
B)when the money that the company can earn investing the money that it borrows is significantly less than the cost of borrowing
C)when the money that the company can earn investing the money that it borrows is significantly greater than the cost of borrowing
D)when the money that the company can earn investing the money that it borrows is equal to more than half of the cost of borrowing

Question 71

Production data for the number of hours required per unit for making the Droid and iPhone versions of cell phone components by Bizzer, a high-tech manufacturing firm, is given below.What is the maximum number of Droid units that the factory can make? Monthly Product

A)625
B)1000
C)5000
D)800

Question 72

A manager does a break-even analysis and finds that his value for BE, the break-even point, has decreased over time.Which of the following could be responsible for this event?

A)TFC has increased.
B)P has increased.
C)VC has decreased.
D)P has decreased.

Question 73

The decision tree shows the profit outcomes for a toy store in a strong and a weak economy for next year.What is the expected value of profit for the store for the year?

A)$10,500
B)$20,900
C)$29,000
D)$10,400

Question 74

A company has a current ratio of of 2.75 to 1.What should a manager in the company conclude?

A)The company is getting the best possible return on its assets.
B)The company has too many liabilities.
C)The company is not getting the best possible return on its assets.
D)The company is not getting the best possible return on its liabilities.

Question 75

For break-even analysis, which of the following is a fixed cost for a doughnut shop?

A)costs for purchasing flour and sugar
B)energy costs for ovens and heating
C)interest payments on loans
D)advertising costs

Question 76

Which of the following characterizes a highly leveraged company?

A)high total assets relative to total debt
B)high total debt relative to total assets
C)high total debt relative to inventories
D)high total interest payments relative to total debt

Question 77

Fixed costs for a product are $60,000.The product itself sells for $4.00 and it costs $1.00 to make each product.How will the break-even point for the product change if the variable cost per unit goes up to $1.50?

A)The break-even point will increase by 4000.
B)The break-even point will increase by 24,000.
C)The break-even point will decrease by 4000.
D)The break-even point will increase by 20,000.

Question 78

Decision trees show the profit outcomes for the plans for two doughnut stores in two different locations in a strong and a weak economy for the future.If the investor interested in building a store is pessimistic, in which location should she build?

A)She should build Store 2, because it has a greater minimum profit.
B)She should build Store 2, because it has a greater maximum profit.
C)She should build Store 1, because it has a greater maximum profit.
D)She should build Store 1, because it has a greater minimum profit.

Question 79

Fixed costs for a product are $50,000.The product itself sells for $5.00 and it costs $3.00 to make each product.What is the break-even point for the product?

A)100,000
B)10,000
C)50,000
D)25,000

Question 80

When is the acid test an especially important test for a company's liquidity?

A)when the economy is slow and inventory is not selling
B)when the economy is robust and inventory is selling fast
C)with companies that exclusively sell services and therefore do not have any inventory
D)with companies that exclusively sell services to the wealthy and therefore are not subject to economic downturns