Business Decision Analysis
Test Preparation
Course Introduction
Business Decision Analysis explores the methodologies and tools used to make effective and informed decisions in complex business environments. The course emphasizes quantitative techniques such as decision trees, simulation, optimization models, and risk analysis, while also highlighting the importance of qualitative factors and managerial judgment. Through real-world case studies and practical applications, students learn to solve problems involving uncertainty, resource allocation, and strategic planning, preparing them to support and justify business decisions in a competitive and dynamic marketplace.
Recommended Textbook
Introduction to Management Science A Modeling and Case Studies Approach With Spreadsheets
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22 Chapters
1066 Verified Questions
1066 Flashcards
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Chapter 1: Introduction
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Sample Questions
Q1) Management scientists make managerial decisions based on the quantitative factors involved in the problem.
A)True
B)False
Answer: False
Q2) Which of the following is an inequality or equation that expresses a restriction in a mathematical model?
A)Decision variable.
B)Parameter.
C)Objective function.
D)Constraint.
E)None of the above.
Answer: D
Q3) Enlightened future managers should know which of the following?
A)The power and relevance of management science.
B)When management science can and cannot be applied.
C)How to apply the major techniques of management science.
D)How to interpret the results of a management science study.
E)All of the above.
Answer: E
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Chapter 2: Linear Programming: Basic Concepts
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Sample Questions
Q1) For the products A,B,C,and D,which of the following could be a linear programming objective function?
A)P = 1A + 2B +3C + 4D.
B)P = 1A + 2BC + 3D.
C)P = 1A + 2AB + 3ABC + 4ABCD.
D)P = 1A + 2B/C + 3D.
E)All of the above.
Answer: A
Q2) When formulating a linear programming problem on a spreadsheet,target cells will show the levels of activities for the decisions being made.
A)True
B)False
Answer: False
Q3) An example of a decision variable in a linear programming problem is profit maximization.
A)True
B)False
Answer: False
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4
Chapter 3: Linear Programming: Formulation and Applications
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58 Flashcards
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Sample Questions
Q1) Cost-benefit-tradeoff problems are linear programming problems involving the allocation of limited resources to activities.
A)True
B)False
Answer: False
Q2) A resource constraint refers to any functional constraint with a \(\ge\) sign in a linear programming model.
A)True
B)False
Answer: False
Q3) It is fairly common to have both resource constraints and benefit constraints in the same formulation.
A)True
B)False
Answer: True
Q4) Model formulation should precede problem formulation.
A)True
B)False
Answer: False
Page 5
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Chapter 4: The Art of Modeling With Spreadsheets
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) It is better to use power functions in Excel to complete a calculation in a single cell than to spread out a calculation over many cells using simpler formulas.
A)True
B)False
Q2) What are some ways to distinguish data cells,changing cells,output cells,and target cells on a spreadsheet?
A)Borders.
B)Shading.
C)Color.
D)All of the above.
E)a and c only.
Q3) Which of the following is not a major step in the process of modeling with spreadsheets?
A)Plan.
B)Build.
C)Test.
D)Analyze.
E)All of the above are major steps.
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6
Chapter 5: What-If Analysis for Linear Programming
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63 Flashcards
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Sample Questions
Q1) If the coefficients of Activity 1 and Activity 2 in the objective function are both increased by $10,then:
A)the optimal solution remains the same.
B)the optimal solution may or may not remain the same.
C)the optimal solution will change.
D)the shadow prices are valid.
E)None of the above.
Q2) In a problem with 4 decision variables,the 100% rule indicates that each objective coefficient can be safely increase by what amount without invalidating the current optimal solution?
A)25%.
B)25% of the allowable increase of that coefficient.
C)100%.
D)25% of the range of optimality.
E)It can't be determined from the information given.
Q3) When a change occurs in the right-hand side values of one of the constraints,a proportional change will occur in one of the coefficients of the objective function.
A)True
B)False
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Chapter 6: Network Optimization Problems
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Sample Questions
Q1) A minimum cost flow problem may be summarized by drawing a network only after writing out the full formulation.
A)True
B)False
Q2) A transportation problem is just a minimum cost flow problem without any transshipment nodes and without any capacity constraints on the arcs.
A)True
B)False
Q3) When reformulating a shortest path problem as a minimum cost flow problem,each link should be replaced by a pair of arcs pointing in opposite directions.
Multiple Choice Questions
A)True
B)False
Q4) In a feasible minimum cost flow problem,the network has enough arcs with sufficient capacity to enable all the flow generated at the supply nodes to reach all the demand nodes.
A)True
B)False
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Chapter 7: Using Binary Integer Programming to Deal With
Yes-Or-No Decisions
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26 Verified Questions
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Sample Questions
Q1) BIP can be used to determine the timing of activities.
A)True
B)False
Q2) The constraint x<sub>1</sub> \(\le\) x<sub>2</sub> in a BIP problem means that alternative 2 cannot be selected unless alternative 1 is also selected.
A)True
B)False
Q3) Binary variables are variables whose only possible values are 0 or 1.
A)True
B)False
Q4) In a BIP problem with 2 mutually exclusive alternatives,x<sub>1</sub> and x<sub>2</sub>,the following constraint needs to be added to the formulation if one alternative must be chosen:
A)x<sub>1</sub> + x<sub>2</sub> \(\le\) 1.
B)x<sub>1</sub> + x<sub>2</sub> = 1.
C)x<sub>1</sub> - x<sub>2</sub> \(\le\) 1.
D)x<sub>1</sub> - x<sub>2</sub> = 1.
E)None of the above.
Page 9
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Chapter 8: Nonlinear Programming
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Sample Questions
Q1) Excel's curve fitting method is used to find the values of the parameters for an equation that best fit data.
A)True
B)False
Q2) A nonlinear function may contain which of the following?
A)A term that contains a single variable with an exponent of 1.
B)A term that contains a single variable with an exponent of 2.
C)A term that is a constant times the product of two variables.
D)All of the above.
E)b.and c.only.
Q3) If the data cells are in column D and the changing cells are in column C,which of the following are linear formulas in a spreadsheet?
A)SUMPRODUCT(D1:D6,C1:C6)
B)SUMPRODUCT(C1:C3,C4:C6)
C)SUM(C1:C6)
D)All of the above.
E)a and c only.
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Chapter 9: Decision Analysis
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Sample Questions
Q1) Given that the research is done,what is the joint probability that the state of nature is S2 and the research predicts S1?
A)0.08.
B)0.16.
C)0.24.
D)0.32.
E)0.36.
Q2) Which one of the following statements is not correct when making decisions?
A)The sum of the state of nature probabilities must be 1.
B)Every probability must be greater than or equal to 0.
C)All probabilities are assumed to be equal.
D)Probabilities are used to compute expected values.
E)Perfect information assumes that the state of nature that will actually occur is known.
Q3) What is the expected payoff for the decision to write the economics book?
A)50,000 copies.
B)40,000 copies.
C)32,000 copies.
D)30,500 copies.
E)10,500 copies.
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Page 11
Chapter 10: Cd Supplement - Decision Analysis
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Sample Questions
Q1) The maximum likelihood strategy is:
A)Buy.
B)Rent.
C)Lease.
D)High.
E)Low.
Q2) Determining the worst payoff for each alternative and choosing the alternative with the "best worst" is the criterion called:
A)minimin.
B)maximin.
C)maximax.
D)maximum likelihood.
E)Bayes decision rule.
Q3) The equally likely strategy is: A)Buy.
B)Rent.
C)Lease.
D)High.
E)Low.
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Page 12
Chapter 11: Forecasting
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Sample Questions
Q1) What is the forecast for this year using a moving-average forecast based on the last three years?
A)163.
B)180.
C)300.
D)467.
E)510.
Q2) The sales force composite method is a top-down approach to forecasting.
A)True
B)False
Q3) Using the latest value in a sequence of data to forecast the next period is:
A)a moving-average forecast.
B)a last-value forecast.
C)an exponentially smoothed forecast.
D)a causal forecast.
E)None of the above.
Q4) The mean absolute deviation is the sum of the absolute value of forecasting errors divided by the number of forecasts.
A)True
B)False
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Chapter 12: Queueing Models
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Sample Questions
Q1) What is the system utilization?
A)0.6.
B)0.7.
C)0.8.
D)0.9.
E)1.
Q2) Multiple-server queueing systems can perform satisfactorily with somewhat higher utilization factors than can single-server queueing systems.
A)True
B)False
Q3) The goal of queueing analysis is to minimize:
A)the sum of customer waiting costs and service costs.
B)the sum of customer waiting time and service time.
C)service costs.
D)customer waiting time.
E)None of the above.
Q4) The most commonly used queueing models assume a service rate that is exponential.
A)True
B)False
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Chapter 13: CD Supplement - Additional Queueing Models
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Sample Questions
Q1) Given the same utilization factor,waiting time in the queue will be less for a finite queue than the corresponding value for the M/M/s model.
A)True
B)False
Q2) A basic difference between infinite calling population and finite calling population queueing models is:
A)the number of servers.
B)the average waiting time.
C)the arrival distribution.
D)the size of the potential customer base.
E)the processing rate.
Q3) The Erlang distribution has less variability than the exponential distribution for the same mean.
A)True
B)False
Q4) The finite calling population queueing model is appropriate when the potential calling population is relatively small.
A)True B)False
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Chapter 14: Computer Simulation: Basic Concepts
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Sample Questions
Q1) Simulation models are fairly easy to use and understand; therefore they can be used for a wide range of decisions.
A)True
B)False
Q2) Computer simulation is a useful tool because it generates accurate information using very small samples.
A)True
B)False
Q3) Computer simulation is only applicable to situations that have elements that can be described by random variables
A)True
B)False
Q4) A simulation model includes:
A)a description of the components of the system.
B)a simulation clock.
C)a definition of the state of the system.
D)All of the above.
E)a.and b.only.
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Chapter 15: CD Supplement - the Inverse Transformation
Method for Generating Random Observations
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Sample Questions
Q1) Excel's RAND()function is designed specifically for applying the inverse transformation method to any discreet probability distribution.
A)True
B)False
Q2) The inverse transformation method can be used to generate random observations from a probability distribution.
A)True
B)False
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Chapter 16: Computer Simulation With Crystal Ball
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53 Verified Questions
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Sample Questions
Q1) Which of the following charts shows a histogram giving the relative frequency of the various output values in the forecast cell?
A)Frequency chart.
B)Statistics table.
C)Percentiles table.
D)Cumulative chart.
E)Reverse cumulative chart.
Q2) The more trials that are run,the lower the mean standard error will become.
A)True
B)False
Q3) OptQuest is guaranteed to find the optimal solution to a simulation problem.
A)True
B)False
Q4) Which of the following is a random input cell in Crystal Ball?
A)An assumption cell.
B)A decision variable.
C)A forecast cell.
D)An output cell.
E)None of the above.
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Chapter 17: CD - Solution Concepts for Linear Programming
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45 Verified Questions
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Sample Questions
Q1) In a linear programming problem with two decision variables,it is possible to have no point that satisfies all of the constraints simultaneously.
A)True
B)False
Q2) The ability to solve large problems with the simplex method is limited primarily by:
A)the number of decision variables.
B)the size of the parameters in the model.
C)the number of functional constraints.
D)the software package chosen.
E)None of the above.
Q3) The simplex method is which kind of algorithm?
A)iterative.
B)repetitive.
C)systematic.
D)All of the above.
E)None of the above.
Q4) It can be helpful for management to have multiple optimal solutions.
A)True
B)False
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Chapter 18: CD - Transportation and Assignment Problems
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Sample Questions
Q1) A network representation can be used to visualize a transportation problem.
A)True
B)False
Q2) Transportation problems always involve shipping goods from one location to another.
A)True
B)False
Q3) Which of the following problems can be reformulated to fit the format for a transportation problem?
A)Certain source-destination combinations cannot be used for distributing units.
B)A destination has both a minimum and maximum demand.
C)The sum of the supplies exceeds the sum of the demands.
D)a and b only.
E)All of the above.
Q4) An assignment problem is a special type of transportation problem
A)True
B)False
Q5) The Hungarian Method is an algorithm used to solve transportation problems. A)True
B)False
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Chapter 19: CD - Pertcpm Models for Project Management
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Sample Questions
Q1) PERT/Cost is a systematic procedure to help a project manager bid on a project.
A)True
B)False
Q2) The path with the greatest slack is:
A)A-E.
B)B-F.
C)C-D-F.
D)C-G.
E)None of the above.
Q3) In an Activity-On-Node project network,the nodes are used to separate an activity from each of its immediate predecessors.
A)True
B)False
Q4) The mean critical path is the path through the project network that would be the critical path if the duration of each activity equals its mean.
A)True
B)False
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21
Chapter 20: CD - Goal Programming
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Sample Questions
Q1) In preemptive goal programming,penalty weights are assigned to measure the relative seriousness of missing the respective goals.
A)True
B)False
Q2) Preemptive goal programming is more appropriate the weighted goal programming when there are major differences in the importance of the goals.
A)True
B)False
Q3) Preemptive goal programming strives to achieve all of the goals simultaneously.
A)True
B)False
Q4) Which of the following are changing cells in a goal programming formulation?
A)Activity levels.
B)Deviations from the goals.
C)The weighted sum of deviations.
D)All of the above.
E)a and b only.
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22
Chapter 21: CD - Inventory Management With Known Demand
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64 Flashcards
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Sample Questions
Q1) Estimating shortage costs is quite challenging because it is difficult to predict the consequences of shortages.
A)True
B)False
Q2) Interest,insurance,and opportunity costs are all associated with holding costs.
A)True
B)False
Q3) If the manager was to order 16 cases of beer at a time,what would be the average inventory level?
A)4 cases.
B)8 cases.
C)12 cases.
D)16 cases.
E)20 cases.
Q4) Which of the following is a consequence of being out of stock of an item?
A)Customer dissatisfaction.
B)Delayed revenues.
C)Costs for additional record keeping.
D)Lost business.
E)All of the above.
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Chapter 22: CD - Inventory Management With Uncertain Demand
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43 Verified Questions
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Sample Questions
Q1) Variability in demand and/or lead time can be compensated for by safety stock.
A)True
B)False
Q2) In the ABC control method,items that have high unit costs are always classified as A items.
A)True
B)False
Q3) Shortage costs are easily quantified.
A)True
B)False
Q4) Service level can be stated in terms of an order cycle or as an annual amount.
A)True
B)False
Q5) The goal of the perishable product model is to identify the order quantity that will minimize the shortage costs.
A)True
B)False
B)False Page 24
Q6) The ABC control method involves classifying items by unit cost. A)True
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