Business Analytics James R Evans Test Bank

Type:

Test Bank

Resource:

Business Analytics

Edition:

4th Edition

Author(s):

James R. Evans

Business Analytics (Evans) Chapter 1 Introduction to Business Analytics 1) Descriptive analytics: A) can predict risk and find relationships in data not readily apparent with traditional analyses.

B) helps companies classify their customers into segments to develop specific marketing campaigns.

C) helps detect hidden patterns in large quantities of data to group data into sets to predict behavior.

D) can use mathematical techniques with optimization to make decisions that take into account the uncertainty in the data.

Answer: B Diff: 1 Blooms: Remember Topic: Scope of Business Analytics LO1: Explain and provide examples of descriptive, predictive, and prescriptive analytics.

LO2: Compare and contrast tools for presenting and organizing data 2) A manager at Gampco Inc. wishes to know the company's revenue and profit in its previous quarter. Which of the following business analytics will help the manager?

A) prescriptive analytics B) normative analytics C) descriptive analytics D) predictive analytics Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Scope of Business Analytics LO1: Explain and provide examples of descriptive, predictive, and prescriptive analytics.

LO2: Describe the major tools and criteria for decision making.

3) Predictive analytics: A) summarizes data into meaningful charts and reports that can be standardized or customized.

B) identifies the best alternatives to minimize or maximize an objective.

C) uses data to determine a course of action to be executed in a given situation.

D) detects patterns in historical data and extrapolates them forward in time.

Answer: D Diff: 2 Blooms: Remember Topic: Scope of Business Analytics LO1: Explain and provide examples of descriptive, predictive, and prescriptive analytics.

LO2: Compare and contrast tools for presenting and organizing data

1-1 .

4) A trader who wants to predict short-term movements in stock prices is likely to use ________ analytics.

A) predictive B) descriptive C) normative D) prescriptive Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Scope of Business Analytics LO1: Explain and provide examples of descriptive, predictive, and prescriptive analytics.

LO2: Describe the major tools and criteria for decision making.

5) Which of the following questions will prescriptive analytics help a company address?

A) How many and what types of complaints did they resolve?

B) What is the best way of shipping goods from their factories to minimize costs?

C) What do they expect to pay for fuel over the next several months?

D) What will happen if demand falls by 10% or if supplier prices go up 5%?

Answer: B Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: Scope of Business Analytics LO1: Explain and provide examples of descriptive, predictive, and prescriptive analytics.

LO2: Describe the major tools and criteria for decision making.

6) What is a database?

A) a collection of related files B) simply a collection of data C) a data file holding a single file D) flat files used to store data Answer: A Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Explain the difference between a data set and a database.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement

1-2 .

7) In a database, the things for which information is stored and maintained are called ________.

A) fields B) measurements C) entities D) attributes Answer: C Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Explain the difference between a data set and a database.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement 8) Which of the following is an example of a measure of continuous metrics?

A) four errors revealed in an invoice B) a delivery delayed by seven days C) weight and volume of a sheet of steel D) three incomplete orders on a day Answer: C Diff: 2 Blooms: Understand Topic: Data for Business Analytics LO1: Explain the difference between a discrete metric and continuous metric, and provide examples of each.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement 9) Nominal data: A) are ranked according to some relationship to one another.

B) have constant differences between observations.

C) are continuous and have a natural zero.

D) are sorted into categories according to specified characteristics.

Answer: D Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Describe the four groups of data classification, categorical, ordinal, interval, and ratio, and provide examples of each.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement

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10) Which of the following is a disadvantage of ordinal data?

A) They bear no relationship to one another.

B) They have no fixed units of measurement.

C) They have no natural zero.

D) They are not comparable with each other.

Answer: B Diff: 2 Blooms: Understand Topic: Data for Business Analytics LO1: Describe the four groups of data classification, categorical, ordinal, interval, and ratio, and provide examples of each.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement 11) Which of the following allow meaningful comparison of statistics?

A) interval data B) categorical data C) ratio data D) ordinal data Answer: A Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Describe the four groups of data classification, categorical, ordinal, interval, and ratio, and provide examples of each.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement 12) Following are the components of a data set containing purchase details of a shoe manufacturing company. Identify the ratio data.

A) Item Number B) Rank of suppliers C) Item cost D) Arrival Date Answer: C Diff: 2 Blooms: Apply Topic: Data for Business Analytics LO1: Describe the four groups of data classification, categorical, ordinal, interval, and ratio, and provide examples of each.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement

1-4 .

13) When data is classified by the type of measurement scale, which is the strongest form of measurement?

A) nominal B) interval C) ordinal D) ratio Answer: D Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Describe the four groups of data classification, categorical, ordinal, interval, and ratio, and provide examples of each.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement 14) The demand for coffee beans over a period of three months has been represented in the form of an L-shaped curve. Which form of model was used here?

A) mathematical model B) visual model C) kinesthetic model D) verbal model Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Explain the concept of a model and various ways a model can be characterized.

LO2: Compare and contrast tools for presenting and organizing data 15) Decision variables: A) cannot be directly controlled by the decision maker.

B) are assumed to be constant.

C) are always uncertain.

D) can be selected at the discretion of the decision maker.

Answer: D Diff: 2 Blooms: Understand Topic: Decision Models LO1: Define and list the elements of a decision model.

LO2: Describe the major tools and criteria for decision making.

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16) Identify the uncontrollable variable from the following inputs of a decision model.

A) investment returns B) machine capacities C) staffing levels D) intercity distances Answer: A Diff: 1 Blooms: Apply Topic: Decision Models LO1: Define and list the elements of a decision model.

LO2: Describe the major tools and criteria for decision making.

17) Which of the following inputs of a decision model is an example of data?

A) estimated consumer demand B) inflation rates C) costs D) investment allocations Answer: C Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Define and list the elements of a decision model.

LO2: Describe the major tools and criteria for decision making.

18) Descriptive decision models: A) aim to predict what will happen in the future.

B) do not tell a manager what to do.

C) help analyze the risks associated with various decisions.

D) do not facilitate evaluation of different decisions.

Answer: B Diff: 2 Blooms: Understand Topic: Decision Models LO1: Explain the concept of a model and various ways a model can be characterized.

LO2: Describe the major tools and criteria for decision making.

1-6 .

19) The total cost of reaching consumers (C) depends upon the number of consumers (N), advertising costs (A), and transportation costs (T). The linear cost prediction model is represented as: C = c - nN + aA + tT where c, n, a, and t are constants and c estimates the total cost when the remaining variables are zero. Which of the following interpretations is true about this model?

A) Change in variables N, A, and T will cause n, a, and t to change.

B) As n decreases, c will increase.

C) When variables N, A, and T are zero, C = c - n + a + t.

D) Change in variables N, A, and T will not reflect any changes in c.

Answer: D Diff: 3 Blooms: Apply Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Compare and contrast methods of summarizing and describing data 20) Which of the following is the mathematical model for deriving total cost of only manufacturing?

A) TC = VC + (C × Q) B) TC = F + (C × Q) C) TC = F + C D) TC = F + (V × Q) Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Describe the major tools and criteria for decision making.

21) Which of the following is the mathematical model for deriving total cost of only outsourcing?

A) TC = Q x C B) TC = F + (C x Q) C) TC = (V + C) x Q D) TC = (VC + F) x Q Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Describe the major tools and criteria for decision making.

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22) Which of the following is the mathematical model for deriving the break-even volume?

A) Q = (C - VC) + F B) Q = F / (C -V) C) Q = (V + C) / F D) Q = F / (VC - C) Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Describe the major tools and criteria for decision making.

23) When will a company use a predictive decision model?

A) when it wishes to determine the best product pricing to maximize revenue B) when it wishes to know how best to use advertising strategies to influence sales C) when it wishes to know sales patterns to plan inventory levels D) when it wishes to ensure that a specified level of customer service is achieved Answer: C Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: Decision Models LO1: Use predictive models to compute model outputs.

LO2: Describe the major tools and criteria for decision making.

24) If D is demand, P is the unit price, and c and d are constants (where d > 0 is the price elasticity), which of the following is a nonlinear demand prediction model?

A) D = d + (c × P) B) D = (d × P)c C) D = cd × P D) D = cP-d Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use predictive models to compute model outputs.

LO2: Describe the major tools and criteria for decision making.

1-8 .

25) Which decision model incorporates the uncertainty element?

A) predictive B) normative C) prescriptive D) descriptive Answer: A Diff: 1 Blooms: Remember Topic: Decision Models LO1: Use predictive models to compute model outputs.

LO2: Describe the major tools and criteria for decision making.

26) What is the slope of the sales function D = a - bP? A) 4 B) 9 C) 12 D) 17 Answer: C Diff: 3 Blooms: Apply Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Describe the major tools and criteria for decision making.

27) How many gallons will be sold if the price is increased to $4.75?

A) 833.26 B) 843 C) 798.72 D) 818 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use predictive models to compute model outputs.

LO2: Describe the major tools and criteria for decision making.

1-9 .

28) Prescriptive decision models help: A) make predictions of how demand is influenced by price.

B) make trade-offs between greater rewards and risks of potential losses.

C) decision makers identify the best solution to decision problems.

D) describe relationships and influence of various elements in the model.

Answer: C Diff: 1 Blooms: Remember Topic: Decision Models LO1: Define the terms optimization, objective function, and optimal solution.

LO2: Describe the major tools and criteria for decision making.

29) The manager at Soul Walk Inc., a shoe manufacturing company, wants to set a new price (P) for a shoe model to maximize total profit. The demand (D) as a function of price is represented as: D = 1,500 - 2.5P The total cost (C) as a function of demand is represented as: C = 3,200 + 3.5D Which of the following is a model for total profit as a function of price?

A) (1,491.25 × price) - (2.5 × price2) - 8,450 B) (3.5 × price2) + 3,200 - (1925.50 × price) C) (1,250 × price) + (5 × price2) - 8,320 D) [4521 + (4.5 × price)] × price - 9684.25 Answer: A Diff: 3 Blooms: Apply Topic: Decision Models LO1: Define the terms optimization, objective function, and optimal solution.

LO2: Describe the major tools and criteria for decision making.

30) Which decision model incorporates the process of optimization?

A) predictive B) prescriptive C) descriptive D) normative Answer: B Diff: 1 Blooms: Remember Topic: Decision Models LO1: Define the terms optimization, objective function, and optimal solution.

LO2: Describe the major tools and criteria for decision making.

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31) Which of the following is the first phase in problem solving?

A) defining the problem B) analyzing the problem C) recognizing the problem D) structuring the problem Answer: C Diff: 1 Blooms: Remember Topic: Problem Solving and Decision Making LO1: List and explain the steps in the problem-solving process.

LO2: Describe the major tools and criteria for decision making.

32) Middle managers in operations: A) develop staffing plans.

B) determine product mix.

C) develop advertising plans.

D) make pricing decisions.

Answer: A Diff: 1 Blooms: Remember Topic: Problem Solving and Decision Making LO1: List and explain the steps in the problem-solving process.

LO2: Describe the major tools and criteria for decision making.

33) The product mix is determined by the: A) accounting staff.

B) middle managers.

C) finance managers.

D) top managers.

Answer: D Diff: 1 Blooms: Remember Topic: Problem Solving and Decision Making LO1: List and explain the steps in the problem-solving process.

LO2: Describe the major tools and criteria for decision making.

34) During which phase in problem solving is a formal model often developed?

A) analyzing the problem B) structuring the problem C) defining the problem D) implementing the solution Answer: B Diff: 1 Blooms: Remember Topic: Problem Solving and Decision Making LO1: List and explain the steps in the problem-solving process.

LO2: Describe the major tools and criteria for decision making.

1-11 .

35) Which of the following is true about problem solving?

A) Recognizing problems involves stating goals and objectives.

B) Analyzing the problem involves characterizing the possible decisions.

C) Decision making involves translating the results of the model in the organization.

D) Structuring the problem involves identifying constraints.

Answer: D Diff: 2 Blooms: Understand Topic: Problem Solving and Decision Making LO1: List and explain the steps in the problem-solving process.

LO2: Describe the major tools and criteria for decision making.

36) To meet consumer demand, Nib 'N' Ink must produce 800 gel-ink refills. Should the company produce them in-house or outsource them from the supplier? (Hint: Use the mathematical descriptive model).

Answer: Total Cost of Manufacturing (TC) = Fixed Cost (F) + Variable Cost (VC) VC = Unit Variable Cost (V) × Quantity Produced (Q) TC = F + VQ = 2,400 + 3 x 800 = 4,800 Total Cost of Outsourcing (TC) = Unit Cost (C) x Quantity Outsourced (Q) TC = CQ = 5 × 800 = 4,000 The gel-ink refills must be outsourced with the total cost of manufacturing the refills in-house being greater than outsourcing them.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Describe the major tools and criteria for decision making.

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37) Find the range of volumes at which it is more economical for Nib 'N' Ink to produce the refills in-house or outsource them. (Hint: Use the break-even decision model).

Answer: Break-even volume can be arrived at by setting TC (manufacturing) = TC (outsourcing) and solving for Q. F+V×Q=C×Q Q = F / (C - V) = 2,400 / (5 - 3) = 1,200 Thus, if the anticipated production volume is greater than 1,200, it is more economical to manufacture the refills; if it is less than 1,200, then they should be outsourced.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use influence diagrams to build simple mathematical models.

LO2: Describe the major tools and criteria for decision making.

38) Profit is computed as the difference between total revenue from sales and total cost of production. Revenue depends on the market share captured by a company and the size of the target market. Various marketing decisions taken by managers are reflected upon the market share. The decisions also have an impact on marketing costs which in turn will affect the total cost of production. Construct an influence diagram that relates these variables.

Answer: Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Define and provide an example of an influence diagram.

LO2: Describe the major tools and criteria for decision making.

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39) Develop a linear model relating the demand for Goody Woods' units to the price.

Answer: Economic theory tells us that demand for a product is negatively related to its price.

The linear model to predict demand as a function of price is: D = a - bP where D is the quantity demanded, P is the unit price, a is a constant that estimates the demand when the price is zero, and b is the slope of the demand function.

Substituting the values given in the data: 1,540 = a - (b × 240) 1,220 = a - (b × 320) By solving the two equations, values of a and b can be found. a = 2,500, which indicates the demand for wood units when price is zero, b = 4, which is the slope of the demand function.

Substituting values of a and b in the linear demand prediction model: D = 2,500 - 4P Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Use predictive models to compute model outputs.

LO2: Describe the major tools and criteria for decision making.

40) Develop a prescriptive model that will help Goody Woods identify the price that maximizes the total revenue.

Answer: Having found out the model for demand as a function of price, sales (S) can be expressed as: S = 2,500 - 4P Revenue (R) = Sales x Price = (2,500 - 4P) × P = 2,500P - 4P2 Thus, Goody Woods Inc. can identify the price that maximizes the total revenue using: R = 2,500P - 4P2 Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Decision Models LO1: Define the terms optimization, objective function, and optimal solution.

LO2: Describe the major tools and criteria for decision making.

1-14 .

41) Decision support systems evolved from efforts to improve military operations prior to and during World War II. Answer: FALSE Diff: 1 Blooms: Remember Topic: Evolution of Business Analytics LO1: Summarize the evolution of business analytics and explain the concepts of business intelligence, operations research and management science, and decision support systems.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 42) In a database file which is organized in a two-dimensional table, the rows represent records of related data elements.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Explain the difference between a data set and a database.

LO2: Compare and contrast tools for presenting and organizing data 43) Measure is the act of obtaining data associated with a metric. Measurements are the numerical values associated with a metric.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Data for Business Analytics LO1: Define a metric and explain the concepts of measurement and measures.

LO2: Explain how data is acquired and distinguish among different types of data and levels of measurement 44) A deterministic model is one in which all model input information is either known or assumed to be known with certainty.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Decision Models LO1: Explain the difference between a deterministic and stochastic decision model.

LO2: Describe the major tools and criteria for decision making.

45) The complexity of a problem increases when the problem belongs to an individual rather than a group.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Problem Solving and Decision Making LO1: List and explain the steps in the problem-solving process.

LO2: Describe the major tools and criteria for decision making.

1-15 .

46) A goal of Korel & Marke, a dot-com company, is to gain strategic advantage over its rival firms. How can Korel & Marke use analytics and exploit social media to accomplish this goal?

Answer: Analytics is helping businesses learn from social media and exploit social media data for strategic advantage. Using analytics, Korel & Marke can integrate social media data with traditional data sources such as customer surveys, focus groups, and sales data. It can also understand trends and customer perceptions of its products; and create informative reports to assist its marketing managers and product designers.

Diff: 2 Blooms: Understand Topic: What is Business Analytics?

LO1: State some typical examples of business applications in which analytics would be beneficial.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 47) What are the three components of decision support systems (DSS)?

Answer: DSSs include three components: • Data management - The data management component includes databases for storing data and allows the user to input, retrieve, update, and manipulate data.

• Model management - The model management component consists of various statistical tools and management science models and allows the user to easily build, manipulate, analyze, and solve models.

• Communication system - The communication system component provides the interface necessary for the user to interact with the data and model management components.

Diff: 2 Blooms: Remember Topic: Evolution of Business Analytics LO1: Summarize the evolution of business analytics and explain the concepts of business intelligence, operations research and management science, and decision support systems.

LO2: Describe the major tools and criteria for decision making.

48) Explain how data is used by accountants, economists, and operations managers.

Answer: Following are the ways data are used: • Accountants conduct audits to determine whether figures reported on a firm's balance sheet fairly represent the actual data by examining samples (that is, subsets) of accounting data, such as accounts receivable.

• Economists use data to help companies understand and predict population trends, interest rates, industry performance, consumer spending, and international trade.

• Operations managers use data on production performance, manufacturing quality, delivery times, order accuracy, supplier performance, productivity, costs, and environmental compliance to manage their operations.

Diff: 2 Blooms: Remember Topic: Data for Business Analytics LO1: State examples of how data are used in business.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

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49) Data used in business analytics need to be reliable and valid. Explain.

Answer: Sample data do not always reflect reality. People do not always behave the same when observed, nor do they always act as they say they act. Poor data can result in poor decisions.

Hence, care must be taken when working with data, and every effort should be made to ensure that data are sufficiently accurate.

Diff: 2 Blooms: Remember Topic: Data for Business Analytics LO1: State examples of how data are used in business.

LO2: Describe the major tools and criteria for decision making.

50) Why do predictive decision models incorporate uncertainty?

Answer: The future is always uncertain. Uncertainty is imperfect knowledge of what will happen; risk is associated with the consequences of what actually happens. Even though uncertainty may exist, there may be no risk. However, risk is an outcome of uncertainty, though not always. Thus, many predictive models incorporate uncertainty and help decision makers analyze the risks associated with their decisions.

Diff: 2 Blooms: Understand Topic: Decision Models LO1: Explain the difference between uncertainty and risk.

LO2: Describe the major tools and criteria for decision making.

1-17 .

Business Analytics (Evans) Chapter 2 Analytics on Spreadsheets 1) Which of the following symbols is used to represent exponents in Excel?

A) ^ B) * C) # D) !

Answer: A Diff: 1 Blooms: Remember Topic: Basic Excel Skills LO1: Find buttons and menus in the Excel 2010 ribbon.

LO2: Use a modern software tool to perform statistical calculations.

2) Which of the following ways would × /100 - 73 be represented in an Excel spreadsheet?

A) 10(2) * 5(3) / 100 ^ 73 B) 10(2) ^ 5(3) / 100 - 73 C) 10^2 * 5^3 / 100 - 73 D) 10*2 ^ 5*3 / 100 - 73 Answer: C Diff: 1 Blooms: Understand Topic: Basic Excel Skills LO1: Write correct formulas in an Excel worksheet.

LO2: Use a modern software tool to perform statistical calculations.

3) Which of the following is a difference between relative addressing and absolute addressing when using cell formulas in Excel?

A) A relative address uses a dollar sign before either the row or column label; an absolute address uses the ampersand symbol before either the row or column label.

B) A relative address uses a dollar sign before either the row or column label; an absolute address uses just the row and column label in the cell reference.

C) A relative address uses just the row and column label in the cell reference; an absolute address uses a dollar sign before either the row or column label.

D) A relative address uses only the column label in the cell reference; an absolute address uses the row.

Answer: C Diff: 2 Blooms: Remember Topic: Basic Excel Skills LO1: Apply relative and absolute addressing in Excel formulas.

LO2: Use a modern software tool to perform statistical calculations.

1 .

Use the data given below to answer the following question(s) Below is the spreadsheet for demand prediction of a company that sells chocolates.

1 2 3 4 5 6 7 8 9 10 11

A Demand Prediction Models

B

Linear Model a b

10,000 10

Price $50 $55 $45

Demand 9,500 9,450 9,550

C

4) Given that D = a-bP, where D, is demand, "a" and "b," are linear constants, and P, is price, from the below spreadsheet, how will the formula in B9 be represented in Excel using relative addressing?

A) B4-B5*A9 B) C5-C6*A10 C) B4-B5*A10 D) B5-B6*A10 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Copy formulas from one cell to another or to a range of cells.

LO2: Use a modern software tool to perform statistical calculations.

5) If a dollar sign is used after the column in B5 (B$5), how will the formula at B8 be represented in C9 using absolute addressing?

A) C3-B5*C9 B) C5-C6*B9 C) C5-C6*C9 D) C5-C5*B9 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Apply relative and absolute addressing in Excel formulas.

LO2: Use a modern software tool to perform statistical calculations.

2 .

6) If a dollar sign is used before the column label B4 ($B4), how will the formula at B10 be represented in C11 using absolute addressing?

A) B5-C6*B11 B) C5-C6*A10 C) B4-C5*B11 D) A5-C6*B11 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Apply relative and absolute addressing in Excel formulas.

LO2: Use a modern software tool to perform statistical calculations.

7) If, in the spreadsheet, cells B9 and B10 were empty, which of the following formulas should be entered in B8 so that the formula can be dragged to B9 and B10 to obtain their correct values?

A) B4-B5*A8 B) B4-B5*$A8 C) $B4-B5*$A8 D) $B$4-$B$5*$A8 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Copy formulas from one cell to another or to a range of cells.

LO2: Use a modern software tool to perform statistical calculations.

8) Using a $ sign before a column label ________.

A) keeps the reference to both the row and column fixed B) keeps the reference to the row fixed, but allows the column reference to change C) keeps the reference to column fixed, but allows the row reference to change D) allows both the row and column references to change Answer: C Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Copy formulas from one cell to another or to a range of cells.

LO2: Use a modern software tool to perform statistical calculations.

3 .

9) To copy a formula from a single cell or range of cells down a column or across a row, first ________, click and hold the mouse on the small square in the lower right-hand corner of the cell, and drag the formula to the "target" cells which you wish to copy.

A) press Ctrl-C B) select the cell or range C) press Ctrl-Enter D) select the whole spreadsheet Answer: B Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Copy formulas from one cell to another or to a range of cells.

LO2: Use a modern software tool to perform statistical calculations.

10) Trace the process of copying and pasting a cell, which has a formula in it, such that the formula is not retained in the pasted cell.

A) Home - Paste - Paste Special - Paste Values B) Home - Paste - Paste Special - Paste Validation C) Home - Paste - Paste Special - Paste Formats D) Home - Paste - Paste Special - Paste Formulas Answer: A Diff: 1 Blooms: Remember Topic: Basic Excel Skills LO1: Copy formulas from one cell to another or to a range of cells.

LO2: Use a modern software tool to perform statistical calculations.

11) Which of the following is a differentiation between calculating using the functions COUNT and COUNTIF? A) COUNT does not require a range of cells; COUNTIF requires a range of cells.

B) COUNT can be obtained without a special criteria, COUNTIF requires range and special criteria to be calculated.

C) COUNT requires a range of cells; COUNTIF does not require a range of cells, only special criteria.

D) COUNT calculates the sum of values for a range of cells; COUNTIF finds the largest value in a range of cells.

Answer: B Diff: 2 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

4 .

12) The Excel function of ________ is used to find the largest value in a range of cells.

A) SUM(range) B) COUNT(range) C) MAX(range) D) COUNTIF(range, criteria) Answer: C Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

5 .

Use the data given below to answer the following question(s).

Below is a spreadsheet of purchase orders for a computer hardware retailer.

1 2

A Purchase Orders

B

C

Item Item 3 Supplier Description Cost Rex Graphics 4 Technologies Card $ 89 Rex 5 Technologies Monitor $150 Rex 6 Technologies Keyboard $ 15 Rex 7 Technologies Speakers $ 15 Max's 8 Wavetech HD Cables $ 5 Max's 9 Wavetech Processor $278 Max's 10 Wavetech Hard disk $120 11 12

D

E

F

G

H

Cost per A/P Terms Order Quantity Order (Months) No.

Order Size

35

$3115

20

AL123

Large

15

$2250

25

AL234

Small

40

$600

15

AL345

Large

20

$300

25

AL456

Small

10

$50

25

KO876

Small

27

$6950

30

KO765

Large

18

$2160

20

KO654

Small

13) To find the largest quantity of items ordered from Rex Technologies, what Excel formula should be used in A12?

A) =COUNTIF(D4:D10) B) =SUM(D4:D7) C) =MAX(D4:D7) D) =COUNT(D4:D7) Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

6 .

14) To find the total order cost, what Excel formula should be used in A12?

A) =COUNT(C4:C10) B) =COUNT(C4:C7) C) =MAX(C4:C10) D) =SUM(E4:E10) Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

15) For which of the following columns can the COUNT function be performed?

A) column G B) column E C) column B D) column A Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

16) To find the average of the total cost of orders from Rex Technologies, what Excel formula should be used in A12?

A) =AVERAGE(C4:C10) B) =AVERAGE(C4:C7) C) =AVERAGE(E4:E7) D) =AVERAGE(E4:E10) Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

7 .

17) To find the number of orders with A/P terms less than 25 months, what Excel formula should be used in A12?

A) =COUNTIF(F4:F10,"<25") B) =COUNT(F4:F10,25) C) =AVERAGE(F4:F10,"<25") D) =COUNTIF(F4:F10,F5) Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

18) If purchase quantities of 25 units or higher are found to be large orders, and orders less than 25 are considered to be small, what IF function should be entered in H4 to be copied to H5:H10 to calculate each order's size?

A) =IF(D4=AND=OR=25,"Large","Small") B) =IF(D4<>25,"Small")=AND(D4=25,"Large") C) =IF(D4=25,"Large")=OR("Small") D) =IF(D4>=25,"Large","Small") Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

19) ________ measures the worth of a stream of cash flows, taking into account the time value of money.

A) Accounting rate of return B) Net present value C) Internal rate of return D) Adjusted present value Answer: B Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

8 .

20) The ________ reflects the opportunity costs of spending funds now versus achieving a return through another investment, as well as the risks associated with not receiving returns until a later time.

A) modified internal rate of return B) payback period C) accounting rate of return D) discount rate Answer: D Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

21) Identify the equation for calculating the net present value for a stated period of time, where = cash flow in period t, and i is the discount rate.

A) NPV =

B) NPV = C) NPV = D) NPV = Answer: C Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

22) A positive NPV means that the investment will provide added value because the projected return exceeds the ________.

A) modified internal rate of return B) discount rate C) accounting rate of return D) adjusted present value Answer: B Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

9 .

23) The easiest way to locate a particular function is to select a cell and click on the Insert function button represented by ________ on the Excel ribbon.

A) fx B) Σ C) $ D) % Answer: A Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Find buttons and menus in the Excel 2010 ribbon.

LO2: Use a modern software tool to perform statistical calculations.

24) ________ is a logical function that returns one value if the condition is true and another if the condition is false.

A) OR(condition 1, condition 2…)

B) AND(condition 1, condition 2…)

C) TO(value if true, value if false) D) IF(condition, value if true, value if false) Answer: D Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

25) Which of the following functions is a logical function that returns TRUE if any condition is true and FALSE if not?

A) TO(value if true, value if false) B) AND(condition 1, condition 2…)

C) OR(condition 1, condition 2…)

D) IF(condition, value if true, value if false) Answer: C Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

10 .

26) Give the logical function for the following: If cell B7 equals 12, check contents of cell B10.

If cell B10 is 10, then the value of the function in the string is YES; if not, it is a blank space. If cell B7 does not equal 12, then the value of the function is 7 no matter what cell H45 is.

A) =IF(B7=12,(AND(B10=10, "")(YES)),7) B) =IF(B10=10,(OR(B7=12,"")"YES")7) C) =IF(B7=12,(IF(B10=10,"YES", "")),7) D) =IF(B7=12,(AND(B10=10,"YES","")(B10="NO"),7) Answer: C Diff: 3 Blooms: Understand AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

27) If cell G7 contains the function ________, it states that if the value in cell C3 is 9, the number 7 will be assigned to cell G7; if the value in cell C3 is not 9, the number 4 will be assigned to cell G7.

A) =IF(G7=9)(G7=7)=OR(G7=4) B) =IF(G7=7)=THEN(C3=9)=OR(C3=4) C) =IF(C3=9)(C3=7)=OR(C3=4) D) =IF(C3=9,7,4) Answer: D Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

28) The function ________ returns a value or reference of the cell at the intersection of a particular row and column in a given range.

A) VLOOKUP(lookup_value, table_array, col_index_num) B) INDEX(array, row_num, col_num) C) MATCH(lookup_value, lookup_array, match_type) D) HLOOKUP(lookup_value, table_array, row_index_num) Answer: B Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

11 .

29) Which of the following Lookup functions returns the relative position of an item in an array that equals a specified value in a specified order?

A) HLOOKUP(lookup_value, table_array, row_index_num) B) MATCH(lookup_value, lookup_array, match_type) C) INDEX(array, row_num, col_num) D) VLOOKUP(lookup_value, table_array, col_index_num) Answer: B Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

30) In a MATCH function, if the match_type = 0, then ________.

A) the function finds the largest value that is less than or equal to lookup_value B) the function finds the smallest value that is greater than or equal to lookup_value C) MATCH finds the first value that is exactly equal to lookup_value D) the values in the lookup_array must be in a particular order Answer: C Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

31) For which of the following MATCH functions must the values in the lookup_array be ordered in a descending order?

A) When match_type = -1 B) When match_type >1 C) When match_type = 0 D) When match_type = 1 Answer: A Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

12 .

Use the following scenario to answer the following question(s) The Blue Sunset Band is planning to record a new album. A major decision to be made is if the band can record the album on their own, or if they should hire a studio to record it with. The fixed cost for recording at the studio is $100,000 plus the manufacturing cost per CD, which is at $250. If they record the album in-house, the cost per CD is $350. They plan to produce 3000 copies of the album regardless of the place of recording. The band plans to record with the cheaper option. Below is the spreadsheet of the Recording Decision.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

A The Blue Sunset Band Album Recording Decision

B

Data Recording at Studio Fixed Cost Unit CD Cost

$ 100,000 $ 250

Recording In-house Unit CD Cost

$

Production Volume

3000

350

Model

Total studio 16 manufacturing cost Total in-house 17 manufacturing cost 18 19 Cost Difference 20 Recording Decision

$ 850,000 $1,050,000 -$ 200,000 Studio

13 .

32) Which of the following formulas is used to calculate the total studio recording cost?

A) =SUM(B6:B12)-B10 B) (B6+B7-B16)B12 C) B6+B7*B12 D) B6+B7*B12-B16 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

33) Which of the following formulas are used to calculate the In-house recording cost?

A) B10*B12 B) B10*B12-B17 C) B6+B10*B12 D) =SUM(B6:B12)-B7 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

34) Which of the following formula is used to make the recording decision in B20?

A) =IF(B19>0,"In-house","Studio") B) =IF(B19<=0,"Studio","In-house") C) =SUM(B19<=0,"Studio") D) =IF(B19>0,"Studio","In-house") Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO2: Use a modern software tool to perform statistical calculations.

14 .

Using the spreadsheet below to answer the following question(s).

The spreadsheet below shows the net income model for a company that sells shoes.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

A Net Income Model

B

Data Sales $10,000,000 Cost of Goods Sold $ 6,400,000 Administrative Expenses $ 500,000 Selling Expenses $ 900,000 Depreciation Expenses $ 750,000 Interest Expenses $ 70,000 Taxes $ 620,000 Model Gross Profit Operating Expenses Net Operating Income Earnings Before Taxes

$ 3,600,000 $ 2,150,000 $ 1,450,000 $ 1,380,000

Net Income

35) Which of the following formulas would be used to calculate the net income value using only the data value?

A) =SUM(B5:B10)-B11 B) =SUM(B5:B11) C) =B5-SUM(B6:B11) D) =B5-SUM(B6:B10)+B11 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

15 .

36) Which of the following would be used to calculate the gross profit?

A) =SUM(B7:B11)-B6 B) =B5-B6 C) =B5-(B6-B11) D) =B5-B6+(B11-B10) Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

37) Which of the following formulas would be used to calculate the operating expenses?

A) =SUM(B7:B10) B) =SUM(B7:B9) C) =SUM(B7:B9)-B6 D) =SUM(B7:10)-B11 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

38) Which of the following formulas would be used to calculate the net operating income?

A) =B15-B5 B) =B15-B16 C) =SUM(B6:B10)-B11 D) =B15-B16+B6 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

16 .

39) Which of the following formulas would be used to calculate earnings before taxes?

A) =B15-B16+B6 B) =B15-B5 C) =B15-B16 D) =B17-B10 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

40) Which of the following formulas would be used to calculate the net income value using only the information in the Model, and not in the Data section?

A) =B5-B17 B) =B6-B15 C) =B15-B16-B17+B18 D) =B18-B11 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Apply principles of spreadsheet engineering to designing and implementing spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

17 .

41) Using the spreadsheet below, provide the steps in using Excel formulas in finding the cost of the first order for Item number 1345, and the total cost of all Item numbers 1345, using the Match and Index functions in Excel. Column B is sorted by item number in ascending order.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

A Purchase Orders

B

C

D

Supplier Rex Technologies Rex Technologies Rex Technologies Rex Technologies Max's Wavetech Max's Wavetech Max's Wavetech Rex Technologies Rex Technologies Rex Technologies Rex Technologies Max's Wavetech

Item No. Item Cost Quantity 1123 $ 89 35 1234 $150 15 1345 $ 15 40 1345 $ 15 20 1345 $ 5 10 1765 $278 27 1654 $120 18 1765 $ 54 56 1100 $ 71 33 1100 $ 10 14 1683 $ 7 25 1683 $100 31

E

Cost per Order $3115 $2250 $ 600 $ 300 $ 50 $6950 $2160 $3024 $2343 $ 140 $ 175 $3100

Answer: To find the order cost associated with the first order for 1345, which is in column E, we have to first use the Match function, =MATCH(1345,$B$4:$B$15,0).

Accordingly, the result will be, =MATCH(1345,$B$4:$B$15,0) = 3.

In order to find the cost associated with this result, we add this function in an Index function.

Therefore, the formula for finding cost is, =INDEX($A$4:$E$15,MATCH(1345,$B$4:$B$15,0),5). …. (1) The result for this formula is, =INDEX($A$4:$E$15,MATCH(1345,$B$4:$B$15,5) = $600.

To find the total cost associated with all items under Item number: 1345, we find the last cost associated with 1345 in column E, which is given by the formula =INDEX($A$4:$E$15,MATCH(1345,$B$4:$B$15,1),5). …. (2) The result for this formula is, =INDEX($A$4:$E$15,MATCH(1345,$B$4:$B$15,1),5) = $50.

We then substitute both (1) and (2) into Excel's SUM function.

Therefore we get, =SUM(INDEX($A$4:$E$15,MATCH(1345,$B$4:$B$15,0),5):INDEX($A$4:$E$15,MATCH(1 345,$B$4:$B$15,1),5)) Therefore the total cost for all items under 1345, =SUM(INDEX($A$4:$E$15,MATCH(1345,$B$4:$B$15,0),5):INDEX($A$4:$E$15,MATCH(1 345,$B$4:$B$15,1),5)) = $950.

18 .

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

42) Using a $ sign before both the row and column labels keeps the reference to that cell fixed no matter where the formula is copied.

Answer: TRUE Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Basic Excel Skills LO1: Write correct formulas in an Excel worksheet.

LO2: Use a modern software tool to perform statistical calculations.

43) AND(condition 1, condition 2…) is a logical function that returns TRUE if all conditions are true and FALSE if not.

Answer: TRUE Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

44) To use the VLOOKUP(lookup_value, table_array, col_index_num), the table must be sorted in the descending order.

Answer: FALSE Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

45) In a MATCH function, the default value for match_type = 0.

Answer: FALSE Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

19 .

46) In a MATCH function, if match_type = 1, then the function finds the smallest value that is greater than or equal to lookup_value.

Answer: FALSE Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

47) The process of developing good, useful, and correct spreadsheet models is known as spreadsheet engineering.

Answer: TRUE Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Use Excel features and spreadsheet engineering to ensure the quality of your spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

48) Describe the method of calculating the net present value (NPV) in Excel.

Answer: The Excel function NPV (rate, value1, value2,…) calculates the net present value of an investment by using a discount rate and a series of future payments (negative values) and income (positive values). Rate is the rate of discount over the length of one period (i), and value1, value2,… are 1 to 29 arguments representing the payments and income. The values must be equally spaced in time and are assumed to occur at the end of each period. The NPV investment begins one period before the date of the value1 cash flow and ends with the last cash flow in the list. The NPV calculation is based on future cash flows. If the first cash flow (such as an initial investment or fixed cost) occurs at the beginning of the first period, then it must be added to the NPV result and not included in the function arguments.

Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

20 .

49) What is the Insert function in Excel?

Answer: The easiest way to locate a particular function is to select a cell and click on the Insert function button fx, which can be found under the ribbon next to the formula bar and also in the Function Library group in the Formulas tab. You may either type in a description in the search field, such as "net present value," or select a category, such as "Financial," from the drop-down box. This feature is particularly useful if you know what function to use but are not sure of what arguments to enter because it will guide you in entering the appropriate data for the function arguments.

Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

50) Explain the different Lookup functions in Excel.

Answer: Excel provides some useful functions for finding specific data in a spreadsheet. These functions are useful in many applications: VLOOKUP(lookup_value, table_array, col_index_num) looks up a value in the leftmost column of a table and returns a value in the same row from a column you specify. The table must be sorted in an ascending order.

HLOOKUP(lookup_value, table_array, row_index_num) looks up a value in the top row of a table and returns a value in the same column from a row you specify.

INDEX(array, row_num, col_num) Returns a value or reference of the cell at the intersection of a particular row and column in a given range.

MATCH(lookup_value, lookup_array, match_type) Returns the relative position of an item in an array that matches a specified value in a specified order.

Diff: 1 Blooms: Remember Topic: Excel Functions LO1: Use basic and advanced Excel functions.

LO2: Use a modern software tool to perform statistical calculations.

21 .

51) Give an account of how the design and format of spreadsheets can be improved.

Answer: A logical design of the spreadsheet should be sketched after inputs, outputs, and key model relationships are well understood. For example, the spreadsheet should resemble a financial statement to make it easier for managers to read. It is good practice to separate the model inputs from the model itself and to reference the input cells in the model formulas; that way, any changes in the inputs will be automatically reflected in the model as shown in the text examples. Another useful approach is to break complex formulas into smaller pieces. This reduces typographical errors, makes it easier to check your results, and also makes the spreadsheet easier to read for the user. Finally, it is also important to set up the spreadsheet in a form that the end user, like a financial manager, can easily interpret and use.

Diff: 1 Blooms: Understand Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Use Excel features and spreadsheet engineering to ensure the quality of your spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

52) Explain how the Data Validation feature in Excel helps in increasing spreadsheet quality.

Answer: The Data Validation feature allows you to define restrictions on what data can or should be entered in a cell. For example, it does not make sense to input a quantity produced that is not a whole number. You can prevent users from entering data that are not valid or allow users to enter invalid data but warn them when they try to type it in the cell. You can also provide messages to define what input you expect for the cell, and instructions to help users correct any errors. Data Validation can be found in the Data Tools group in the Data tab in the Excel ribbon.

Diff: 1 Blooms: Understand Topic: Spreadsheet Modeling and Spreadsheet Engineering LO1: Use Excel features and spreadsheet engineering to ensure the quality of your spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

22 .

Business Analytics (Evans) Chapter 3 Visualizing and Exploring Data 1) To select a chart type in Excel from the Charts group, which tab has to be accessed?

A) Design tab B) Layout tab C) Insert tab D) Format tab Answer: C Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Create Microsoft Excel charts.

LO2: Compare and contrast tools for presenting and organizing data 2) Roger wants to compare values across categories using vertical rectangles. Which of the following charts must Roger use?

A) Line chart B) Clustered column chart C) Pie chart D) Stacked column chart Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data 3) Which of the following charts provides a useful means for displaying data over time?

A) Scatter chart B) A doughnut chart C) Pie chart D) Line chart Answer: D Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data

1 .

4) Philip wishes to understand the relative proportion of each data source to the total. Which of the following charts must Philip use?

A) Pie chart B) Bar chart C) Scatter chart D) Column chart Answer: A Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data 5) Observations consisting of pairs of variable data are required to construct a ________ chart.

A) doughnut B) scatter C) radar D) line Answer: B Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data 6) Which of the following charts shows three-dimensional data?

A) Surface chart B) Column chart C) Stock chart D) Doughnut chart Answer: A Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data

2 .

7) Peige, a stock broker, has data consisting of price, price/earnings ratio, and market capitalization for seven different stocks on one particular day. She wishes to plot these three variables in two dimensions. Which of the following charts must Peige use?

A) Stock chart B) Surface chart C) Bubble chart D) Line chart Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data 8) Which of the following charts allows plotting of multiple dimensions of several data series?

A) Doughnut chart B) Bubble chart C) Radar chart D) Area chart Answer: C Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Compare and contrast tools for presenting and organizing data 9) The sort buttons in Excel can be found under: A) the Data tab in the Sort & Filter group.

B) the Home tab in the Styles group.

C) the Insert tab in the Sort group.

D) the Sort tab in the Filter group.

Answer: A Diff: 1 Blooms: Remember Topic: Data Queries: Using Sorting and Filtering LO1: Sort a data set in an Excel spreadsheet.

LO2: Compare and contrast tools for presenting and organizing data

3 .

10) Which of the following relies on sorting data and calculating the cumulative percentage of the characteristic of interest?

A) Randolph diagram B) Anscombe's quartet C) Bland-Altman plot D) Pareto analysis Answer: D Diff: 1 Blooms: Remember Topic: Data Queries: Using Sorting and Filtering LO1: Apply the Pareto Principle to analyze data.

LO2: Compare and contrast tools for presenting and organizing data 11) Howard has screened some employee details out of the employee database for tax computation purposes. In order to restore the original data file, Howard must: A) click Sort Newest to Oldest.

B) click Clear filter from Item Description.

C) click Unmerge cells.

D) click Clear outline from Ungroup.

Answer: B Diff: 1 Blooms: Remember Topic: Data Queries: Using Sorting and Filtering LO1: Use the Excel Autofilter to identify records in a database meeting certain characteristics.

LO2: Compare and contrast tools for presenting and organizing data

4 .

Use the data given below to answer the following question(s).

Following is the Sales database of Pointler's Inc., a manufacturer of clothing material.

Item Type

Item ID

Denim Cotton Denim Leather Denim Cotton Denim Denim Denim Cotton Denim Cotton Cotton Denim Jute Fur Cotton Leather Leather Fur Denim Fur Cotton Cotton Cotton

D101 C101 D102 L101 D103 C102 D101 D102 D101 C103 D102 C105 C101 D102 J101 F101 C103 L102 L101 F102 D104 F101 C103 C104 C101

Region

Buyer

Quintasia Prioland Prioland Prioland Dygertia Quintasia Prioland Prioland Dygertia Quintasia Prioland Quintasia Quintasia Quintasia Prioland Quintasia Prioland Quintasia Quintasia Prioland Prioland Quintasia Prioland Prioland Quintasia

Peter Kane Jones Gerry Sarah Peter Audrey Jones Thomas Peter Mary Henry Philip Peter Simson Peter Mary Peter Philip Kane Simson Philip Gerry Simson Peter

Unit Cost Units ($) 9.79 101 27.79 56 12.79 42 27.79 33 10.79 62 12.79 66 9.79 81 12.79 96 9.79 38 16.79 66 12.79 96 9.79 35 27.79 87 12.79 41 132.8 8 23.79 22 16.79 34 16.79 70 27.79 21 12.79 102 9.09 73 23.79 80 16.79 52 22.8 93 12.79 10

12) Use Excel to calculate the total $ amount earned from sales of all denim items to Prioland A) $4449.42 B) $22213 C) $388 D) $57.25 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Data Queries: Using Sorting and Filtering LO1: Use the Excel Autofilter to identify records in a database meeting certain characteristics.

LO2: Use a modern software tool to perform statistical calculations.

5 .

13) Use Excel to identify the buyer who made the highest single purchase of cotton (in terms of sales revenue for Pointler's Inc.) in Quintasia.

A) Peter B) Henry C) Philip D) Simson Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Data Queries: Using Sorting and Filtering LO1: Use the Excel Autofilter to identify records in a database meeting certain characteristics.

LO2: Use a modern software tool to perform statistical calculations.

14) Use Excel to calculate the total $ amount of sales made to Quintasia. Include the sale of fur, jute, and leather.

A) $193 B) $4185.47 C) $25250.19 D) $130.83 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Data Queries: Using Sorting and Filtering LO1: Use the Excel Autofilter to identify records in a database meeting certain characteristics.

LO2: Use a modern software tool to perform statistical calculations.

15) To construct a frequency distribution for categorical data, the A) observations that appear in each category must be summed up.

B) number of observations that appear in each category must be counted.

C) observations in each category must be multiplied by observations in the corresponding category.

D) number of observations in each category must be divided by the total number of observations in all categories.

Answer: B Diff: 2 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a frequency distribution for both discrete and continuous data.

LO2: Compare and contrast methods of summarizing and describing data

6 .

16) If a data set has 'c' number of observations, the relative frequency of category 'l' is computed as ________.

A) (frequency of category 'l') / 'c' B) 'c' × (number of observations in category 'l') C) (sum of all observations in category 'l') / 'c' D) sum of ('c' + each observation in category 'l') Answer: A Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Compare and contrast methods of summarizing and describing data

7 .

Use the data given below to answer the following question(s).

Following is an extract from the Employee Payroll Database of HFR Informatics Inc.

Female

Rank / Grade 3

Pay Scale A

White American

Male

2

B

George Hispanic American

Male

1

C

Smith

Black American

Female

1

D

Johnson

Alaska Native

Male

2

E

Thompson Asian American

Male

2

B

Martinez

Alaska Native

Male

3

A

Lewis

White American

Female

2

B

Lee

Black American

Male

2

A

Taylor

Asian American

Female

1

B

Carter

Asian American

Male

2

C

Edwards Hispanic American

Male

2

E

Bailey

White American

Male

2

B

Cooper

White American

Male

2

A

Bill

Alaska Native

Male

3

E

Cox

Asian American

Male

1

A

Perry

Hispanic American Female

2

C

Employee

Ethnic Group

Gender

Maria

Asian American

Peter

Flores

Alaska Native

Female

2

B

Woods

White American

Male

3

E

Cole

Asian American

Female

1

A

17) What is the relative frequency of Grade 3 employees?

A) 4 B) 0.55 C) 0.20 D) 5 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Compare and contrast methods of summarizing and describing data 8 .

18) What is the relative frequency of Female employees?

A) 0.65 B) 0.75 C) 0.25 D) 0.35 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Compare and contrast methods of summarizing and describing data 19) What is the cumulative relative frequency of employees on a 'A to D' pay scale?

A) 1.00 B) 0.80 C) 0.30 D) 0.60 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Compute cumulative relative frequencies.

LO2: Compare and contrast methods of summarizing and describing data 20) What is the cumulative relative frequency of Ranks 1 and 2?

A) 0.80 B) 0.15 C) 0.30 D) 0.25 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Compute cumulative relative frequencies.

LO2: Compare and contrast methods of summarizing and describing data

9 .

21) A graphical depiction of a frequency distribution for numerical data in the form of a column chart is called a ________.

A) cartogram B) correlogram C) histogram D) dendogram Answer: C Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Compare and contrast methods of summarizing and describing data 22) While constructing a histogram, how is group width calculated?

A) number of groups × (lower limit of the last group + upper limit of the first group) B) (upper limit of the last group - lower limit of the first group) / number of groups C) (upper limit of the first group + number of groups) × lower limit of the last group + number of groups) D) (lower limit of the first group - number of groups) × upper limit of the last group Answer: B Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Compare and contrast methods of summarizing and describing data 23) Which of the following represents the proportion of the total number of observations that fall at or below the upper limit of each group?

A) Percentile B) Pareto chart C) Frequency distribution D) Cumulative relative frequency Answer: D Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Compute cumulative relative frequencies.

LO2: Compare and contrast methods of summarizing and describing data

10 .

24) The Excel 2010 function ________ computes the kth percentile of data in the range specified in the array field, where k is in the range 0 to 1, inclusive.

A) PERCENTILE.INC(array, k) B) PERCENTILE(array + k) C) PERCENTILE.IF(array, k) D) PERCENTILE(SUM(array), k) Answer: A Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Use a modern software tool to perform statistical calculations.

11 .

Use the data given below to answer the following question(s).

Following is an extract from the Cost per Order Database of Grogtes LLC. Item Category Nuts Screws Nuts Screwdriver Nuts Screws Nuts Nuts Nuts Screws Nuts Screws Screws Nuts Nails Bolts Screws Screwdriver Screwdriver Bolts Nuts Bolts Screws Screws Screws Screws Bolts Nuts Screwdriver Nuts Screws Nailgun pack Bolts Bolts Bolts Nails Nuts Screwdriver Screws Nuts

Item ID N101 S101 N102 SD101 N102 S102 N101 N102 N101 S103 N102 S101 S101 N102 NG101 B101 S103 SD102 SD101 B102 N103 B101 S103 S104 S102 S101 B102 N101 SD103 N103 S103 NG101 B102 B103 B104 NG102 N103 SD104 S101 N103

Item Cost $ 2.44 $ 20.44 $ 5.44 $ 20.44 $ 3.44 $ 5.44 $ 2.44 $ 5.44 $ 2.44 $ 9.44 $ 5.44 $ 2.44 $ 20.44 $ 5.44 $ 125.45 $ 16.44 $ 9.44 $ 9.44 $ 20.44 $ 5.44 $ 1.74 $ 16.44 $ 9.44 $ 15.45 $ 5.44 $ 20.44 $ 5.44 $ 2.44 $ 5.44 $ 1.74 $ 9.44 $ 125.45 $ 5.44 $ 12.94 $ 24.40 $ 275.45 $ 1.74 $ 2.44 $ 20.44 $ 1.74

Units 94 49 35 26 55 59 74 89 31 59 89 28 80 34 1 15 27 63 14 95 66 73 45 86 3 6 49 65 95 52 79 4 61 54 41 2 6 75 56 13 12 .

Cost per Order $ 229.36 $ 1,001.56 $ 190.40 $ 531.44 $ 189.20 $ 320.96 $ 180.56 $ 484.16 $ 75.64 $ 556.96 $ 484.16 $ 68.32 $ 1,635.20 $ 184.96 $ 125.45 $ 246.60 $ 254.88 $ 594.72 $ 286.16 $ 516.80 $ 114.84 $ 1,200.12 $ 424.80 $ 1,328.70 $ 16.32 $ 122.64 $ 266.56 $ 158.60 $ 516.80 $ 90.48 $ 745.76 $ 501.80 $ 331.84 $ 698.76 $ 1,000.40 $ 550.90 $ 10.44 $ 183.00 $ 1,144.64 $ 22.62

Screws Screws Screws

S102 S101 S102

$ 5.44 $ 20.44 $ 5.44

10 93 27

13 .

$ $ $

54.40 1,900.92 146.88

25) Which of the following observations is closest to the 87th percentile of costs per order?

A) 75 SD104 screwdrivers for $183.00 B) 66 N103 nuts for $114.84 C) 73 B101 bolts for $1,200.12 D) 49 S101 screws for $1,001.56 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data 26) Which of the following does the 38th percentile of the costs per order indicate?

A) 17% of the costs per order are less than or equal to $190.40.

B) 38% of the costs per order are less than or equal to $183.00.

C) 83% of the costs per order are less than or equal to $10.44.

D) 62% of the costs per order are less than or equal to $1,001.56.

Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data 27) Which of the following observations is closest to the third quartile?

A) 35 N102 nuts for $190.40 B) 59 S103 screws for $556.96 C) 13 N103 nuts for $22.62 D) 2 NG102 nailgun packs for $550.90 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data

14 .

28) Which of the following does the second quartile of the costs per order indicate?

A) 2% of the costs per order are less than or equal to $114.84.

B) 20% of the costs per order are less than or equal to $1,200.12.

C) 5% of the costs per order are less than or equal to $229.36.

D) 50% of the costs per order are less than or equal to $286.16.

Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data 29) What is the rank of the 42nd percentile of the costs per order ?

A) 17 B) 13.35 C) 19 D) 33.75 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data 30) Which of the following is true about quartiles?

A) The 25th percentile is called the fourth quartile.

B) One-fourth of the data fall below the fourth quartile.

C) Three-fourths of the data are below the third quartile.

D) The 50th quartile is the third percentile.

Answer: C Diff: 2 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data

15 .

31) Which of the following will give the value for the third quartile?

A) PERCENTILE.INC(array, 0.75) B) QUARTILE.INC(array, 0.75) C) DECILE.INC(array, 0.30) D) QUARTILE.INC(array, 0.25) Answer: A Diff: 2 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Find percentiles and quartiles for a data set.

LO2: Compare and contrast methods of summarizing and describing data 32) Which of the following is true about cross-tabulation?

A) All subcategories together must constitute the complete data set.

B) A cross-tabulation table is often called a latent class model.

C) Each observation can be classified into many subcategories.

D) The table displays the number of categorical variables between two observations.

Answer: A Diff: 2 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a cross-tabulation (contingency table).

LO2: Compare and contrast methods of summarizing and describing data 33) Which of the following can be used to quickly create cross-tabulations?

A) Frequency distribution B) COUNTIF function C) PivotTable D) Sort & Filter Answer: C Diff: 1 Blooms: Remember Topic: Exploring Data Using PivotTables LO1: Use PivotTables to construct a cross-tabulation.

LO2: Use a modern software tool to perform statistical calculations.

16 .

34) Which of the following is true about constructing PivotTables?

A) It is not possible to construct the PivotTable in the same worksheet.

B) Dragging a field into the Report Filter area allows addition of a third dimension to the analysis.

C) Placing a field each in the row and column labels will automatically sum the variable values in the table.

D) PivotTables cannot be duplicated by copying and pasting an existing table.

Answer: B Diff: 2 Blooms: Remember Topic: Exploring Data Using PivotTables LO1: Use PivotTables to explore and summarize data.

LO2: Use a modern software tool to perform statistical calculations.

35) After choosing the PivotTable, the PivotChart can be found on the ________ tab.

A) Design B) View C) Options D) Layout Answer: C Diff: 1 Blooms: Remember Topic: Exploring Data Using PivotTables LO1: Display the results of PivotTables using PivotCharts.

LO2: Use a modern software tool to perform statistical calculations.

17 .

Use the data given below to answer the following question(s).

Following is the purchase order database of 'The Chef Says So', a restaurant in New York, over the last quarter (April-June).

Order Date 5/6/2012 4/7/2012 5/13/2012 6/10/2012 6/22/2012 5/17/2012 4/25/2012 6/1/2012 4/2/2012 5/27/2012 6/13/2012 4/30/2012 5/11/2012 6/18/2012 5/9/2012 5/30/2012 6/6/2012 4/3/2012 6/26/2012 4/23/2012 4/29/2012 4/4/2012 6/15/2012 6/25/2012 5/23/2012 6/28/2012 5/25/2012 5/1/2012 4/12/2012 4/18/2012 6/30/2012 5/19/2012 4/16/2012 6/4/2012 5/2/2012 4/19/2012 6/11/2012 5/31/2012

Item Steel Fork Ceramic Plate Steel Fork Silver Spoon Steel Fork Ceramic Plate Steel Fork Steel Fork Steel Fork Ceramic Plate Steel Fork Ceramic Plate Ceramic Plate Steel Fork Glass Bottle Ceramic Bowl Ceramic Plate Silver Spoon Silver Spoon Ceramic Bowl Steel Fork Ceramic Bowl Ceramic Plate Ceramic Plate Ceramic Plate Ceramic Plate Ceramic Bowl Steel Fork Silver Spoon Steel Fork Ceramic Plate Glass Bottle Ceramic Bowl Ceramic Bowl Ceramic Bowl Glass Bottle Steel Fork Silver Spoon

Region Supplier Antasia Peter Puitoria Kane Puitoria Jones Puitoria Gerry Almeco Sarah Antasia Peter Puitoria Audrey Puitoria Jones Almeco Thomas Antasia Peter Puitoria Mary Antasia Henry Antasia Philip Antasia Peter Puitoria Simson Antasia Peter Puitoria Mary Antasia Peter Antasia Philip Puitoria Kane Puitoria Simson Antasia Philip Puitoria Gerry Puitoria Simson Antasia Peter Almeco Sarah Puitoria Jones Puitoria Audrey Antasia Henry Puitoria Gerry Puitoria Gerry Puitoria Kane Antasia Peter Puitoria Mary Puitoria Kane Almeco Sarah Puitoria Gerry Almeco Sarah 18 .

Unit Cost Units 5.44 98 23.44 53 8.44 39 23.44 30 6.44 59 8.44 63 5.44 78 8.44 93 5.44 35 12.44 63 8.44 93 5.44 32 23.44 84 8.44 38 128.45 5 19.44 19 12.44 31 12.44 67 23.44 18 8.44 99 4.74 70 19.44 77 12.44 49 18.45 90 8.44 7 23.44 10 8.44 53 5.44 69 8.44 99 4.74 56 12.44 83 128.45 8 8.44 65 15.94 58 27.4 45 278.45 6 4.74 10 5.44 79

6/2/2012 4/13/2012 5/3/2012 6/3/2012 4/17/2012

Ceramic Plate Steel Fork Ceramic Plate Ceramic Plate Ceramic Plate

Almeco Puitoria Puitoria Puitoria Puitoria

Thomas Audrey Jones Jones Audrey

23.44 4.74 8.44 23.44 8.44

60 17 14 97 31

36) Describe how to and construct a line chart exhibiting the purchase order of ceramic plates over the three months.

Answer: Filter the data set by Item (Ceramic Plate). Sort the Order Date by Oldest to Newest.

Select the entire data and choose the type of chart (Line Chart) from the Charts group under the Insert tab. Change the title and make data and formatting changes where necessary.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Data Visualization LO1: Create Microsoft Excel charts.

LO2: Use a modern software tool to perform statistical calculations.

19 .

37) Describe how to sort the data by inventory value to compute cumulative percentage of total inventory value to help the restaurateur conduct a Pareto analysis. (Assume that no damages were caused to the inventory purchased over the three months) Answer: In order to calculate inventory value of items, only Item, Unit Cost, and Units have to be retained in the table. Inventory value can be calculated by multiplying the unit cost by the number of units. Percentage and the cumulative percentage may be calculated based on the inventory values. Then, sort by Item, calculate subtotals for each Item, calculate percentages, sort the percentage in descending order and then calculate the cumulative percentages.

Item Steel Fork Ceramic Plate Steel Fork Silver Spoon Steel Fork Ceramic Plate Steel Fork Steel Fork Steel Fork Ceramic Plate Steel Fork Ceramic Plate Ceramic Plate Steel Fork Glass Bottle Ceramic Bowl Ceramic Plate Silver Spoon Silver Spoon Ceramic Bowl Steel Fork Ceramic Bowl Ceramic Plate Ceramic Plate Ceramic Plate Ceramic Plate Ceramic Bowl Steel Fork Silver Spoon Steel Fork Ceramic Plate Glass Bottle Ceramic Bowl Ceramic Bowl

Unit Units Cost 5.44 98 23.44 53 8.44 39 23.44 30 6.44 59 8.44 63 5.44 78 8.44 93 5.44 35 12.44 63 8.44 93 5.44 32 23.44 84 8.44 38 128.45 5 19.44 19 12.44 31 12.44 67 23.44 18 8.44 99 4.74 70 19.44 77 12.44 49 18.45 90 8.44 7 23.44 10 8.44 53 5.44 69 8.44 99 4.74 56 12.44 83 128.45 8 8.44 65 15.94 58

Inventory Percentage Value 533.12 1.776463 1242.32 4.139661 329.16 1.096827 703.2 2.343204 379.96 1.266103 531.72 1.771798 424.32 1.41392 784.92 2.615512 190.4 0.634451 783.72 2.611513 784.92 2.615512 174.08 0.58007 1968.96 6.560971 320.72 1.068704 642.25 2.140106 369.36 1.230782 385.64 1.28503 833.48 2.777323 421.92 1.405922 835.56 2.784254 331.8 1.105624 1496.88 4.987906 609.56 2.031177 1660.5 5.533121 59.08 0.196866 234.4 0.781068 447.32 1.49056 375.36 1.250775 835.56 2.784254 265.44 0.8845 1032.52 3.440565 1027.6 3.42417 548.6 1.828046 924.52 3.080687 20 .

Cumulative percentage 1.776463261 5.916123823 7.012951268 9.356155359 10.62225864 12.39405682 13.80797656 16.42348816 17.05793932 19.66945228 22.28496387 22.86503351 29.42600497 30.49470863 32.63481504 33.86559699 35.15062717 37.92795047 39.33387293 42.11812721 43.22375167 48.21165744 50.24283418 55.77595477 55.97282123 56.75388926 58.24444964 59.49522479 62.27947907 63.16397864 66.60454332 70.02871358 71.85675932 74.93744625

Ceramic Bowl Glass Bottle Steel Fork Silver Spoon Ceramic Plate Steel Fork Ceramic Plate Ceramic Plate Ceramic Plate Total

27.4 278.45 4.74 5.44 23.44 4.74 8.44 23.44 8.44

45 6 10 79 60 17 14 97 31

1233 1670.7 47.4 429.76 1406.4 80.58 118.16 2273.68 261.64 30010.19

4.108604 5.567109 0.157946 1.432047 4.686408 0.268509 0.393733 7.57636 0.871837

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Data Queries: Using Sorting and Filtering LO1: Sort a data set in an Excel spreadsheet.

LO2: Use a modern software tool to perform statistical calculations.

21 .

79.04605069 84.61315973 84.77110608 86.203153 90.88956118 91.15806998 91.5518029 99.1281628 100

38) Construct a relative frequency distribution for items in the purchase order database and show the proportions of the frequencies visually using a pie chart.

Answer: In a new table, list out the items and use the COUNTIF function to calculate the frequencies. The relative frequency may be calculated as: (frequency of an item) / total number of observations Items

Frequency Relative Frequency

Steel Fork Ceramic Plate

13

0.30

15

0.35

Silver Spoon

5

0.12

Glass Bottle

3

0.07

Ceramic Bowl

7

0.16

Total

43

1.00

The pie chart can be constructed for the items with their corresponding relative frequencies.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Use a modern software tool to perform statistical calculations.

22 .

39) Describe and construct a cross-tabulation showing the region-wise percentage breakdown of purchase of glass bottles and silver spoons and visually represent the data in a 3-D cylindrical chart.

Counts: Region

Glass Bottle

Silver Spoon

Grand Total

Almeco

6

79

85

Antasia

0

184

184

Puitoria

13

30

43

Percentages by Region: Glass Silver Region Bottle Spoon

Grand Total

Almeco

7%

93%

100%

Antasia

0%

100%

100%

Puitoria

30%

70%

100%

Answer: Construct a pivot table with regions as the row labels and filtering the items to include only glass bottle and silver spoon. Compute the percentage purchase within each region and construct a chart on that data.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Methods for Summarizing Data. Exploring Data Using PivotTables LO1: Use PivotTables to construct a cross-tabulation.

LO2: Use a modern software tool to perform statistical calculations.

23 .

40) Construct a PivotChart to visualize the purchase order total units for steel forks and ceramic bowls within each region.

Answer: Choose the whole range of data set and opt for PivotChart in the Insert Tab. Set the regions as row labels and the items as column labels after filtering to include only ceramic bowl and steel fork.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Exploring Data Using PivotTables LO1: Display the results of PivotTables using PivotCharts.

LO2: Use a modern software tool to perform statistical calculations.

41) Changes to the type of chart, data included in the chart, and chart layout and styles can be made from the Layout tab.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Create Microsoft Excel charts.

LO2: Compare and contrast tools for presenting and organizing data 42) AutoFilter creates filtering criteria based on the type of data being filtered.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Data Queries: Using Sorting and Filtering LO1: Use the Excel Autofilter to identify records in a database meeting certain characteristics.

LO2: Compare and contrast tools for presenting and organizing data

24 .

43) While constructing frequency distributions for numerical data, SUMIF is used to count the frequencies of each discrete value.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a frequency distribution for both discrete and continuous data.

LO2: Use a modern software tool to perform statistical calculations.

44) Specifying a Bin Range will allow Excel to automatically determine bin values for the frequency distribution and histogram.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Use a modern software tool to perform statistical calculations.

45) Fewer groups provide a "coarse" histogram.

Answer: TRUE Diff: 2 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a relative frequency distribution and histogram.

LO2: Use a modern software tool to perform statistical calculations.

46) How does Excel distinguish between vertical and horizontal bar charts?

Answer: Excel distinguishes between vertical and horizontal bar charts, calling the former column charts and the latter bar charts. A clustered column chart compares values across categories using vertical rectangles; a stacked column chart displays the contribution of each value to the total by stacking the rectangles; and a 100% stacked column chart compares the percentage that each value contributes to a total.

Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Determine the appropriate chart to visualize different types of data.

LO2: Use a modern software tool to perform statistical calculations.

25 .

47) Elaborate on the use of geographic data mapping in business analytics.

Answer: Many applications of business analytics involve geographic data. For example, problems such as finding the best location for production and distribution facilities, analyzing regional sales performance, transporting raw materials and finished goods, and routing vehicles such as delivery trucks involve geographic data. In such problems, data mapping can help in a variety of ways. Visualizing geographic data can highlight key data relationships, identify trends, and uncover business opportunities. In addition, it can often help to spot data errors and help end users understand solutions, thus increasing the likelihood of acceptance of decision models.

MapPoint is a geographic data-mapping tool that allows you to visualize data imported from Excel and other database sources and integrate them into other Microsoft Office applications.

Diff: 1 Blooms: Remember Topic: Data Visualization LO1: Create Microsoft Excel charts.

LO2: Use a modern software tool to perform statistical calculations.

48) Explain with an example the filtering tool provided by Excel for simple criteria.

Answer: Excel provides AutoFilter for simple criteria. AutoFilter creates filtering criteria based on the type of data being filtered. For instance, the Number Filters menu list includes numerical criteria such as "equals," "does not equal," and so on. If one chooses to filter data based on categories such as Order Date or Arrival Date, the AutoFilter tools will display a different Date Filters menu list for filtering that includes "tomorrow," "next week," "year to date," and so on.

The AutoFilter can be used sequentially to "drill down" into the data.

Diff: 1 Blooms: Remember Topic: Data Queries: Using Sorting and Filtering LO1: Use the Excel Autofilter to identify records in a database meeting certain characteristics.

LO2: Use a modern software tool to perform statistical calculations.

49) Explain statistics as defined by David Hand. What are the two ways in which Microsoft Excel supports statistical analysis?

Answer: Statistics, as defined by David Hand, is both the science of uncertainty and the technology of extracting information from data. Statistics involves collecting, organizing, analyzing, interpreting, and presenting data. A statistic is a summary measure of data. Microsoft Excel supports statistical analysis in two ways: • with statistical functions that are entered in worksheet cells directly, or embedded in formulas • with the Excel Analysis Toolpak add-in to perform more complex statistical computations.

Diff: 1 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Explain the science of statistics and define the term statistic.

LO2: Use a modern software tool to perform statistical calculations.

26 .

50) How is a frequency distribution calculated for categorical and numerical data?

Answer: A frequency distribution is a table that shows the number of observations in each of several nonoverlapping groups. Categorical variables naturally define the groups in a frequency distribution. The frequencies may be expressed as a fraction, or proportion, of the total; this is called the relative frequency. A relative frequency distribution is a tabular summary of the relative frequencies of all categories. For numerical data that consist of a small number of discrete values, frequency distributions may be constructed in a similar way as done for categorical data; COUNTIF is used to count the frequencies of each value. A graphical depiction of frequency distributions for numerical data in the form of a column chart is called a histogram.

Diff: 2 Blooms: Remember Topic: Statistical Methods for Summarizing Data LO1: Construct a frequency distribution for both discrete and continuous data.

LO2: Use a modern software tool to perform statistical calculations.

27 .

Business Analytics (Evans) Chapter 4 Descriptive Statistical Measures 1) Which of the following is an example of a subset?

A) The number of individuals who have a Ford car B) The number of IT employees out of all employees working in an office of Google C) The number of members in the Democratic Party D) The population of Canada Answer: B Diff: 1 Blooms: Understand Topic: Populations and Samples LO1: Explain the difference between a population and a sample.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 2) The purpose of sampling is to ________.

A) enumerate all the values in the population B) measure all items of interest for a particular interest or investigation C) obtain sufficient information to draw a valid inference about a population D) calculate all variables and observations within a population Answer: C Diff: 1 Blooms: Remember Topic: Populations and Samples LO1: Explain the difference between a population and a sample.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 3) In statistical notation, the elements of a data set are typically labeled as ________.

A) summation operators B) letters in capitals C) Greek letters D) subscripted variables Answer: D Diff: 1 Blooms: Remember Topic: Populations and Samples LO1: Understand statistical notation.

LO2: Compare and contrast methods of summarizing and describing data

1 .

4) According to statistical notations, what does Σ stand for?

A) to act as a summation operator B) to represent sample statistics C) to represent population measures D) to represent the number of items in a population Answer: A Diff: 1 Blooms: Remember Topic: Populations and Samples LO1: Understand statistical notation.

LO2: Compare and contrast methods of summarizing and describing data

5) Which of the following measures of location is calculated using the formula =

, where

n is the number of observations?

A) midrange B) sample mean C) mode D) median Answer: B Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 6) Which of the following is true from the equation:

= 0 where is the mean of the

sample?

A) The sum of the deviations above the mean are the same as the sum of the deviations below the mean B) Half the data lie above the mean of the values C) The specific set of values does not have any outliers affecting the mean D) Half the data lie below the mean of the values Answer: A Diff: 2 Blooms: Remember Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Compare and contrast methods of summarizing and describing data

2 .

Use the table below to answer the following question(s).

Below is a table showing the costs per order of items bought by a computer hardware store.

Supplier Aloham Technologies Aloham Technologies Aloham Technologies Aloham Technologies Aloham Technologies Aloham Technologies MindRoot Hardwares MindRoot Hardwares MindRoot Hardwares MindRoot Hardwares

Item Description Monitors Hard Disks Power Supply Graphics Card Processor Speakers Flashdrive Graphics Card CD-ROM Bluetooth Device

Cost per Order $250 $220 $ 88 $300 $325 $ 88 $ 9 $299 $ 88 $ 80

7) Calculate the mean cost per order.

A) $220.54 B) $174.70 C) $159 D) $88 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Compare and contrast methods of summarizing and describing data 8) Calculate the mode for the cost per order data.

A) $174.17 B) $325 C) $88 D) $206.5 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Compare and contrast methods of summarizing and describing data

3 .

9) Calculate the median for the cost per order data.

A) $325 B) $154 C) $174.17 D) $88 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 10) One of the measures of location is calculated as 88. Which of the following measures of location corresponds to this value?

A) mean B) mode C) median D) midrange Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Location LO1: List different measures of location.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 11) The measure of location that specifies the middle value when the data are arranged from least to greatest is the ________.

A) outlier B) mean C) median D) mode Answer: C Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data

4 .

12) Which of the following is true for a median?

A) A median is only meaningful for interval or ordinal data and not for ratio data.

B) Medians can be calculated no matter how the data is arranged.

C) Medians are affected by outliers.

D) For an even number of observations, the median is the mean of the two middle numbers.

Answer: D Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 13) Which of the following is a difference between a mean and a median?

A) A mean divides the data half above it and half below it; a median does not.

B) A median is not affected by outliers; a mean is affected by outliers.

C) A mean is an observation that occurs most frequently; a median is the average of all observations.

D) A median is not meaningful for ratio data; a mean is meaningful to ratio data.

Answer: B Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 14) The ________ is the observation that occurs most frequently.

A) mode B) mean C) outlier D) median Answer: A Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data

5 .

15) Which of the following is true for a mode?

A) Modes are the mid values of data arranged from least to greatest.

B) Modes are affected by outliers.

C) Modes cannot be used in data having repetitious values.

D) The highest bar in a histogram is its mode.

Answer: D Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 16) The ________ is the average of the greatest and least values in the data set.

A) mean B) median C) midrange D) mode Answer: C Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 17) Which of the following types of conditions is most likely to render a midrange value useless?

A) having repetitious values in the data set B) having the data arranged from least to greatest in value C) having a small sample size D) having extreme values in a data Answer: D Diff: 1 Blooms: Remember Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 18) Which of the following is a similarity between a midrange and a mean?

A) Both measures are calculated using all the values in a data set.

B) Both measures are affected by outliers.

C) Both measures divide the data into two equal halves.

D) Both measures can only be used for small sample sizes.

Answer: B Diff: 1 Blooms: Understand Topic: Measures of Location LO1: List different measures of location.

LO2: Compare and contrast methods of summarizing and describing data 6 .

19) Which of the following is an example of a measure of dispersion?

A) median B) mode C) variance D) midrange Answer: C Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data 20) Which of the following describes dispersion in statistics?

A) the degree of variation in the data B) the central value in the data C) the frequency of values in the data D) the measure of outliers in the data Answer: A Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data 21) The difference between the first and third quartiles is referred to as the ________.

A) standard deviation B) variance C) interquartile range D) midrange Answer: C Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data

7 .

22) Which of the following is true of midspread?

A) It is an example of a measure of location.

B) It is calculated by finding the difference between the highest and lowest values in the data set.

C) It is affected by extreme values.

D) It is calculated using only the middle 50% of the data.

Answer: D Diff: 1 Blooms: Understand Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data 23) Which of the following describes variance?

A) It is the difference between the maximum value and the minimum value in the data set.

B) It is the difference between the first and third quartiles of a data set.

C) It is the average of the squared deviations of the observations from the mean.

D) It is the average of the greatest and least values in the data set.

Answer: C Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data 24) Which of the following is true of variance?

A) The formula to calculate variance of a population is not the same as the formula to calculate variance of a sample.

B) Its value is inversely proportional to the degree to which the data is spread from the mean.

C) It only requires the middle 50% of data to be calculated.

D) It is the square root of standard deviation.

Answer: A Diff: 1 Blooms: Understand Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

8 .

25) Which of the following describes standard deviation?

A) It is the average of the greatest and least values in the data set.

B) It is the square root of the variance.

C) It is the difference between the first and third quartiles of a data set.

D) It is the average of the squared deviations of the observations from the mean.

Answer: B Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data 26) ________ states that for any set of data, the proportion of values that lie within k standard deviations (k > 1) of the mean is at least 1 - 1/k2.

A) Prime number theorem B) Bertrand's postulate C) Oppermann's conjecture D) Chebyshev's theorem Answer: D Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: Explain Chebyshev's theorem.

LO2: Compare and contrast methods of summarizing and describing data 27) Using Chebyshev's theorem for standard deviation, calculate the percentage of data that lie within five standard deviations of the mean.

A) 89% B) 75% C) 96% D) 50% Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Explain Chebyshev's theorem.

LO2: Compare and contrast methods of summarizing and describing data

9 .

28) In the equation Cp = upper specification - lower specification/total variation, what does Cp denote?

A) capacity variation index B) capability pattern C) process capability index D) capability push Answer: C Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: List different measures of dispersion.

LO2: Compare and contrast methods of summarizing and describing data 29) Which of the following is the z-score equation for the ith observation?

A) Zt = B) Zi = C) Z1= (xi - )S D) Zi = Answer: B Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: Compute a standardized value (z-score) for observations in a data set.

LO2: Compare and contrast methods of summarizing and describing data 30) In the z-score formula, which of the following is true if the value in the numerator is a negative value?

A) that the xi value lies to the left of the mean B) that the mean is of lesser value than the xi value C) that the mean is of negative value D) that the numerator value cannot be divided by the standard deviation Answer: A Diff: 2 Blooms: Understand Topic: Measures of Dispersion LO1: Compute a standardized value (z-score) for observations in a data set.

LO2: Compare and contrast methods of summarizing and describing data

10 .

31) A z-score of 1.0 means that ________.

A) the observation is -1.0 standard deviation to the right of the mean B) the observation is -1.0 standard deviation to the left of the mean C) the observation has no deviation from the mean D) the observation is 1.0 standard deviation to the right of the mean Answer: D Diff: 2 Blooms: Understand Topic: Measures of Dispersion LO1: Compute a standardized value (z-score) for observations in a data set.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 32) Which of the following is the equation for calculating the coefficient of variation (CV)?

A) CV = standard deviation/mean B) CV = standard deviation - z-score/mean (total variation) C) CV = value of observation's distance from mean/standard deviation D) CV = mean/(standard deviation)2 Answer: A Diff: 2 Blooms: Understand Topic: Measures of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Compare and contrast methods of summarizing and describing data 33) How is the return to risk described in financial statistics?

A) as the relative measure of the distance an observation is from the mean B) as the reciprocal of coefficient of variation C) as the square root of variance D) as the ratio of excess returns to its standard deviation Answer: B Diff: 1 Blooms: Understand Topic: Measures of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

11 .

34) In finance, the ________ is the ratio of a fund's excess returns (annualized total returns minus Treasury bill returns) to its standard deviation.

A) field ratio B) Sortino ratio C) Calmar ratio D) Sharpe ratio Answer: D Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 35) Calculate the coefficient of variation from the following data: z-score = 1.32; standard deviation = 0.173; mean = 4.7; total variation = 0.6 A) 27.16 B) 156.66 C) 0.04 D) -0.5 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Compare and contrast methods of summarizing and describing data 36) Which of the following values of the coefficients of variation of stocks represents the least risky stock?

A) 1.0 B) 0.005 C) 0.5 D) 0.045 Answer: B Diff: 2 Blooms: Understand Topic: Measures of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

12 .

37) Which of the following describes a positively skewed histogram?

A) a histogram that tails off toward the right B) a histogram that has no fluctuation in mass C) a histogram where more mass tails off toward the left D) a histogram where mass is only concentrated in the middle Answer: A Diff: 1 Blooms: Remember Topic: Measures of Shape LO1: Explain the nature of skewness and kurtosis in a distribution.

LO2: Compare and contrast methods of summarizing and describing data 38) The ________ measures the degree of asymmetry of observations around the mean.

A) coefficient of variation B) return to risk factor C) coefficient of skewness D) coefficient of kurtosis Answer: C Diff: 1 Blooms: Remember Topic: Measures of Shape LO1: Explain the nature of skewness and kurtosis in a distribution.

LO2: Compare and contrast methods of summarizing and describing data 39) The coefficient of skewness is computed as ________.

A) CS =

)3

B) CS =

C) CS =

D) CS = Answer: D Diff: 1 Blooms: Remember Topic: Measures of Shape LO1: Interpret the coefficients of skewness and kurtosis.

LO2: Compare and contrast methods of summarizing and describing data 13 .

40) Which of the following is true of the coefficient of skewness (CS)?

A) If the CS is positive, the distribution of values tails off to the left.

B) If the CS value is between 0.5 and 1, the skewness is considered to be moderate.

C) If the CS is closer to zero, the degree of skewness is considered to be high.

D) If the CS value is between -0.5 and -1, the skewness is considered negligible.

Answer: B Diff: 1 Blooms: Remember Topic: Measures of Shape LO1: Interpret the coefficients of skewness and kurtosis.

LO2: Compare and contrast methods of summarizing and describing data 41) In statistics, ________ refers to the peakedness or flatness of a histogram.

A) Sharpe ratio B) entropy rate C) Markov chain D) kurtosis Answer: D Diff: 1 Blooms: Remember Topic: Measures of Shape LO1: Explain the nature of skewness and kurtosis in a distribution.

LO2: Compare and contrast methods of summarizing and describing data 42) Which of the following cases require the mean of a sample to be calculated using the formula

=

?

A) the sample has no mode value B) there is direct access to the raw data C) sample data are grouped in a frequency distribution D) the coefficient of skewness is 1 or less than -1 Answer: C Diff: 1 Blooms: Understand Topic: Descriptive Statistics for Grouped Data LO1: Calculate the mean, variance, and standard deviation for grouped data.

LO2: Compare and contrast methods of summarizing and describing data

14 .

43) The ________ is a formal statistical measure for categorical data, such as defects or errors in quality control applications or consumer preferences in market research.

A) variance B) proportion C) mean D) skewness Answer: B Diff: 1 Blooms: Remember Topic: Descriptive Statistics for Categorical Data: The Proportion LO1: Calculate a proportion.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 44) ________ is a measure of the linear association between two variables, X and Y. A) Kurtosis B) Proportion C) Skewness D) Covariance Answer: D Diff: 1 Blooms: Remember Topic: Measures of Association LO1: Explain the importance of understanding relationships between two variables. Explain the difference between covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data

15 .

45) Which of the following formula is used to compute covariance between two variables X and Y?

A) cov (X,Y) =

B) cov (X,Y) = C) cov (X,Y) =

D) cov (X,Y) = Answer: A Diff: 1 Blooms: Remember Topic: Measures of Association LO1: Explain the importance of understanding relationships between two variables. Explain the difference between covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data 46) Which of the following is true of covariance, between two variables, when one of the deviations from the mean is positive and the other is negative?

A) the degree of linear association is high between the two variables B) there is no covariance between the two variables C) the covariance will be negative D) the covariance will be positive Answer: C Diff: 2 Blooms: Understand Topic: Measures of Association LO1: Explain the importance of understanding relationships between two variables. Explain the difference between covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data

16 .

47) ________ is a measure of the linear relationship between two variables, X and Y, which does not depend on the units of measurement.

A) Kurtosis B) Proportion C) Skewness D) Correlation Answer: D Diff: 1 Blooms: Remember Topic: Measures of Association LO1: Explain the importance of understanding relationships between two variables. Explain the difference between covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data 48) Which of the following is the equation used for computing the sample correlation coefficient?

A) rxy = cov(X,Y)(sxsy) B) rxy = C) rxy = D) rxy = Answer: B Diff: 1 Blooms: Remember Topic: Measures of Association LO1: Calculate measures of covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data 49) For two variables, a positive correlation coefficient indicates ________.

A) a linear relationship exists for which one variable increases as the other also increases B) a linear relationship exists for one variable that increases while the other decreases C) that the two variables have no linear relationship with each other D) a nonlinear relationship with no linear correlation between the two variables Answer: A Diff: 2 Blooms: Understand Topic: Measures of Association LO1: Calculate measures of covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data

17 .

Use the spreadsheet below to answer the following question(s).

Below is the table showing rate of shoes sold per day and the highest-priced shoe sold that day for a one-week period. The rate of shoes sold per day (X) and the price of the shoes (Y).

Shoes sold in % (X) Price (Y) 15

$48

27

$55

10

$40

13

$88

25

$53

9

$47

18

$40

50) Use Excel to calculate the mean for X. A) 16.71 B) 7.04 C) 2.67 D) 0.02 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Use a modern software tool to perform statistical calculations.

51) Use Excel to calculate the variance of X. A) 271.33 B) 16.47 C) 49.57 D) 7.04 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Compute the range, interquartile range, variance, and standard deviation of a set of data.

LO2: Use a modern software tool to perform statistical calculations.

18 .

52) Use Excel to calculate the standard deviation for Y. A) 49.57 B) 16.47 C) 7.04 D) 2.6 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Compute the range, interquartile range, variance, and standard deviation of a set of data.

LO2: Use a modern software tool to perform statistical calculations.

53) Use Excel to calculate the covariance between variables X and Y. A) 2.66 B) 0.02 C) 16.71 D) 7.04 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Association LO1: Calculate measures of covariance and correlation.

LO2: Use a modern software tool to perform statistical calculations.

54) Use Excel to calculate the z-score of X observation 27.

A) -0.24 B) 0 C) 0.18 D) 1.46 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Compute a standardized value (z-score) for observations in a data set.

LO2: Use a modern software tool to perform statistical calculations.

19 .

55) Use Excel to calculate the coefficient of variation of X. A) 0.42 B) 0.31 C) 7.04 D) 16.47 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Use a modern software tool to perform statistical calculations.

56) Use Excel to calculate the correlation between variables X and Y. A) 16.47 B) 0.02 C) 16.71 D) 7.04 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Association LO1: Calculate measures of covariance and correlation.

LO2: Use a modern software tool to perform statistical calculations.

20 .

57) Calculate the standard deviation for cost per order in the following table.

Observation X1 X2 X3 X4 X5 X6 X7

Cost per order $ 1345 $ 4364 $ 1768 $ 2278 $ 4332 $ 2984 $ 3326

Answer: The formula for standard deviation, S =

where n, is the number of

observations. (xi - )2 is the square of the difference between each observation minus the mean.

In order to calculate the standard deviation, we must first calculate the mean of all the cost per order.

=

, where,

is the sum of observations, n, the number of observations.

Therefore, = 20397 / 7 = 2913.86.

Now, we have to calculate

)2 , which is calculated by adding all the squares of each

observation minus the mean.

Observation X1 X2 X3 X4 X5 X6 X7 Sum Count Mean Variance Standard Deviation

Cost per order in $ 1345 4364 1768 2278 4332 2984 3326

(xi - mean) -1568.87 1450.13 -1145.87 -635.87 1418.13 70.13 412.13

20397 7 2913.87 1411240.14

(xi - mean)2 2461353.07 2102877.01 1313018.05 404330.65 2011092.69 4918.21 169851.13 8467440.85

1187.95

21 .

Therefore,

)2 = 8467440.85

From this variance can be calculated using

= 8467440.85 / 6 = 1411240.14

Standard Deviation is the square root of variance, therefore, standard deviation = = 1187.95.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Compute the range, interquartile range, variance, and standard deviation of a set of data.

LO2: Compare and contrast methods of summarizing and describing data

22 .

58) Below is the data collected from a manufacturing process for a part whose dimensions are specified as 4.00 ± 0.1 centimetres. Calculate the process capability index within three standard deviations of the mean.

Manufacturing Measurements 4.78 3.99 5.02 4.23 4.57 4.44 5.18 Answer: The process capability index, denoted as Cp = upper specification - lower specification / total variation.

Manufacturing Measurements (Xi - mean {X}) (Xi - mean {X})2 4.78 0.18 0.032 Mean 4.6 Standard 3.99 -0.61 0.37 Deviation 0.424 5.02 0.42 0.18 Variance 0.18 4.23 -0.37 0.14 Mean -3*Stdev 3.33 4.57 -0.03 0.00099 Mean +3*Stdev 5.87 4.44 -0.16 0.03 Total Variation 2.54 5.18 0.58 0.33 Lower Specification 3.9 Upper Sum 1.08 Specification 4.1 Specification Range 0.2 Cp

.08

In order to calculate the process capability index, the mean of the measurements should be first calculated using the formula: sum of all measurements / number of measurements.

The mean is found to be: 4.6.

23 .

From the mean, we calculate variation using the formula observations.

; where n is the number of

)2 is the sum of all the squares of each observation minus the mean.

The variation is found to be: 0.18.

The standard deviation is the square root of variance, therefor, standard deviation =

= 0.42.

Now Mean - 3*Stdev, and Mean+3*Stdev are calculated.

Mean - 3*Stdev = 4.6 × 3(0.44) = 3.33, and, Mean + 3*Stdev = 4.6 + 3(0.44) = 5.87.

Therefore total variation = (Mean + 3*Stdev) - (Mean - 3*Stdev) = 5.87 - 3.33 = 2.54.

The process capability index, Cp, is then calculated as 0.2 / 2.54 = 0.08.

Therefore, Cp = 0.08.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Compute the range, interquartile range, variance, and standard deviation of a set of data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

24 .

59) The table below shows the sales per day at a grocery store over a period of a week. Calculate the z-score for sales on Day 4.

Day 1 2 3 4 5 6 7

Sales per day in $ (Xi) 5000 5304 6430 7889 5333 6109 6734

Answer: Z-score is calculated using the formula, z4 =, where s is the standard deviation, xi are observations, is the mean of the observation.

Day 1 2 3 4 5 6 7 Sum Mean Variance Standard Deviation

Sales per day (Xi - mean in $ (Xi) {X}) 5000 -1114.14 5304 -810.14 6430 315.86 7889 1774.86 5333 -781.14 6109 -5.14 6734 619.86 42799 6114.14 1023660.47

(Xi - mean {X})^2 1241314.30 656331.44 99765.73 3150117.87 610184.16 26.448979 384222.87 6141962.85

z-score -1.10 -0.80 0.31 1.75 -0.77 -0.005 0.61

1011.76

First, the mean has to be calculated using the formula = observations, and x are number of observations.

The mean is calculated to be: 42799/7 = 6114.14.

25 .

, n is the number of

From the mean we calculate the variance using the formula s2 =

, where (xi - )2 is

the sum of the squares of observations minus the mean.

Therefor variance is calculated as 6141962.85/6 = 1023660.47.

Standard deviation is the square root of variance, therefor, standard deviation = 1011.76.

Now, the z-score for the 4th day can be calculated as 1774.86/1011.76 = 1.75.

Therefore, z4 = 1.75.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: Compute a standardized value (z-score) for observations in a data set.

LO2: Compare and contrast methods of summarizing and describing data

26 .

=

60) The table below shows the daily frequency of female customers at a particular ice cream shop during discount sale periods. The data is collected for 5 days. Calculate the mean for the data.

Female Customer Frequency Days (x) 1 2 3 4 5

Frequency (f) 0 5 8 11 18

Answer: For grouped data, mean, =

, where n is the number of observations, and fixi

is individual frequencies multiplied by the corresponding number of days.

Female Customer Frequency

Days (x) 1 2 3 4 5 Sum

Frequency (f) Frequency*Days 0 0 5 10 8 24 11 44 18 90 42 168 Mean

4

First we multiply individual frequencies by their corresponding number of day. Then we add the multiplied values to obtain Here,

.

=168.

n is calculated to be 42.

27 .

Therefore the mean, = 168/42 = 4. = 4.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Descriptive Statistics for Grouped Data LO1: Calculate the mean, variance, and standard deviation for grouped data.

LO2: Compare and contrast methods of summarizing and describing data

28 .

61) The following table lists the amounts paid in mortgages as a percentage of the household income in the town Aponia. Calculate the variance and standard deviation of the data, if mean is given as 22.4%. The percentage (x) values are estimated as midpoints of each percentage range.

Mortgage as a percentage of household income in Aponia Group in % 0 - 10 10 - 20 20 - 30 30 - 40 40 - 50 50 - 60

Percentag Number of households e (x) (f) 5 4567 15 6562 25 3356 35 2975 45 1644 55 1376

Answer: For grouped data such as this, variance, s2 = frequencies, and,

Since mean is given,

, where n is the sum of

is the sum of all the squares of each observation minus the mean.

is calculated to be 453.9.

Note that the square of (x - mean) is divided by 10000 to simplyfy the calculations.

Sum of frequencies is calculated to be 20480.

29 .

Substituting these values in the variance formula, we get, S2 = 453.9/20479 = 0.022.

Therefore, the variance value is 0.02.

Standard deviation is the square root of variance, therefore, standard deviation, s = Therefore, the standard deviation value is 0.15.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Descriptive Statistics for Grouped Data LO1: Calculate the mean, variance, and standard deviation for grouped data.

LO2: Compare and contrast methods of summarizing and describing data

= 0.15.

62) A sample is a subset of a population.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Populations and Samples LO1: Explain the difference between a population and a sample.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 63) One of the properties of the mean is that the sum of the deviations of each observation from the mean is zero.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Compare and contrast methods of summarizing and describing data 64) For an odd number of observations, the median is the mean of the two middle numbers.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Measures of Location LO1: Compute the mean, median, mode, and midrange of a set of data.

LO2: Compare and contrast methods of summarizing and describing data 65) The larger the variance, the more the data are spread out from the mean.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: Compute the range, interquartile range, variance, and standard deviation of a set of data.

LO2: Compare and contrast methods of summarizing and describing data

30 .

66) According to the empirical rules of standard deviation in statistics, approximately 68% of the observations will fall within three standard deviations of the mean.

Answer: FALSE Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Measures of Dispersion LO1: State the Empirical Rules and apply them to practical data.

LO2: Compare and contrast methods of summarizing and describing data 67) Two different sets of data can never have the same z-scores.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Measures of Dispersion LO1: Compute a standardized value (z-score) for observations in a data set.

LO2: Compare and contrast methods of summarizing and describing data 68) In stock trading, the higher the coefficient of variation for the stock, the smaller the relative risk is for the return provided.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Measure of Dispersion LO1: Define and compute the coefficient of variation.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 69) Skewness describes the lack of symmetry of data.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Measure of Shape LO1: Explain the nature of skewness and kurtosis in a distribution.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 70) The value of a coefficient of skewness falling between 0.5 and -0.5 indicates relative symmetry.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Measure of Shape LO1: Interpret the coefficients of skewness and kurtosis.

31 .

71) If the distribution of observations are such that mode < median < mean, the histogram would be said to be negatively skewed.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Measure of Shape LO1: Explain the nature of skewness and kurtosis in a distribution.

LO2: Compare and contrast methods of summarizing and describing data 72) Two variables can only have a statistical relationship if there is a cause-and-effect factor between them.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Measures of Association LO1: Explain the importance of understanding relationships between two variables. Explain the difference between covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data 73) A correlation of 0 indicates that the two variables have no linear relationship with each other.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Measures of Association LO1: Calculate measures of covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data 74) According to the interquartile range, extreme outliers are more than 3*IQR away from the left of Q1 or to the right of Q3.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Outliers LO1: Compute the range, interquartile range, variance, and standard deviation of a set of data.

LO2: Compare and contrast methods of summarizing and describing data

32 .

75) State the three empirical rules in standard deviation.

Answer: The three empirical rules in standard deviation are: 1. Approximately 68% of the observations will fall within one standard deviation of the mean, or between - s and + s.

2. Approximately 95% of the observations will fall within two standard deviations of the mean, or within + 2s.

3. Approximately 99.7% of the observations will fall within three standard deviations of the mean, or within + 3s.

Diff: 1 Blooms: Remember Topic: Measures of Dispersion LO1: State the Empirical Rules and apply them to practical data.

LO2: Compare and contrast methods of summarizing and describing data 76) Give an account of Excel's Descriptive Statistics Tool.

Answer: Excel provides a useful tool for basic data analysis, Descriptive Statistics. Click on Data Analysis in the Analysis group under the Data tab in the Excel menu bar. Select Descriptive Statistics from the list of tools. You need to enter only the range of the data, which must be in a single row or column. If the data are in multiple columns, the tool treats each row or column as a separate data set, depending on which you specify. This means that if you have a single data set arranged in a matrix format, you would have to stack the data in a single column before applying the Descriptive Statistics tool. Check the box Labels in First Row if labels are included in the input range. You may choose to save the results in the current worksheet or in a new one. For basic summary statistics, check the box Summary statistics; you need not check any others. One important point to note about the use of the tools in the Analysis Toolpak versus Excel functions is that while Excel functions dynamically change as the data in the spreadsheet are changed, the results of the Analysis Toolpak tools do not.

Diff: 1 Blooms: Remember Topic: Excel Descriptive Statistics Tool LO1: Use the Excel Descriptive Statistics tool to summarize data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 77) What are the different interpretations for correlation coefficient values?

Answer: A correlation of 0 indicates that the two variables have no linear relationship to each other. Thus, if one changes, we cannot reasonably predict what the other variable might do. A positive correlation coefficient indicates a linear relationship for which one variable increases as the other also increases. A negative correlation coefficient indicates a linear relationship for one variable that increases while the other decreases.

Diff: 1 Blooms: Remember Topic: Measures of Association LO1: Calculate measures of covariance and correlation.

LO2: Compare and contrast methods of summarizing and describing data

33 .

78) How can outliers be identified in a data set?

Answer: Outliers can make a significant difference in the results we obtain from statistical analyses. The first thing to do is to check the data for possible errors, such as a misplaced decimal point or an incorrect transcription to a computer file. Histograms can help to identify possible outliers visually. The empirical rule and z-scores can also be used to identify an outlier as one that is more than three standard deviations from the mean. Outliers can also be identified based on the interquartile range. "Mild" outliers are often defined as being between 1.5*IQR and 3*IQR to the left of Q1 or to the right of Q3, and "extreme" outliers, as more than 3*IQR away from these quartiles.

Diff: 1 Blooms: Remember Topic: Outliers LO1: Identify outliers in data.

LO2: Compare and contrast methods of summarizing and describing data 79) What is statistical thinking? How is it important to making business decisions?

Answer: Statistical thinking is a philosophy of learning and action for improvement that is based on the principles that (1) all work occurs in a system of interconnected processes, (2) variation exists in all processes, and (3) better performance results from understanding and reducing variation.

Understanding business processes provides the context for determining the effects of variation and the proper type of action to be taken. Any process contains many sources of variation.

Statistical analysis can provide better insight into the facts and nature of relationships among the many factors that may have contributed to an event and enable managers to make better decisions.

Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: Statistical Thinking in Business Decisions LO1: State the principles of statistical thinking.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

34 .

Business Analytics (Evans) Chapter 5 Probability Distributions and Data Modeling 1) Which of the following is true about the classical definition of probability?

A) It is based on judgment and experience.

B) If the process that generates the outcomes is known, probabilities can be deduced from theoretical arguments.

C) The probability that an outcome will occur is simply the relative frequency associated with that outcome.

D) It is based on observed data.

Answer: B Diff: 1 Blooms: Knowledge Topic: Basic Concepts of Probability LO1: Explain the concept of probability and provide examples of the three definitional perspectives of probability.

LO2: Identify and apply the basic concepts and tools of probability 2) John and Mike were offered mints. What is the probability that at least John or Mike would respond favorably? (Hint: Use the classical definition).

A) B) C) D) Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability

1 .

3) Consider an event X comprised of three outcomes whose probabilities are

,

, and

.

Compute the probability of the complement of the event.

A) B) C) D) Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability Use the data given below to answer the following question(s).

In an event X, the probability of rolling a sum of 8 on two dice is rolling an 11 is rolling a 9 is

while the probability of

. In another event Y, the probability of rolling a 2 is , and the probability of rolling a 4 is

, the probability of

.

4) What is the probability that either event X or Y occurs?

A) B) C) D) Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability

2 .

5) What is probability that neither X nor Y will occur?

A) B) C) D) Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability 6) Consider an event Z that includes all outcomes of rolling two dice whose sum is odd. What is the probability that either event Y or Z occurs?

A) B) C) D) Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability 7) Which of the following computes the probability of an event P given that event Q is known to have occurred?

A) P(P|Q) = P(P and Q) / P(Q) B) P(Q|P) = P(Q) - P(P) C) P(P|Q) = P(Q) - P(P or Q) D) P(Q|P) = P(P or Q) - P(Q) Answer: A Diff: 1 Blooms: Knowledge Topic: Basic Concepts of Probability LO1: Explain conditional probability and how it can be applied in a business context.

LO2: Identify and apply the basic concepts and tools of probability 3 .

Use the data given below to answer the following question(s).

15 students were asked to choose between the broad categories of Arts, Science, and Math as their preferred area of study.

Respondent Gender Preference 1 Female Arts 2 Male Science 3 Male Math 4 Female Arts 5 Female Math 6 Male Science 7 Male Math 8 Male Math 9 Female Arts 10 Male Arts 11 Male Science 12 Female Science 13 Female Math 14 Male Arts 15 Female Arts 8) What is the probability that a respondent is male and prefers Arts given that the respondent is male?

A) B) C) D) Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability

4 .

9) What is the probability that a respondent prefers Science given that the respondent is female?

A) B) C) D) Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Use probability rules and formulas to perform probability calculations.

LO2: Identify and apply the basic concepts and tools of probability 10) Use the multiplication law of probability to compute the probability that the respondent is male and prefers Math.

A) B) C) D) Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Apply the multiplication law of probability.

LO2: Identify and apply the basic concepts and tools of probability 11) Identify the correct statement from the following.

A) The events that a respondent is female and chooses Math are not independent.

B) All events are independent of each other.

C) The events that a respondent is male and chooses Science are not dependent.

D) The events that a respondent is female and that she chooses Science are independent.

Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Basic Concepts of Probability LO1: Determine if two events are independent using probability arguments.

LO2: Identify and apply the basic concepts and tools of probability 5 .

12) Which of the following will hold true if events X and Y are independent?

A) P(X) = P(Y) × P(X and Y) B) P(Y) = P(X|Y) C) P(X and Y) = [P(X) + P(Y)] - P(X or Y) D) P(X) = P(X|Y) Answer: D Diff: 2 Blooms: Knowledge Topic: Basic Concepts of Probability LO1: Determine if two events are independent using probability arguments.

LO2: Identify and apply the basic concepts and tools of probability 13) Which of the following is a continuous random variable?

A) the outcomes of rolling two dice B) the time to complete a specific task C) the number of new hires in a year D) the number of hits on a Web site link Answer: B Diff: 2 Blooms: Understand Topic: Random Variables and Probability Distributions LO1: Explain the difference between a discrete and a continuous random variable.

LO2: Identify and apply the basic concepts and tools of probability 14) While rolling two dice, what is the probability of rolling a sum of 7 or more?

A) B) C) D) Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Discrete Probability Distributions LO1: Use the cumulative distribution function to compute probabilities over intervals.

LO2: Explain the characteristics and applications of discrete probability distributions

6 .

15) The ________ of a random variable corresponds to the notion of the mean, or average, for a sample.

A) mode B) variance C) expected value D) standard deviation Answer: C Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions 16) For a discrete random variable X, which of the following computes the expected value?

A) B) C) D) Answer: B Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions 17) Which of the following is a weighted average of the squared deviations from the expected value?

A) skewness B) mean difference C) kurtosis D) variance Answer: D Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions

7 .

18) Which of the following formulas will compute the variance of a discrete random variable X? A)

- E[X]2)

B)

f (xj)

C) D)

f (xj) f (xj)

Answer: C Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions 19) Which of the following is true about variance?

A) It measures the uncertainty of a random variable.

B) Higher variance implies low uncertainty.

C) It is the square root of a random variable's standard deviation.

D) It is the weighted average of all possible outcomes.

Answer: A Diff: 2 Blooms: Understand Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions 20) Which of the following characterizes a random variable having two possible outcomes, each with a constant probability of occurrence?

A) Beta distribution B) Bernoulli distribution C) Poisson distribution D) Binominal distribution Answer: B Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions

8 .

21) Which of the following is the probability mass function of the Bernoulli distribution?

A) B)

C) D) Answer: B Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions 22) The binominal distribution: A) is a discrete distribution used to model the number of occurrences in some unit of measure.

B) assumes that the average number of occurrences per unit is a constant and that occurrences are independent.

C) is symmetric irrespective of the value of the probability of success.

D) models n independent replications of a Bernoulli experiment, each with a probability p of success.

Answer: D Diff: 2 Blooms: Understand Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions

9 .

23) Which of the following is true of the binomial distribution?

A) The expected value of the binomial distribution is np (1 - p), where n is the number of experiments and p is the probability of success.

B) The binomial distribution can assume different shapes and amounts of skewness, depending on the parameters.

C) In Excel's binomial distribution function, setting cumulative to TRUE will provide the probability mass function for a specified value.

D) The expected value of the binomial distribution is λ, a constant.

Answer: B Diff: 2 Blooms: Understand Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions Use the data given below to answer the following question(s).

On an average, the number of students that choose to study Arts subjects at Greyin Tide University is 17 each year. (Hint: Use Poisson distribution formula).

24) What is the probability that exactly 13 students will take up Arts in the coming year?

A) 0.08795 B) 0.20087 C) 0.04798 D) 0.06579 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions

10 .

25) What is the probability of 8 takers or less for Arts subjects in the coming year?

A) 0.00716 B) 0.01316 C) 0.03164 D) 0.04744 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions 26) A probability density function: A) is the probability distribution of discrete outcomes.

B) suggests that the probability that a random variable assumes a specific value must be positive.

C) characterizes outcomes of a continuous random variable.

D) can yield negative values depending on the values of the random variable, X. Answer: C Diff: 1 Blooms: Knowledge Topic: Continuous Probability Distributions LO1: List the key properties of probability density functions.

LO2: Explain the characteristics and applications of continuous probability distributions 27) Which of the following is true about probability density functions?

A) A graph of the density function must lie at or below the x-axis.

B) The total area under the density function below the x-axis is 2.0.

C) It calculates the probability of a random variable lying between a certain interval.

D) P (a) x P (b) is the area under the density function between two numbers a and b.

Answer: C Diff: 2 Blooms: Understand Topic: Continuous Probability Distributions LO1: List the key properties of probability density functions.

LO2: Explain the characteristics and applications of continuous probability distributions

11 .

28) Which of the following characterizes a continuous random variable for which all outcomes between some minimum and maximum value are equally likely?

A) exponential distribution B) uniform distribution C) normal distribution D) lognormal distribution Answer: B Diff: 1 Blooms: Knowledge Topic: Continuous Probability Distributions LO1: Use the probability density and cumulative distribution functions to calculate probabilities for a uniform distribution.

LO2: Explain the characteristics and applications of continuous probability distributions 29) Which of the following is true of normal distributions?

A) The mean, median, and mode are all equal.

B) Its measure of skewness is always greater than 1.

C) The range of the random variable X is bounded.

D) Mathematical formulas make it easier to compute normal distributions.

Answer: A Diff: 2 Blooms: Remember Topic: Continuous Probability Distributions LO1: Describe the normal and standard normal distributions and use Excel functions to calculate probabilities.

LO2: Explain the characteristics and applications of continuous probability distributions 30) The exponential distribution: A) has the density function f (x) = e-λx , for x ≥ 0.

B) models the time between randomly occurring events.

C) has an expected value λ.

D) is described by the familiar bell-shaped curve.

Answer: B Diff: 2 Blooms: Knowledge Topic: Continuous Probability Distributions LO1: Describe properties of the exponential distribution and compute probabilities.

LO2: Explain the characteristics and applications of continuous probability distributions

12 .

31) Which of the following distributions is appropriate when the probability of zero is very low, but the most likely value is just greater than zero?

A) triangular distribution B) exponential distribution C) lognormal distribution D) beta distribution Answer: C Diff: 1 Blooms: Knowledge Topic: Continuous Probability Distributions LO1: Give examples of other types of distributions used in business applications.

LO2: Explain the characteristics and applications of continuous probability distributions 32) Which of the following is true of the parameters of a beta distribution function?

A) The parameters of the distribution function, α and β, can be negative.

B) The values of the parameters do not affect the skewness of the distribution.

C) If either parameter is 1.0 and the other is lesser than 1.0, the distribution takes an "L" shape.

D) If the parameter β exceeds the other parameter α, the distribution is positively skewed.

Answer: D Diff: 2 Blooms: Remember Topic: Continuous Probability Distributions LO1: Give examples of other types of distributions used in business applications.

LO2: Explain the characteristics and applications of continuous probability distributions 33) Which of the following is true about the Random Number Generation tool?

A) The Random Number Generation dialog presents only three distributions to choose from: beta, lognormal, and triangular.

B) The default distribution in this tool is the continuous distribution.

C) Repeating the process generates a new set of sample values.

D) Pressing the recalculation (F9) key is an easy way to change the values generated.

Answer: C Diff: 2 Blooms: Understand Topic: Random Sampling from Probability Distributions LO1: Use Excel's Random Number Generation tool.

LO2: Use a modern software tool to perform statistical calculations.

13 .

34) Which of the following is true about using sample data?

A) All samples have the same characteristics and hence always adequately represent the underlying population.

B) It can limit the ability to predict uncertain events that may occur because potential values outside the range of the sample data are not included.

C) It is better to use sample data than trying to identify the underlying probability distribution and fitting a theoretical distribution to it.

D) Using sample data in a decision model increases the ability to predict uncertain events.

Answer: B Diff: 2 Blooms: Understand Topic: Data Modeling and Distribution Fitting LO1: Fit distributions using Risk Solver Platform.

LO2: Use a modern software tool to perform statistical calculations.

35) The Kolmogorov-Smirnov procedure: A) compares the cumulative distribution of the data with the theoretical distribution to base its conclusion.

B) puts more weight on the differences between the tails of the distributions.

C) breaks down the theoretical distribution into areas of equal probability and compares the data points within each area to the number that would be expected for that distribution.

D) is useful when a better fit is needed at the extreme tails of the distribution.

Answer: A Diff: 1 Blooms: Knowledge Topic: Data Modeling and Distribution Fitting LO1: Fit distributions using Risk Solver Platform.

LO2: Identify and apply the basic concepts and tools of probability Use the data given below to answer the following question(s).

At a casino, a combination of two spinners is used to decide the winner based on the sum of scores from spinning. The spinners each have four colored spaces - red, yellow, blue, and green.

Red = 1, Yellow = 2, Blue = 3, and Green = 4

14 .

36) What is the probability that the spinners land on colors summing up to exactly 3?

Answer: There are 16 outcomes. The following is a breakdown of all possible sums and their frequencies.

Outcome x Frequency f(x) 2 1 0.0625 3 2 0.1250 4 3 0.1875 5 4 0.2500 6 3 0.1875 7 2 0.1250 8 1 0.0625

F(x) 0.0625 0.1875 0.3750 0.6250 0.8125 0.9375 1.0000

where, = n=7 p = 1/8 = 0.125 f(3) =

(0.006)3 (0.94)7-3

where, = f(3) = 35 x (0.000216) x (0.78074896) = 0.00590 The probability that the spinners land on colors summing up to exactly 3 = 0.1250 Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions

15 .

37) Compute the expected value of the random variable that denotes the possible summed scores from the two spinners.

Answer: For a discrete random variable X, the expected value, denoted E[X], is the weighted average of all possible outcomes, where the weights are the probabilities: E[X] = Outcome, x

Frequency 2 3 4 5 6 7 8

Probability, f(x) Xxf(x) 1 1/16 1/8 2 1/8 3/8 3 3/16 3/4 4 1/4 5/4 3 3/16 9/8 2 1/8 7/8 1 1/16 1/2 Expected value 5

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions

16 .

38) Compute the variance of the random variable that denotes the possible summed scores from the two spinners.

Answer: The variance, Var[X], of a discrete random variable X as a weighted average of the squared deviations from the expected value: Var[X] = (xOutcome, x Probability, f(x) xxf(x) (x-E[X]) (x-E[X])2 E[X])2xf(x) 2 1/16 1/8 -3 9 9/16 3 1/8 3/8 -2 4 1/2 4 3/16 3/4 -1 1 3/16 5 1/4 5/4 0 0 0 6 3/16 9/8 1 1 3/16 7 1/8 7/8 2 4 1/2 8 1/16 1/2 3 9 9/16 Expected Value 5 Variance 2 1/2 Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions Use the data given below to answer the following question(s).

The profit from selling folding tables varies uniformly each quarter between $1,500 and $2,300.

39) What is the probability that profit will be less than $1,900?

Answer:

F(1,900) = (1,900 - 1,500) / (2,300 - 1,500) = 0.50 Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Continuous Probability Distributions LO1: Use the probability density and cumulative distribution functions to calculate probabilities for a uniform distribution.

LO2: Explain the characteristics and applications of continuous probability distributions 17 .

40) What is the probability that profit will be between $2,000 and $2,200?

Answer: P(2,000 ≤ X ≤ 2,200) = P(X ≤ 2,200) - P(X ≤ 2,000) = F(2,200) - F(2,000)

Since quarterly profit here follows a uniform distribution

, where a =

$1,500 and b = $2,300, the probability that profit will be between $2,000 and $2,200 = = 0.25 Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Continuous Probability Distributions LO1: Use the probability density and cumulative distribution functions to calculate probabilities for a uniform distribution.

LO2: Explain the characteristics and applications of continuous probability distributions 41) If P(X|Y) = P(X), it implies that event Y is dependent on event X. Answer: FALSE Diff: 1 Blooms: Knowledge Topic: Basic Concepts of Probability LO1: Determine if two events are independent using probability arguments.

LO2: Identify and apply the basic concepts and tools of probability 42) The expected value and variance of the Poisson distribution are equal to λ.

Answer: TRUE Diff: 1 Blooms: Knowledge Topic: Discrete Probability Distributions LO1: Calculate probabilities for the Bernoulli, binomial, and Poisson distributions, using the probability mass function and Excel functions.

LO2: Explain the characteristics and applications of discrete probability distributions 43) The Excel function NORM.DIST finds probabilities for the standard normal distribution.

Answer: FALSE Diff: 1 Blooms: Knowledge Topic: Continuous Probability Distributions LO1: Describe the normal and standard normal distributions and use Excel functions to calculate probabilities.

LO2: Explain the characteristics and applications of continuous probability distributions

18 .

44) The beta distribution is a function of three parameters, the minimum, a; maximum, b; and most likely, c.

Answer: FALSE Diff: 1 Blooms: Knowledge Topic: Continuous Probability Distributions LO1: Give examples of other types of distributions used in business applications.

LO2: Explain the characteristics and applications of continuous probability distributions 45) The VLOOKUP function in Excel can be used to generate outcomes from any discrete distribution.

Answer: TRUE Diff: 1 Blooms: Knowledge Topic: Random Sampling from Probability Distributions LO1: Sample from discrete distributions in a spreadsheet using VLOOKUP. LO2: Use a modern software tool to perform statistical calculations.

46) How are probability, experiment, outcome, and sample space related to each other?

Answer: Probability is the likelihood that an outcome will occur. An experiment is a process that results in an outcome. The outcome of an experiment is a result that is observed. The collection of all possible outcomes of an experiment is called the sample space.

Diff: 1 Blooms: Knowledge Topic: Basic Concepts of Probability LO1: Explain the concept of probability and provide examples of the three definitional perspectives of probability.

LO2: Identify and apply the basic concepts and tools of probability 47) What are the properties of a probability mass function?

Answer: A probability mass function has the properties that (1) the probability of each outcome must be between 0 and 1 and (2) the sum of all probabilities must add to 1; that is, 0 ≤ f(xi) ≤ 1, for all i

Diff: 2 Blooms: Understand Topic: Discrete Probability Distributions LO1: Verify the properties of a probability mass function.

LO2: Explain the characteristics and applications of discrete probability distributions

19 .

48) Explain the similarity between the formulas for computing population mean and expected value of discrete random variable X. Answer: For a discrete random variable X, the expected value, denoted E[X], is the weighted average of all possible outcomes, where the weights are the probabilities:

The population mean can be computed using the formula: μ= If this formula is written as the sum of xi multiplied by (fi / N), then fi / N can be thought of as the probability of xi. Then this expression for the mean has the same basic form as the expected value formula.

Diff: 2 Blooms: Understand Topic: Discrete Probability Distributions LO1: Compute the expected value and variance of a discrete random variable.

LO2: Explain the characteristics and applications of discrete probability distributions 49) How can normal probabilities be computed using Excel? Given the cumulative probability, how can the value of the random variable be found?

Answer: The Excel 2010 function NORM.DIST(x, mean, standard_deviation, cumulative) computes normal probabilities. NORM.DIST(x, mean, standard_deviation, TRUE) calculates the cumulative probability F (x) = P (X ≤ x) for a specified mean and standard deviation. The Excel function NORM.INV(probability, mean, standard_dev) can be used to compute the value of x if the cumulative probability is known. In this function, probability is the cumulative probability value corresponding to the value of x which is sought.

Diff: 2 Blooms: Understand Topic: Continuous Probability Distributions LO1: Describe the normal and standard normal distributions and use Excel functions to calculate probabilities.

LO2: Explain the characteristics and applications of continuous probability distributions 50) What is a random number? How is it generated in Excel?

Answer: A random number is one that is uniformly distributed between 0 and 1. In Excel, a random number may be generated within any cell using the function RAND( ). This function has no arguments; therefore, nothing should be placed within the parentheses (but the parentheses are required).

Diff: 2 Blooms: Knowledge Topic: Random Sampling from Probability Distributions LO1: Use Excel's Random Number Generation tool.

LO2: Use a modern software tool to perform statistical calculations.

20 .

Business Analytics (Evans) Chapter 6 Sampling and Estimation 1) A ________ is a description of the approach that is used to obtain samples from a population prior to any data collection activity.

A) population frame B) sampling weight C) sampling plan D) probability interval Answer: C Diff: 1 Blooms: Remember Topic: Statistical Sampling LO1: Describe the elements of a sampling plan.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 2) Which of the following is true of judgment sampling?

A) It selects samples based on expert opinion.

B) It selects samples based on ease of data collection.

C) It selects samples based on random procedures.

D) It selects samples based on full representation of all subsets in a population.

Answer: A Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 3) Which of the following types of sampling involves using random procedures to select a sample?

A) judgment sampling B) probabilistic sampling C) subjective sampling D) convenience sampling Answer: B Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

1 .

4) ________ involves selecting items from a population so that every subset of a given size has an equal chance of being selected.

A) Convenience sampling B) Subjective sampling C) Judgment sampling D) Simple random sampling Answer: D Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 5) Which of the following sampling methods bases its selection of samples on the ease of data collection?

A) probabilistic sampling B) judgment sampling C) simple random sampling D) convenience sampling Answer: D Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 6) Which of the following describes periodic sampling?

A) It is a sampling method based solely on expert opinion.

B) It is a sampling method based on selecting a time and then sampling the products after that time.

C) It is a sampling method based on selecting every nth item from a population.

D) It is a sampling method exclusively used for population that is divided into subsets.

Answer: C Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

2 .

7) ________ sampling applies to populations that are divided into natural subsets and allocates the appropriate proportion of samples to each subset.

A) Systematic B) Stratified C) Cluster D) Continuous process Answer: B Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 8) ________ is based on dividing a population into subgroups, sampling a set of subgroups, and conducting a complete census within the subgroups sampled.

A) Cluster sampling B) Continuous process sampling C) Judgment sampling D) Systematic sampling Answer: A Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 9) In sampling, ________ involves assessing the value of an unknown population parameter– such as a population mean, population proportion, or population variance–using sample data.

A) distribution B) randomization C) estimation D) substitution Answer: C Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

3 .

10) From the standard deviation formula, s2 =

, identify the estimator.

A) s2 B) C) (x - )2 D) n - 1 Answer: A Diff: 1 Blooms: Remember Topic: Statistical Sampling 11) A(n) ________ is a single number derived from sample data that is used to estimate the value of a population parameter.

A) confidence interval B) frequentist interference C) interval estimate D) point estimate Answer: D Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 12) For which of the following is the value of the estimator said to be biased?

A) if the expected value of the estimator does not equal the population parameter B) if the expected value of the estimator equals the population parameter C) only if the expected value of the estimator is zero D) only if the expected value of the estimator goes below zero Answer: A Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

4 .

13) Which of the following is true of an unbiased estimator value?

A) The expected value will align perfectly with the population mean.

B) The expected value will not equal the population's parameters.

C) The expected value will not be greater than zero.

D) The expected value will equal the population's parameters.

Answer: D Diff: 1 Blooms: Remember Topic: Statistical Sampling LO1: Explain the importance of unbiased estimators.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 14) Which of the following accurately describes a sampling distribution of the mean?

A) It is the mean of any one sample from a group of related populations of different sizes.

B) It is the mean of any one sample from a group of samples of varying sizes from a population.

C) It is the mean of half the samples from a related group of populations.

D) It is the means of all possible samples of a fixed size n from a group of population.

Answer: D Diff: 1 Blooms: Remember Topic: Sampling Distributions LO1: Define the sampling distribution of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 15) Which of the following is the inherent reason why sampling errors occur?

A) because samples represent the whole population B) because samples are only a subset of the population C) because samples never provide enough data to estimate standard deviation D) because the means cannot be accurately estimated using samples Answer: B Diff: 1 Blooms: Understand Topic: Sampling Error LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

5 .

16) ________ are statistical errors that are caused due to the sample not representing the target population adequately.

A) Parallax errors B) Sampling errors C) Nonsampling errors D) Quantization errors Answer: C Diff: 1 Blooms: Understand Topic: Sampling Error LO1: Describe the difference between sampling error and nonsampling error.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 17) The means of all possible samples of a fixed size n from some population will form a distribution which is known as the ________.

A) corollary of the mean B) sampling distribution of the mean C) standard error of the mean D) point estimate Answer: B Diff: 1 Blooms: Remember Topic: Sampling Error LO1: Define the sampling distribution of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 18) Which of the following is the equation for calculating the standard error of the mean?

A) B) (xi - )n C) σ D) σ / Answer: D Diff: 1 Blooms: Remember Topic: Sampling Error LO1: Calculate the standard error of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

6 .

19) Which of the following is implied from the standard error of the mean formula?

A) that true means of populations can be found easier than those of samples B) that standard deviation increases with increase in sample size C) that larger sample sizes provide greater accuracy in estimating the true population mean D) that the true mean of the population can only be calculated using smaller sample sizes Answer: C Diff: 1 Blooms: Remember Topic: Sampling Error LO1: Calculate the standard error of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 20) The Ransin Sports Company has noted that the size of individual customer orders is normally distributed with a mean of $112 and a standard deviation of $9. Which of the following is the answer for the probability that the next individual who buys a product will make a purchase of more than $116?

A) 71% B) 48% C) 33% D) 42% Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Sampling Distributions LO1: Define the sampling distribution of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 21) The Ransin Sports Company has noted that the size of individual customer orders is normally distributed with a mean of $112 and a standard deviation of $9. If a soccer team of 11 players were to make the next batch of orders, what would be the standard error of the mean?

A) 1.64 B) 2.71 C) 3.67 D) 0.82 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Sampling Distributions LO1: Define the sampling distribution of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

7 .

22) The Ransin Sports Company has noted that the size of individual customer orders is normally distributed with a mean of $112 and a standard deviation of $9. If a soccer team of 11 players were to make the next batch of orders, what is the probability that the mean purchase would exceed $116?

A) 11% B) 3% C) 33% D) 7% Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Sampling Distributions LO1: Define the sampling distribution of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 23) ________ states that if the sample size is large enough, the sampling distribution of the mean is approximately normally distributed, regardless of the distribution of the population and that the mean of the sampling distribution will be the same as that of the population.

A) Chebyshev's theorem B) Central limit theorem C) Prime number theorem D) Oppermann's conjecture Answer: B Diff: 1 Blooms: Remember Topic: Sampling Distributions LO1: Explain the practical importance of the central limit theorem.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 24) The central limit theorem states that if the population is normally distributed, then the ________.

A) mean of the population can be calculated without using samples B) standard error of the mean will not vary from the population mean C) sampling distribution of the mean will vary from sample to sample D) sampling distribution of the mean will also be normal for any sample size Answer: D Diff: 1 Blooms: Understand Topic: Sampling Distributions LO1: Explain the practical importance of the central limit theorem.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

8 .

25) Which of the following is a difference between interval estimates and point estimates?

A) Point estimates cannot be used to calculate statistical error, while interval estimate is used to calculate statistical error.

B) Point estimates provide only a single value for a sample, while interval estimates provide us a range of values.

C) Point estimates indicate the magnitude of potential error in the estimate, while interval estimates don't.

D) Point estimates on an average provide more information than interval estimates.

Answer: B Diff: 2 Blooms: Understand Topic: Interval Estimates LO1: Explain how an interval estimate differs from a point estimate.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 26) A ________ is a range of values between which the value of the population parameter is believed to be, along with a probability that the interval correctly estimates the true population parameter.

A) point estimate B) frequentist interference C) confidence interval D) fiducial inference Answer: C Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 27) A 100(1-α)% confidence interval for the population mean μ based on a sample of size n with a sample mean and a known population standard deviation σ is given by ________.

A) ± za/2(n-1)( ) B) C) x1 - / (σ /

)

D) ± za/2(σ / ) Answer: D Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation

9 .

28) For the formula for calculating the confidence level with known standard deviation, the value ________ represents the value of a standard normal random variable with a cumulative probability of 1 - α / 2.

A) σ / B) za/2 C) D) xi Answer: B Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 29) The ________ is a family of probability distributions with a shape similar to the standard normal distribution.

A) log-normal distribution B) Gaussian q-distribution C) frequentist interference D) t-distribution Answer: D Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation 30) Which of the following is a difference between the t-distribution and the standard normal distribution?

A) The t-distribution cannot be calculated without a known standard deviation, while the standard normal distributions can be.

B) The standard normal distribution's confidence levels are wider than those of the t-distribution.

C) The t-distribution has a larger variance than the standard normal distribution.

D) The standard normal distribution is dependent on parameters like degrees of freedom, while tdistribution is not.

Answer: C Diff: 2 Blooms: Understand Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation

10 .

31) Which of the following is true of the t-distribution?

A) It has narrower confidence intervals than the standard normal distribution.

B) It's only used to calculate confidence intervals where there is no known population standard deviation.

C) It converges to the standard normal distribution as degrees of freedom increase.

D) It does not require parameters such as degrees of freedom.

Answer: C Diff: 2 Blooms: Understand Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation 32) Which of the following is true of calculating confidence intervals for larger samples?

A) For larger samples, the t-distribution is indistinguishable from the standard normal distribution.

B) For larger samples, both the t-distribution and the standard normal distribution require standard deviation values to be calculated.

C) For larger samples, the degrees of freedom cannot be calculated accurately.

D) For larger samples, only z-values provide a true sampling distribution of the mean.

Answer: A Diff: 2 Blooms: Understand Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation 33) Which of the following types of distributions use z-values to establish confidence intervals?

A) Gaussian q-distribution B) t-distribution C) log-normal distribution D) standard normal distribution Answer: D Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation

11 .

Use the table below to answer the following question(s).

The historical data of Velvetta Inc., a healthcare products manufacturer, have shown that in a production process for filling bottles of shampoo, variance in the volume is constant; however, clogs in the filling machine often affect the average volume. The historical standard deviation is 5 milliliters. In filling 250-milliliter bottles, a sample of 20 found an average volume of 242 milliliters.

Velvetta Inc. Shampoo Production Alpha Value Standard Deviation Sample Size Sample Average

0.05 5 20 2.42

34) Based on the data in the table above, calculate the margin of error at 95% confidence interval.

A) 1.84 B) 2.19 C) 2.51 D) 1.96 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 35) From the table above, calculate the

value at a 95% confidence interval.

A) 1.64 B) 1.84 C) 1.96 D) 2.19 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation

12 .

36) From the table above, determine the cumulative probability for z at a 95% confidence level.

A) 0.975 B) 0.950 C) 1 D) 0.987 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 37) From the table above, calculate the lower confidence interval estimate at a confidence level of 95% A) 239.49 B) 240.16 C) 239.81 D) 240.04 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 38) The formula for a 100(1 - α)% confidence interval for the mean μ when the population standard deviation is unknown is ________.

A) xi - /(σ / ) B) ±tα/2n-1(s / C) ±zα/2 (σ/

) )

D) Answer: B Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Calculate confidence intervals for population means and proportions using the formulas in the chapter and the appropriate Excel functions.

LO2: Discuss the applications of confidence interval estimation

13 .

39) In which of the following cases is a proportion of the observations of a sample used in estimating the confidence interval?

A) when the degrees of freedom are too large B) when a true sampling distribution cannot be estimated C) when the population standard deviation is known D) when variables have only two possible outcomes Answer: D Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Use confidence intervals to draw conclusions about population parameters.

LO2: Discuss the applications of confidence interval estimation 40) In the equation for calculating a confidence interval for a proportion, p± za/2 does

, what

represent?

A) the mean for the sampling distribution of the proportion B) the degree of freedom for the sampling distribution of the proportion C) the standard error for the sampling distribution of the proportion D) the estimator for sampling distribution of the proportion Answer: C Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Use confidence intervals to draw conclusions about population parameters.

LO2: Discuss the applications of confidence interval estimation 41) A ________ is one that provides a range for anticipating the value of a new observation from the same population.

A) prediction interval B) confidence interval C) t-distribution D) standard normal distribution Answer: A Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Compute a prediction interval and explain how it differs from a confidence interval.

LO2: Discuss the applications of confidence interval estimation

14 .

42) Which of the following is true of prediction intervals?

A) It provides estimates for variables that can have only two possible outcomes.

B) It is associated with the distribution of a random variable.

C) It provides an interval estimate of a population parameter.

D) It is associated with the sampling distribution of a statistic.

Answer: B Diff: 2 Blooms: Understand Topic: Prediction Intervals LO1: Compute a prediction interval and explain how it differs from a confidence interval.

LO2: Discuss the applications of confidence interval estimation 43) Which of the following is true of the equation [n > (zα/2)2

] for computing the sample

size required to achieve a desired confidence interval half-width for a proportion?

A) The sample size calculated will only be an approximation.

B) The standard deviation need not be calculated first in order to compute the sample size.

C) The value for π is always set at 1.

D) The value for π is never a constant.

Answer: D Diff: 1 Blooms: Understand Topic: Prediction Intervals LO1: Compute sample sizes needed to ensure a confidence interval for means and proportions with a specified margin of error.

LO2: Discuss the applications of confidence interval estimation

15 .

44) The table below shows the weights of female individuals in Catherine's family. Calculate the sample variance in the weights, and the standard deviation.

Weights of female individuals in Catherine's family (in lbs) 163 160 155 161 158 155 149 151 158 17 Answer: Sample variance is calculated by the formula, s2 =

… (1)

Where, n = number of samples is the sum of individual samples minus the sample mean.

N= 10, = 163+160+155+161+158+155+149+151+158+171 / 10 = 158.1 Therefore substituting the values in equation (1), and by simplifying the values, we get,

=24.01+3.61+9.61+8.41+.01+9.61+82.81+50.41+.01+166.41 / 9 =354.9 / 9 =39.43.

Therefore, total variance is 39.43.

Standard deviation is the positive square root of variance.

Therefore, standard deviation = = 6.28.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Estimating Population Parameters LO1: Explain how the average, standard deviation, and distribution of means of samples changes as the sample size increases.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 16 .

45) The table below shows the number of goals scored by the Huntington Soccer Club in their league for the past 12 years. Calculate the standard error of the mean of the data given that the variance of the data is 50.45 Goals Scored by the Huntington Soccer Club for the past 12 years Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12

45 51 33 40 30 38 49 52 46 43 40 50

Answer: Standard error of the mean is calculated by the formula …(1), where is the standard deviation of the data, and n is the number of samples.

Standard deviation is the positive square root of variance, and since we have the variance value as 50.45, the standard deviation is =7.10 n = 12…(2) σ =7.10…(3) Substituting (2) and (3) in (1), we get 7.10 / = 2.05 Therefore the standard error of the mean = 2.05 Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Sampling Distributions LO1: Calculate the standard error of the mean.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 46) Convenience sampling is an example of a probabilistic sampling method.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Statistical Sampling LO2: Explain systematic, stratified, and cluster sampling, and sampling from a continuous process.

17 .

47) Estimators are the measures used to estimate population parameters.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Estimating Population Parameters LO2: Explain systematic, stratified, and cluster sampling, and sampling from a continuous process.

48) Point estimates do not provide any indication of the magnitude of the potential error in the estimate.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Estimating Population Parameters LO2: Explain systematic, stratified, and cluster sampling, and sampling from a continuous process.

49) The simple random sampling method is the only statistical sampling method that does not include sampling errors.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Sampling Error LO1: Describe the difference between sampling error and nonsampling error.

LO2: Explain systematic, stratified, and cluster sampling, and sampling from a continuous process.

50) A confidence interval is a range of values between which the value of the population parameter is believed to be.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 51) As the number of degrees of freedom increases, the t-distribution converges to the standard normal distribution.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation

18 .

52) For any sample size, the true sampling distribution of the mean is the standard deviation.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation 53) A confidence interval is associated with the sampling distribution of a statistic.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Prediction Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 54) As the sample size increases, the width of the confidence interval decreases.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Confidence Intervals and Sample Size LO1: Explain how confidence intervals change as the level of confidence increases or decreases.

LO2: Discuss the applications of confidence interval estimation 55) Explain selecting a sample using the continuous process sampling methods.

Answer: Selecting a sample from a continuous manufacturing process can be accomplished in two main ways. First, select a time at random; then select the next n items produced after that time. Second, select n times at random; then select the next item produced after each of these times. The first approach generally ensures that the observations will come from a homogeneous population; however, the second approach might include items from different populations if the characteristics of the process should change over time.

Diff: 1 Blooms: Remember Topic: Statistical Sampling LO1: Explain systematic, stratified, and cluster sampling, and sampling from a continuous process.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions

19 .

56) Give an account of biased and unbiased estimators in sampling methods.

Answer: Statisticians develop many types of estimators, and from a theoretical as well as a practical perspective, it is important that they "truly estimate" the population parameters they are supposed to estimate. Suppose that we perform an experiment in which we repeatedly sampled from a population and computed a point estimate for a population parameter. Each individual point estimate will vary from the population parameter; however, we would hope that the longterm average (expected value) of all possible point estimates would equal the population parameter. If the expected value of an estimator equals the population parameter it is intended to estimate, the estimator is said to be unbiased. If this is not true, the estimator is called biased and will not provide correct results.

Diff: 1 Blooms: Remember Topic: Estimating Population Parameters LO1: Explain the importance of unbiased estimators.

LO2: Explain the fundamentals of sampling methods, experiment designs, and sampling distributions 57) What is a confidence interval in sampling?

Answer: Confidence interval estimates provide a way of assessing the accuracy of a point estimate. A confidence interval is a range of values between which the value of the population parameter is believed to be, along with a probability that the interval correctly estimates the true (unknown) population parameter. This probability is called the level of confidence, denoted by 1 -α, where α is a number between 0 and 1. The level of confidence is usually expressed as a percent; common values are 90%, 95%, or 99%.

Diff: 1 Blooms: Remember Topic: Confidence Intervals LO1: Define and give examples of confidence intervals.

LO2: Discuss the applications of confidence interval estimation 58) Compare between the t-distribution and the standard normal distribution.

Answer: The t-distribution is actually a family of probability distributions with a shape similar to the standard normal distribution. Different t-distributions are distinguished by an additional parameter, degrees of freedom (df). The t-distribution has a larger variance than the standard normal, thus making confidence intervals wider than those obtained from the standard normal distribution, in essence correcting for the uncertainty about the true standard deviation, which is not known. As the number of degrees of freedom increases, the t-distribution converges to the standard normal distribution. When sample sizes get to be as large as 120, the distributions are virtually identical; even for sample sizes as low as 30 to 35, it becomes difficult to distinguish between the two. Thus, for large sample sizes, many people use z-values to establish confidence intervals even when the standard deviation is unknown.

Diff: 2 Blooms: Remember Topic: Confidence Intervals LO1: Describe the difference between the t-distribution and the normal distribution.

LO2: Discuss the applications of confidence interval estimation 20 .

59) Compare between a prediction interval and a confidence interval.

Answer: A prediction interval is one that provides a range for predicting the value of a new observation from the same population. This is different from a confidence interval, which provides an interval estimate of a population parameter, such as the mean or proportion. A confidence interval is associated with the sampling distribution of a statistic, but a prediction interval is associated with the distribution of the random variable itself.

Diff: 2 Blooms: Remember Topic: Prediction Intervals LO1: Compute a prediction interval and explain how it differs from a confidence interval.

LO2: Discuss the applications of confidence interval estimation

21 .

Business Analytics (Evans) Chapter 7 Statistical Inference 1) Which of the following propositions describes an existing theory or belief?

A) standard deviation B) null hypothesis C) proportion D) alternative hypothesis Answer: B Diff: 1 Blooms: Remember Topic: Hypothesis Testing LO1: Explain the difference between the null and alternative hypotheses.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 2) Which of the following is the initial step in conducting a hypothesis test?

A) collecting data and calculating a test statistic B) selecting a level of significance C) identifying the population parameter of interest D) determining a decision rule Answer: C Diff: 1 Blooms: Remember Topic: Hypothesis Testing LO1: List the steps in the hypothesis-testing procedure.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 3) Which of the following is a valid one-sample hypothesis test?

A) H0: population parameter ≠ constant vs. H1: population parameter = constant B) H0: population parameter > constant vs. H1: population parameter ≤ constant C) H0: population parameter < constant vs. H1: population parameter ≥ constant D) H0: population parameter = constant vs. H1: population parameter ≠ constant Answer: D Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: State the proper forms of hypotheses for one-sample hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

1 .

4) A manufacturer wishes to determine if the average profit from the sale of his product exceeds $6,710. Which of the following is the appropriate hypothesis test?

A) H0: population mean profit from sale > $6,710 vs. H1: population mean profit from sale ≤ $6,710 B) H0: population mean profit from sale ≤ $6,710 vs. H1: population mean profit from sale > $6,710 C) H0: population mean profit from sale < $6,710 vs. H1: population mean profit from sale ≥ $6,710 D) H0: population mean profit from sale ≥ $6,710 vs. H1: population mean profit from sale < $6,710 Answer: B Diff: 2 Blooms: Apply Topic: One-Sample Hypothesis Tests LO1: Correctly formulate hypotheses LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 5) Which of the following is true about determining the proper form of the hypotheses?

A) H0 is statistically proved true while testing B) failure to reject H0 proves H1 wrong C) H0 is always assumed to be true in testing D) H1 is always assumed to be true in testing Answer: C Diff: 2 Blooms: Understand Topic: One-Sample Hypothesis Tests LO1: Correctly formulate hypotheses LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 6) Which of the following is a Type I error?

A) the null hypothesis is actually true, and the hypothesis test correctly fails to reject it B) the null hypothesis is actually false, but the test incorrectly fails to reject it C) the null hypothesis is actually false, and the test correctly rejects it D) the null hypothesis is actually true, but the hypothesis test incorrectly rejects it Answer: D Diff: 2 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

2 .

7) Robin Inc. feared that the average company loss is running beyond $34,000. It initially conducted a hypothesis test on a sample extracted from its database. The hypothesis was formulated as H0: average company loss $34,000 vs. H1: average company loss > $34,000. The test resulted in favor of Robin Inc.'s loss not exceeding $34,000. Detailed study of company accounts later revealed that the average company loss had run up to $37,896. Which of the following errors were made during the hypothesis test?

A) Type III error B) Type II error C) Type I error D) Type IV error Answer: B Diff: 1 Blooms: Apply Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 8) Type II error occurs when the test: A) correctly fails to reject an actually true null hypothesis.

B) incorrectly fails to reject an actually false null hypothesis.

C) correctly rejects an actually false null hypothesis.

D) incorrectly rejects an actually true null hypothesis.

Answer: B Diff: 2 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 9) Level of significance is the probability of: A) incorrectly rejecting an actually true null hypothesis.

B) correctly failing to reject an actually true null hypothesis.

C) incorrectly failing to reject an actually false null hypothesis.

D) correctly rejecting an actually false null hypothesis.

Answer: A Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

3 .

10) The confidence coefficient is denoted by: A) α B) 1 - β C) β D) 1 - α Answer: D Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 11) What is the confidence coefficient when the level of significance is 0.03?

A) 0.9700 B) 0.0376 C) 0.7924 D) 0.7776 Answer: A Diff: 1 Blooms: Apply Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 12) Which of the following denotes the power of the test?

A) α B) 1 - β C) β D) 1 - α Answer: B Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 13) Which of the following probabilities gives the confidence coefficient?

A) P(rejecting H0 | H0 is true) B) P(not rejecting H0 | H0 is false) C) P(rejecting H0 | H0 is false) D) P(not rejecting H0 | H0 is true) Answer: D Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 4 .

14) Identify the power of the test from the following probabilities.

A) P(rejecting H0 | H0 is true) B) P(not rejecting H0 | H0 is false) C) P(rejecting H0 | H0 is false) D) P(not rejecting H0 | H0 is true) Answer: C Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between Type I and Type II errors.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 15) Which of the following is true about the value of the power of the test?

A) low value will enable valid conclusions to be made B) small sample sizes generate a low value of the power of the test C) low value will help in detecting small differences in sample statistics D) small sample sizes incur higher costs than large sample sizes Answer: B Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: State how to increase the power of a test.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 16) Which of the following is the test statistic for a one-sample test for mean when the population standard deviation is unknown?

A) t = B) z = C) z = D) t = Answer: A Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Choose the proper test statistic for hypothesis tests involving means and proportions.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

5 .

17) The average cost for the sample of 5 sales of a product is = $230 and the sample standard deviation is s = $17.50. The hypothesized mean is μ0 = $250. Compute the value of the test statistic.

A) -2.56 B) -4.00 C) -1.67 D) -3.87 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: One-Sample Hypothesis Tests LO1: Choose the proper test statistic for hypothesis tests involving means and proportions.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 18) For a one-tailed test, the critical value: A) divides the sampling distribution into three parts.

B) is the number of standard errors away from the sample mean.

C) helps determine if the test statistic falls in the rejection region or not.

D) fails to reject the null hypothesis if the value exceeds the test statistic.

Answer: C Diff: 2 Blooms: Understand Topic: One-Sample Hypothesis Tests LO1: Explain how to draw a conclusion for one- and two-tailed hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 19) Which of the following is true about the rejection region?

A) The rejection region is chosen to determine the probability of a Type I error.

B) With a true null hypothesis, the test statistic falls into the rejection region.

C) If the test statistic is in the nonrejection region, the null hypothesis is rejected.

D) The rejection region occurs in the tails of the sampling distribution of the test statistic.

Answer: D Diff: 2 Blooms: Understand Topic: One-Sample Hypothesis Tests LO1: Explain how to draw a conclusion for one- and two-tailed hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

6 .

20) Which of the following is true about one-tailed and two-tailed tests?

A) For standard normal and t-distributions, which have a mean of zero, lower-tail critical values are negative and upper-tail critical values are positive.

B) For an upper one-tailed test, if the test statistic is greater than the critical value, the decision would fail to reject the null hypothesis.

C) For a lower one-tailed test, if the test statistic is less than the critical value, thse decision would be to fail to reject the null hypothesis.

D) For a two-tailed test, if the test statistic is either greater than the upper critical value or less than the lower critical value, the decision would be to fail to reject the null hypothesis.

Answer: A Diff: 2 Blooms: Understand Topic: One-Sample Hypothesis Tests LO1: Explain how to draw a conclusion for one- and two-tailed hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests Use the data given below to answer the following question(s).

In a lower one-tailed hypothesis test, chosen level of significance = 0.10, true mean = 30, sample size = 55, and t-test statistic = -1.76.

21) What is the observed level of significance?

A) 0.4605 B) 0.4191 C) 0.0379 D) 0.0420 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: One-Sample Hypothesis Tests LO1: Use p-values to draw conclusions about hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 22) Which of the following is the conclusion?

A) This is a high probability and the conclusion is difficult.

B) The null hypothesis is rejected.

C) There are many sampling errors.

D) The null hypothesis cannot be rejected.

Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: One-Sample Hypothesis Tests LO1: Use p-values to draw conclusions about hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 7 .

23) Which of the following computes the test statistic for a one-sample test for proportions?

A) z = B) z = C) z = D) z = Answer: C Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Choose the proper test statistic for hypothesis tests involving means and proportions.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 24) For a two-sample hypothesis which tests for differences in population parameters (1) and (2), a two-tailed test seeks evidence that population parameter: A) seeks evidence that population parameter (2) is larger than parameter (1).

B) (2) is the same as parameter (1).

C) (2) is smaller than parameter (1).

D) (1) and (2) do not belong to the same data.

Answer: B Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: State the proper forms of hypotheses for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests

8 .

25) For a two-sample hypothesis test for differences in population parameters (1) and (2), which of the following is the correct form of an upper-tailed test?

A) H0: population parameter (1) - population parameter (2) 0 vs. H1: population parameter (1) population parameter (2) < 0 B) H0: population parameter (1) - population parameter (2) > 0 vs. H1: population parameter (1) - population parameter (2) ≤ 0 C) H0: population parameter (1) - population parameter (2) < 0 vs. H1: population parameter (1) - population parameter (2) 0 D) H0: population parameter (1) - population parameter (2) ≤ 0 vs. H1: population parameter (1) - population parameter (2) > 0 Answer: D Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: State the proper forms of hypotheses for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests 26) In a two-sample test for differences in means, the hypotheses are of the form: A) B) C) D) Answer: B Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: State the proper forms of hypotheses for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests 27) For a lower-tail test, the p-value in the output from an Excel tool: A) is correct if the test-statistic is negative.

B) is the difference from 1.0 if the test-statistic is negative.

C) is correct if the test-statistic is zero.

D) is correct if the test-statistic is positive.

Answer: A Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: Select and use Excel Analysis Toolpak procedures for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests 9 .

28) Which of the following Excel tools is used for a two-sample test for equality of variances?

A) Excel F-test Two-sample for variances B) Excel z-test: Two-sample for means C) Excel t-test: Two-sample assuming unequal variances D) Excel t-test: Two-sample assuming equal variances Answer: A Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: Select and use Excel Analysis Toolpak procedures for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests 29) While testing for equality of variances, which of the following formulae gives the F-test statistic?

A)

-

B) C)

D)

Answer: D Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: Explain the purpose of analysis of variance.

LO2: Discuss the applications of the major types of two-sample tests 30) In statistical terminology, the variable of interest is called a ________.

A) critical value B) p-value C) factor D) test-statistic Answer: C Diff: 1 Blooms: Remember Topic: Analysis of Variance LO1: Explain the purpose of analysis of variance.

LO2: Discuss the applications of the major types of two-sample tests

10 .

31) Which of the following is true while applying the Excel ANOVA tool?

A) The specified input range of data must be separated.

B) The sample size for each factor level must be the same.

C) The input range must be a rectangular region that contains all data.

D) Level of significance need not be specified.

Answer: C Diff: 1 Blooms: Understand Topic: Analysis of Variance LO1: Use the Excel ANOVA tool to conduct an analysis of variance test.

LO2: Discuss the applications of the major types of two-sample tests 32) In order to reject the null hypothesis, the F-test statistic must be greater than the ________.

A) p-value B) variance C) df D) crit Answer: D Diff: 1 Blooms: Remember Topic: Analysis of Variance LO1: Use the Excel ANOVA tool to conduct an analysis of variance test.

LO2: Discuss the applications of the major types of two-sample tests 33) Which of the following tests is used to determine if two categorical variables are independent?

A) Chi-square test B) t-test C) z-test D) ANOVA Answer: A Diff: 1 Blooms: Remember Topic: Chi-Square Test for Independence LO1: Conduct and interpret the results of a chi-square test for independence.

LO2: Discuss the applications of the major types of two-sample tests

11 .

34) Which of the following is true about chi-square distribution?

A) It is a special distribution and is denoted by (C2).

B) It is characterized by degrees of freedom.

C) It is computed using the Excel function CHISQ.INV.TEST. D) It has a left-tail area equal to the expected value of the sample.

Answer: B Diff: 1 Blooms: Understand Topic: Chi-Square Test for Independence LO1: Conduct and interpret the results of a chi-square test for independence.

LO2: Discuss the applications of the major types of two-sample tests 35) Which of the following 2010 Excel functions computes the p-value for the chi-square test?

A) CHISQ.INV.RT B) CHIDIST C) CHI.SQ D) CHISQ.TEST Answer: D Diff: 1 Blooms: Remember Topic: Chi-Square Test for Independence LO1: Conduct and interpret the results of a chi-square test for independence.

LO2: Discuss the applications of the major types of two-sample tests

12 .

Use the data given below to answer the following question(s).

The following extract from a manufacturer's database shows a sample of 10 suppliers, their transportation charges, and the estimated and actual total costs of supplying materials. (Note: Assume a significance level of 0.05 wherever necessary.)

Supplier Peter John Martin Philip Mark Thomas Jaison David Carter Leonard

Transportation Charges 340 560 480 290 370 520 350 430 510 270

Estimated Total Cost 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500

Actual Total Cost 4,680 4,790 5,110 4,780 4,810 4,770 5,250 4,930 5,010 4,810

36) Conduct the appropriate type of one-sample test-statistic to determine whether the average transportation charge is less than $430.

Answer: The hypotheses take the form: H0: population parameter ≥ constant vs. H1: population parameter < constant H0: population mean transportation charges ≥ $430 vs. H1: population mean transportation charges < $430 Average transportation charges for a sample of 10 suppliers ( ) = $412 Sample standard deviation (s) = $102.18 Hypothesized mean (μ0) = $430 t = ( - μ0) / (s /✓n) = (412 - 430) / (102.18 /✓ 10) = (-18) / (32.31) = -0.56 The sample mean is 0.56 standard errors below the hypothesized value of 430. Since -0.56 > that Critical t -2.1318, there is insufficient evidence to conclude that the average transportation charges is below $430.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: One-Sample Hypothesis Tests LO1: Choose the proper test statistic for hypothesis tests involving means and proportions.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

13 .

37) Conduct the appropriate type of one-sample test-statistic to determine whether the average transportation charge is less than $430. Apply a decision rule using the observed level of significance and draw a conclusion.

Answer: If the true mean is 430, then the p-value is the probability of obtaining a test statistic of - 0.56 or less.

Using the Excel function T.DIST(-0.56,9,TRUE), p-value = 0.2946.

Decision rule: Whenever p-value < chosen level of significance α, reject the null hypothesis and otherwise fail to reject it.

Because p-value is not less than α = 0.05, the null hypothesis cannot be rejected. There is about a 30% chance that the test statistic would be -0.56 or smaller if the null hypothesis was true. This is a fairly high probability, so it would be difficult to conclude that the true mean is less than 430. The fact that the sample mean is less than the hypothesized value can be attributed to sampling error alone.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: One-Sample Hypothesis Tests LO1: Use p-values to draw conclusions about hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

14 .

38) On studying the database, the manufacturer found out that the average difference between the estimated and actual total costs was $426. Based on the sample data, can the manufacturer conclude that the average difference between the estimated and actual total costs is different from zero?

Answer: If μD denotes the population mean difference between the estimated and actual total costs, then the null and the alternative hypotheses are of the form, H0: μD = 0 vs. H1: μD ≠ 0. t-Test: Paired Two Sample for Means

The above output from the Excel tool shows the critical values are ± 2.26. Since t Stat -6.97 is much smaller than the lower critical value -2.26, the null hypothesis is rejected. It can be concluded that the mean of the differences between the estimated and the actual total costs is statistically significant. The p-value 0.0001 too is essentially zero verifying this conclusion.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Two-Sample Hypothesis Tests LO1: State the proper forms of hypotheses for two-sample hypothesis tests. Select and use Excel Analysis Toolpak procedures for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests

15 .

39) During a study, individuals were asked to rate a product on a scale of 1-5. From the following data, help the researcher determine whether any significant differences exist in opinions among individuals from different regions. (Note: Assume a significance level of 0.05 wherever necessary.)

Quintasia 3 4 2 5 1 5 3

Paraland Bayundera 1 5 4 1 2 3 2 2 3 2 5 5 5 1 1 4 4 2 Answer: The null hypothesis for ANOVA is that the population means of all groups are equal; the alternative hypothesis is that at least one mean differs from the rest: H0: μ1 = μ2 = μ3 vs. H1: at least the mean from one region is different from others Anova: Single Factor

From the above results of the ANOVA test, F = 0.16 and F crit = 3.443. Clearly, F < F crit, which means that the null hypothesis cannot be rejected. It can be concluded that there are no significant differences in the opinions among the individuals from different regions. The p-value 0.8492 being greater than the chosen level of significance verifies the conclusion.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Analysis of Variance LO1: Use the Excel ANOVA tool to conduct an analysis of variance test.

LO2: Discuss the applications of the major types of two-sample tests 16 .

40) Using the following data, test for the independence of the variables. (Note: Assume a significance level of 0.05 wherever necessary.)

Respondent Gender Breakfast Preference 1 Female Fruits 2 Male Cereal 3 Male Milk 4 Female Fruits 5 Female Milk 6 Male Cereal 7 Male Milk 8 Male Milk 9 Female Fruits 10 Male Fruits 11 Male Cereal 12 Female Cereal 13 Female Milk 14 Male Fruits 15 Female Fruits Answer: The chi-square test for independence tests the following hypotheses: H0: the two categorical variables are independent H1: the two categorical variables are dependent Cross-tabulation table:

Expected Frequency Female Male Grand Total

Cereal Fruits Milk 1.87 2.80 2.33 2.13 3.20 2.67 4.00 6.00 5.00

The chi-square statistic is computed as X2 =

Grand Total 7.00 8.00 15.00 , where fo is the observed frequency, and

fe is the expected frequency.

Chi Square Statistic Female Male Grand Total

Cereal 0.40 0.36 0.76

Fruits 0.51 0.45 0.96 17 .

Milk 0.05 0.04 0.09

Grand Total 0.96 0.85 1.81

From the above table of calculations, the value of the chi-square statistic is 1.81.

From the cross-tabulation table, the number of rows r = 2 and number of columns c = 3.

Degrees of freedom = (r-1)(c-1) = (2-1)(3-1) = 2. Chi-square critical = 5.991. p-value = 0.4049 The chi-square test returned a p-value greater than the chosen level of significance. Therefore, the null hypothesis cannot be rejected. The categorical variables are independent.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Chi-Square Test for Independence LO1: Conduct and interpret the results of a chi-square test for independence.

LO2: Discuss the applications of the major types of two-sample tests 41) In conducting a hypothesis test, what is usually to be proven statistically is identified as the null hypothesis.

Answer: FALSE Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain the difference between the null and alternative hypotheses.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 42) If the alternative hypothesis includes the symbol <, the rejection region is in the upper tail.

Answer: FALSE Diff: 1 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: Explain how to draw a conclusion for one- and two-tailed hypothesis tests.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests 43) For a two-sample test for means with the population variance being known, the Excel procedure used is the Excel z-test.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: Select and use Excel Analysis Toolpak procedures for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests

18 .

44) In a two-sample test for means with the population variance being known, the z-test uses a test statistic that is based on the standard normal distribution.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Two-Sample Hypothesis Tests LO1: Explain how to draw a conclusion for one- and two-tailed hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests 45) The first step in a chi-square test is to compute the observed frequency between each cell of the cross-tabulation if the two variables are independent.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Chi-Square Test for Independence LO1: Conduct and interpret the results of a chi-square test for independence.

LO2: Discuss the applications of the major types of two-sample tests 46) What are the four different outcomes of hypothesis testing?

Answer: Hypothesis testing can result in one of four different outcomes: • The null hypothesis is actually true, and the test correctly fails to reject it.

• The null hypothesis is actually false, and the hypothesis test correctly reaches this conclusion.

• The null hypothesis is actually true, but the hypothesis test incorrectly rejects it (called Type I error).

• The null hypothesis is actually false, but the hypothesis test incorrectly fails to reject it (called Type II error).

Diff: 2 Blooms: Remember Topic: One-Sample Hypothesis Tests LO1: List the four possible outcome results from a hypothesis test.

LO2: Compare and contrast the major types of hypothesis testing for one-sample tests

19 .

47) How do test statistics for two-sample tests vary depending on whether the population standard deviations are known, and if not, whether they are assumed to be equal?

Answer: Selection of the proper test statistic for a two-sample test for means depends on whether the population standard deviations are known, and if not, whether they are assumed to be equal.

• Population variance is known. In Excel 2010, choose z-Test: Two-Sample for Means from the Data Analysis menu. This test uses a test statistic that is based on the standard normal distribution.

• Population variance is unknown and assumed unequal. From the Data Analysis menu, choose t-test: Two-Sample Assuming Unequal Variances. The test statistic for this case has a tdistribution.

• Population variance unknown but assumed equal. In Excel, choose t-test: Two-Sample Assuming Equal Variances. The test statistic also has a t-distribution, but it is different from the unequal variance case.

Diff: 2 Blooms: Understand Topic: Two-Sample Hypothesis Tests LO1: Select and use Excel Analysis Toolpak procedures for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests 48) For a two-sample test, explain the procedure used when it is difficult to justify the assumption that the variances of each population are equal.

Answer: Only rarely are the population variances known; also, it is often difficult to justify the assumption that the variances of each population are equal. Therefore, in most practical situations, the t-test: Two-Sample Assuming Unequal Variances is used. This procedure also works well with small sample sizes if the populations are approximately normal. It is recommended that the size of each sample be approximately the same and total 20 or more. If the populations are highly skewed, then larger sample sizes are recommended.

Diff: 2 Blooms: Understand Topic: Two-Sample Hypothesis Tests LO1: Select and use Excel Analysis Toolpak procedures for two-sample hypothesis tests.

LO2: Discuss the applications of the major types of two-sample tests

20 .

49) Explain the assumptions underlying ANOVA along with their violations.

Answer: ANOVA requires assumptions that the m groups or factor levels being studied represent populations whose outcome measures: • are randomly and independently obtained, • are normally distributed, and • have equal variances.

If these assumptions are violated, then the level of significance and the power of the test can be affected. If sample sizes are equal, violation of the third assumption does not have serious effects on the statistical conclusions; however, with unequal sample sizes, it can. A nonparametric test may be used when the assumptions underlying ANOVA are violated.

Diff: 2 Blooms: Understand Topic: Analysis of Variance LO1: List the assumptions of ANOVA. LO2: Discuss the applications of the major types of two-sample tests 50) Why is testing for independence important for businesses?

Answer: A common problem in business is to determine whether two categorical variables are independent. With sample data, sampling error can make it difficult to properly assess independence of categorical variables. The joint probabilities would never be expected to be exactly the same as the product of the marginal probabilities because of sampling error even if the two variables are statistically independent. Testing for independence is important in marketing applications.

Diff: 2 Blooms: Understand Topic: Chi-Square Test for Independence LO1: Conduct and interpret the results of a chi-square test for independence.

LO2: Discuss the applications of the major types of two-sample tests

21 .

Business Analytics (Evans) Chapter 8 Predictive Modeling and Analysis 1) In the equation to calculate the economic value of a customer, V = R × F × M/D, how is the value for F estimated?

A) It is estimated to be the total number of purchases the customer has made.

B) It is estimated to be the number of visits of the customer without actually spending on an item.

C) It is estimated to be the purchase frequency per year.

D) It is estimated to be the number of customers defecting per year.

Answer: C Diff: 1 Blooms: Remember Topic: Logic-Driven Modeling LO1: Develop analytic models mathematically using logic-driven approaches.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 2) Troista Mobile Accessories sells mobile apps on their Web site. If a customer spends on average, $12 per visit and visits the Web site 20 times each year, what is the average nondiscounted gross profit during a customer's lifetime? Given that Troista makes a margin of 60 percent on the average bill, with 25 percent of customers not returning each year.

A) $30 B) $75 C) $360 D) $576 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Develop analytic models mathematically using logic-driven approaches.

LO2: Use a modern software tool to perform statistical calculations.

3) Which of the following is necessary to calculate the variable cost of production for the company to develop a profit model?

A) unit sale price B) quantity of item produced C) quantity of item sold D) fixed cost of production Answer: B Diff: 1 Blooms: Understand Topic: Logic-Driven Modeling LO1: Develop analytic models mathematically using logic-driven approaches.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

1 .

4) Which of the following ways does demand influence profit?

A) It predicts how many units will be sold.

B) It directly influences the fixed cost of production.

C) It helps in reducing the variable cost of production.

D) It reduces the unit cost of production.

Answer: A Diff: 1 Blooms: Understand Topic: Logic-Driven Modeling LO1: Develop analytic models mathematically using logic-driven approaches.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

2 .

Use the table below to answer the following question(s).

Below is the profit model spreadsheet for the Lazarus Shoe Company producing their latest model of shoes for the month of January.

Profit Model for Lazarus Shoe Company for January (All cost in $) Unit Price 47 Unit Cost 22 Fixed Cost for Production 350,000 Demand 40,000 Model Unit Price Quantity Sold Revenue

47 38,000

Unit Cost Quantity Produced Variable Cost Fixed Cost

22 38,000 300,000

Profit 5) Calculate the revenue for units sold.

A) $836,000 B) $1,136,000 C) $600,000 D) $1,786,000 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

3 .

6) Calculate the variable cost of production.

A) $1,786,000 B) $836,000 C) $600,000 D) $1,436,000 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

7) Calculate the total profit.

A) $600,000 B) $1,436,000 C) $836,000 D) $1,786,000 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

4 .

Use the table below to answer the following question(s).

Dresden Pharmaceuticals has decided to go ahead and start clinical trials on a potential new drug.

The total R&D costs are estimated to reach around $875,000,000 with clinical trials mounting to $145,000,000. The current market size is estimated to be around 3,000,000 and is expected to grow at 4 percent every year. The market share Dresden hopes to capture in the first year is 7 percent, and is projected to grow by 25 percent each year for the next 4 years. A monthly prescription is anticipated to generate revenue of $420 while incurring variable costs of $150. A discount rate of 8 percent is assumed.

Dresden Pharmaceuticals Data Market Size 3,000,000 Unit (monthly Rx) revenue ($) 420 Unit (monthly Rx) cost ($) 150 Discount Rate ( per cent) 8 Project Costs R&D ($) Clinical Trials ($)

875,000,000 145,000,000

8) Calculate the projected sales for the first year.

A) $ 273,000 B) $210,000 C) $378,000,000 D) $268,230 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

5 .

9) Calculate the market size for the second year.

A) 3,000,000 B) 273,000 C) 3,244,800 D) 3,120,000 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

10) Calculate the market share percentage in the third year.

A) 25 percent B) 4 percent C) 11 percent D) 7 percent Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

11) Calculate the annual revenue for the fourth year.

A) $ 2,325,304,800 B) $830,466,000 C) $1,494,838,800 D) $1,149,876,000 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

6 .

12) Calculate the annual cost incurred for the second year.

A) $1,224,120,000 B) $884,520,000 C) $491,400,000 D) $638,820,000 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

13) Calculate the projected profit for the third year.

A) $31,315,200 B) $2,373,996,000 C) $1,149,876,000 D) $1,494,838,800 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

14) Calculate cumulative net profit at the fourth year.

A) $1,073,538,462 B) $3,868,834,800 C) $1,312,041,240 D) $1,494,838,800 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

7 .

15) Calculate the net present value for Dresden's new drug.

A) $1,312,041,240 B) ($33,96,00,000) C) $1,073,538,462 D) ($932,028,690) Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

16) Which of the following years shows the first profit for Dresden's new drug?

A) first year B) second year C) third year D) fourth year Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

17) Which of the following is the root cause for the newsvendor problem?

A) uncertainty in supply B) uncertainty in demand C) high cost per unit sale D) high total production cost Answer: B Diff: 1 Blooms: Understand Topic: Logic-Driven Modeling LO1: Describe the newsvendor problem and implement it on a spreadsheet.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

8 .

18) Which of the following conditions is a solution to the newsvendor problem, where Q is the quantity to be purchased, and D is demand?

A) Q > D B) Q = D C) D > Q D) Q / D = 0 Answer: B Diff: 1 Blooms: Understand Topic: Logic-Driven Modeling LO1: Describe the newsvendor problem and implement it on a spreadsheet.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

9 .

Use the table below to answer the following question(s).

Sujito Electronix makes headphones for $22 and sells them for $32. Sujito has sold at least 50 headphones on average per week in the past, though the actual demand is unknown. Sujito has also often run short of supply in the past. After three months of release, the headphones are sold at 40 percent discount. The spreadsheet below shows Sujito's sales and demand for the headphones. We take demand at 51, and quantity produced at 55.

Newsvendor model for Sujito's headphones Data Selling Price Cost Discount Price

$32 $22 $19.2

Model Demand Produced Quantity

51 55

Quantity Sold Surplus Quantity 19) Which of the following is the value for quantity sold?

A) 51 B) 50 C) 4 D) 55 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Describe the newsvendor problem and implement it on a spreadsheet.

LO2: Use a modern software tool to perform statistical calculations.

10 .

20) Calculate the net profit for the headphones.

A) $586.8 B) $498.8 C) $1653.8 D) $466.8 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Describe the newsvendor problem and implement it on a spreadsheet.

LO2: Use a modern software tool to perform statistical calculations.

11 .

Use the table below to answer the following question(s).

Below is a room overbooking model spreadsheet for the Metza, a hotel chain. The hotel has 425 rooms priced at $180 per day each, and is usually fully booked. Reservations can be cancelled any time before 5:00 p.m. with no penalty. The hotel estimates an average overbooking cost of $150. Customer demand is set at 400 with an average cancellation of 20.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

A B Hotel Overbooking Model for the Metza group of hotels Data Rooms Available Price per room Overbooking Cost

425 $180 $150

Model Reservation Limit Customer Demand Reservation Made Cancellations Customer Arrivals Overbooked Customers

425 400 20

21) Calculate the customer arrivals at the Metza.

A) 425 B) 405 C) 400 D) 380 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Describe how overbooking decisions can be modeled on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

12 .

22) Which of the following is the excel formula used to estimate overbooked customers?

A) =MIN(0,B5-B15) B) =MAX(0,B15-B5) C) =MAX(B11,B12) D) =MIN(B11-B12,B11-B14) Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Describe how overbooking decisions can be modeled on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

23) Calculate the net revenue.

A) $72,900 B) $76,500 C) $64,650 D) $68,400 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Describe how overbooking decisions can be modeled on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

13 .

Use the table below to answer the following question(s).

Sheila joined Simsin Tradings at the age of 36 with a starting salary of $75,000. She expects a salary increase of 5 percent every year. Her retirement plan requires her to pay 9 percent of her salary, while the company matches it at 32 percent. She expects an annual return of 7 percent on her retirement portfolio. Using a predictive model for Sheila's first five years, calculate the following, assuming that the salary increases at the same rate every year, and the return of interest does not change.

Retirement Plan Model for Sheila Data Retirement Contribution ( percent of salary) Employer Match Annual Salary Increase Annual Return on Investment

9 percent 32 percent 5 percent 7 percent

24) What will be Sheila's salary in her second year of work at Simsin?

A) $81,750 B) $82,688 C) $78,750 D) $ 75,000 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Explain how model validity can be assessed.

LO2: Use a modern software tool to perform statistical calculations.

25) What will be the amount of employee contribution to retirement plan when Sheila is aged 38?

A) $7,441.88 B) $7,813.97 C) $24,450 D) $2381.40 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Explain how model validity can be assessed.

LO2: Use a modern software tool to perform statistical calculations.

14 .

26) Calculate the employer contribution in Sheila's fourth year at Simsin.

A) $546.98 B) $703.26 C) $2,500.47 D) $2,160 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Explain how model validity can be assessed.

LO2: Use a modern software tool to perform statistical calculations.

27) What's the total retirement balance when Sheila has reached the age of 40 while working with Simsin?

A) $108,374.54 B) $56,253.36 C) $53,627.87 D) $91,163 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Explain how model validity can be assessed.

LO2: Use a modern software tool to perform statistical calculations.

28) Which of the following is true of linear functions used in predictive analytical models?

A) It is used when the rate of change in a variable decreases or increases quickly and then levels out.

B) It is used when there is a steady decrease or increase over a range of a variable.

C) It is used when there is increase at a specific rate.

D) It is used when there is a rise or fall at a constantly increasing rate.

Answer: B Diff: 2 Blooms: Remember Topic: Data-Driven Modeling LO1: List the common types of mathematical functions used in predictive modeling.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

15 .

29) ________ are mathematical functions used in predictive analytical models which define phenomena that increase at a specific rate, and is represented by the formula y = axb A) Exponential functions B) Power functions C) Polynomial functions D) Logarithmic functions Answer: B Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: List the common types of mathematical functions used in predictive modeling.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 30) Which of the following mathematical functions, used in predictive analytical models, is represented by the formula y = ax3 + bx2 dx + e?

A) exponential functions B) power functions C) logarithmic functions D) polynomial functions Answer: D Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: List the common types of mathematical functions used in predictive modeling.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 31) In ________ functions, represented by y = abx, y rises or falls at constantly increasing rates.

A) logarithmic B) power C) exponential D) polynomial Answer: C Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: List the common types of mathematical functions used in predictive modeling.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

16 .

32) In Excel's Trendline tool, the value of the________ gives the measure of fit of the line to the data.

A) linear function B) R-squared C) moving average D) set intercept Answer: B Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: Apply the Excel Trendline tool to fit models to data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 33) Which of the following is true of the R-squared (R2) value in Excel's Trendline function?

A) A value of 1.0 for R2 indicates maximum deviation of the data from the line.

B) If the value of R2 is above 1.0, the line will be at a perfect fit for the data.

C) The value of R2 will always be between -1 and 1.

D) As the value of R2 gets higher, the line will be a better fit for the data.

Answer: D Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: Apply the Excel Trendline tool to fit models to data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

17 .

Use the table below to answer the following question(s).

Fiberia Accessories, a clothing retailer, is planning to introduce a new line of sweaters as part of the winter collection for $65 with an inventory of 1500. The main selling season is 60 days between November and December. The store then sells the remaining units in a clearance sale at 65 percent discount. Out of the 60 main retail days, Fiberia sells the sweaters at full retail price for only 45 days, while giving a discount of 25 percent for the remaining 15 days. The demand functions a, and b are given as 79.5 and 1.1 respectively.

Marked Down Pricing Model for Fiberia Accessories's new sweater Data Retail Price Inventory Selling Season (days) Days at Full Retail Intermediate Markdown Clearance Markdown Demand Function a b

$65 1500 60 45 25 percent 65 percent 79.5 1.1

34) What is the average daily sale during the full retail sales period?

A) 15 B) 33.33 C) 8 D) 24.55 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

18 .

35) Calculate the total number of units sold during the full retail sales period.

A) 33.33 B) 520 C) 187.5 D) 360 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

36) Calculate the total revenue during the full retail sales period.

A) $23,400 B) $16,200 C) $2,880 D) $17,550 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

37) Calculate the daily sales during the discount sales period.

A) 39.28 B) 133.3 C) 388.13 D) 25.88 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

19 .

38) Calculate the total units sold during the discount sales period.

A) 388.13 B) 25.88 C) 133.3 D) 39.28 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

39) Calculate the total revenue during the discount sales period.

A) $4,478.91 B) $18,921.09 C) $10,042.73 D) $43,321.09 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

40) Calculate the revenue for the clearance sales period.

A) $18,921.09 B) $23,400 C) $48,871.88 D) $17,105.16 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

20 .

41) Calculate the total revenue for the new line of sweaters.

A) $59,426.25 B) $48,871.88 C) $23,400 D) $43,231.09 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Use a modern software tool to perform statistical calculations.

Use the table below to answer the following question(s).

In the spreadsheet below, there is data on the price, demand, quantity produced, and cost for an item. There are also different "what if" values that can help a manager to calculate costs and revenue with variability in demand.

1 2 3 4 5 6 7 8 9 10

A Profit Model

B

Data Unit Price ($) Unit Cost ($) Fixed Cost ($) Demand Quantity Produced

50 25 550,000 60,000 55,000

C

What-If Demand Values 20,000 40,000 55,000 60,000 65,000

42) Which of the following is the Excel formula to determine the number of units sold?

A) =B8 B) =MIN(0,B8,B9) C) =MIN(B8,B9) D) =MAX(0,B8,B9) Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Data-Driven Modeling LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

21 .

43) Calculate the total revenue when the quantity produced is 55,000 and demand is 60,000.

A) $1,375,000 B) ($1,320,000) C) $1,430,000 D) $2,750,000 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

44) Calculate the variable cost when the demand is 60,000 units.

A) $1,430,000 B) $1,375,000 C) $2,750,000 D) $1,320,000 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

45) From the "what if" values, calculate the revenue if the demand is 60,000 units.

A) $2,750,000 B) $825,000 C) $75,000 D) $1,375,000 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

22 .

46) From the "what if" values, calculate the total cost when demand is 40,000.

A) $ 2,000,000 B) $1,925,000 C) $1,100,000 D) $75,000 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

47) From the "what if" values, calculate the total profit when the demand is 20,000.

A) $825,000 B) $1,000,000 C) $1,100,000 D) ($925,000) Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

48) From the "what if" values, calculate the net profit when the demand is 65,000.

A) $825,000 B) $1,650,000 C) $800,000 D) $925,000 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Perform what-if analysis on spreadsheet models.

LO2: Use a modern software tool to perform statistical calculations.

23 .

49) ________ is the term used by Risk Solver Platform for systematic methods of "what-if" study.

A) Scenario B) Validity C) Parametric sensitivity analysis D) Goal Seek Answer: C Diff: 1 Blooms: Remember Topic: Model Analysis Using Risk Solver Platform LO1: Create data tables and tornado charts using Risk Solver Platform.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 50) Calculate the economic value of a loyal customer for a company given that the customer purchases, on an average, worth $43worth per visit and comes three times a year. The company's gross profit margin is 35 per cent with a customer defection rate of 0.4.

Answer: The economic value of a loyal customer is, V, and it is calculated as V = , where, R = revenue per purchase; F = purchase frequency per year; M = gross profit margin; D = defection rate.

From the data provided; R = $43; F = 3; M = 35/100 = 0.35; D = 0.4, Therefore V = (43 × 3 × 0.35)/0.4 = $112.88 Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Develop analytic models mathematically using logic-driven approaches.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

24 .

51) Gruten Retailers sells Mother's Day special greeting cards at their store at $6. They make the cards for a dollar apiece. Most of the cards are sold by Mother's Day, but the actual demand is unknown. They have orders for 120 cards. In the past, they have had sales of at least 100 cards

by Mother's Day. The remaining cards are sold at a 40 percent discount. Calculate the net profit, if demand, D, is set at 110 units.

Answer: Net profit is calculated as, (R × quantity sold + S × surplus quantity) - (C × Q), where, R = selling price, S, salvage value, C is the cost per unit, and Q, the quantity purchased.

From the data provided: R = $6 S = $6(1-0.4) = $3.6 C=1 Q = 120 Quantity sold will be the minimum value between demand and quantity purchased which is 110 units here and surplus quantity is 10.

Therefore, net profit = 6 × 110 + 3.6 × 10 - 1 × 120 = $576.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Describe the newsvendor problem and implement it on a spreadsheet.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

25 .

52) Brenton joined the Kroos Corporation at a starting salary of $61,500. According to the company's retirement plan, Brenton has to make a retirement contribution of 6 percent of his salary. The company contributes 30 percent of this amount. Brenton is expected to receive a salary increment of 3.5 percent per year for the next three years. Brenton is also expected to receive an annual investment return of 8 percent on the plan. Assuming the same rate of salary increases and investment returns each year, calculate the total balance of the retirement plan in its second year.

Answer: Brenton joined the Kroos Corporation at $61,500. At an annual increment of 3.5 percent, Brenton's salary in the second year would be = 61,500 × (1 + 0.035) = $63,652.50. …. (1) Brenton's contribution to the retirement plan = (1) × 6 percent = 63,625.5 × 6/100 = $3,819.15. …. (2) The employer contribution is 30 percent of (2) Therefore, the employer contribution for the second year = 3,819.15 × 30/100 = 3,819.15 × 0.3 = $1,145.75. …. (3) In order to calculate the total balance for the second year, we must also calculate the retirement plan balance of the previous year.

Brenton's starting salary is $61,500.

Therefore, his contribution in the first year = 61,500 × 0.06 = $3,690. …. (4) The employer contribution for the first year = 3,690 × 0.3 = $1,107. …. (5) Therefore, the balance for the first year is calculated as (4) + (5) = 3,690 + 1,107 = $4,797. …. (6) From (6), we can now calculate the balance for the second year using the investment return on the retirement plan.

Therefore, total balance for the second year = (6) × (1 + 0.08) + (2) + (3) = (4,796 × 1.08) + 3,819.15 + 1,145.75 = $10,145.66.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Logic-Driven Modeling LO1: Implement mathematical decision models on spreadsheets.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

26 .

53) Blue Sunset Band is planning to record a new album. A major decision to be made is if the band can record the album on their own, or if they should hire a studio to record it with. The fixed cost for recording at the studio is $100,000, plus the manufacturing cost per CD, which is at $5. If they record the album in-house, the cost per CD is $10. They plan to produce 3000 copies of the album regardless of the place of recording. If the band wished to break even with the cost, how can they achieve this by using the Goal Seek feature in Excel?

A The Blue Sunset Band Album Recording Decision

1 2 3 Data 4 5 Recording at Studio 6 Fixed Cost 7 Unit CD Cost 8 9 Recording In-house 10 Unit CD Cost 11 12 Production Volume 13 14 Model 15 16 Total studio manufacturing cost 17 Total in-house manufacturing cost 18 19 Cost Difference 20 Recording Decision

B

$ 100,000 $ 5

$

10

3000

$ 115,000 $ 30,000 $ 85,000 In-house

27 .

Answer: The break-even point is the value of demand volume for which total in-house manufacturing cost equals total manufacturing cost in studio, or, equivalently, for which the cost difference is zero.

Therefore, you seek to find the value of production volume in cell B12 that yields a value of zero in cell B19.

In the Goal Seek dialog, enter B19 that contains the formula for the Set cell, enter 0 in the To value box, and enter B12 in the By changing cell box.

The Goal Seek tool determines that the break-even volume is 20,000 and enters this value in cell B12 in the model.

A

B The Blue Sunset Band Album Recording Decision

1 2 3 Data 4 5 Recording at Studio 6 Fixed Cost $ 100,000 7 Unit CD Cost $ 5 8 9 Recording In-house 10 Unit CD Cost $ 10 11 12 Production Volume 20,000 13 14 Model 15 16 Total studio manufacturing cost $ 200,000 17 Total in-house manufacturing cost $ 200,000 18 19 Cost Difference $ 0 20 Recording Decision In-house Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Analyzing Uncertainty and Model Assumptions LO1: Apply the Excel Goal Seek tool for break-even analysis and other types of models.

LO2: Use a modern software tool to perform statistical calculations.

28 .

54) In predictive modeling, validity refers to how well a model represents reality.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Logic-Driven Modeling LO1: Explain how model validity can be assessed.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 55) In predictive analysis models, a second-order polynomial has only one hill or valley.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: List the common types of mathematical functions used in predictive modeling.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 56) Excel's Trendline feature cannot be used in modeling trends which include time variables.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Data-Driven Modeling LO1: Apply the Excel Trendline tool to fit models to data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 57) Two-way data tables can evaluate only one output variable.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Analyzing Uncertainty and Model Assumptions LO1: Construct one- and two-way data tables.

LO2: Apply the major types of one-way and two-way analyses of variables 58) In Excel's Risk Solver Platform, a parameter is a set of outputs in a model.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Model Analysis Using Risk Solver Platform LO1: Create data tables and tornado charts using Risk Solver Platform.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

29 .

59) Give an account of how data is used in predictive models.

Answer: Data used in models can come from subjective judgment based on past experience, existing databases and other data sources, analysis of historical data, or surveys, experiments, and other methods of data collection. For example, in the profit model, querying accounting records for values of the unit cost and fixed costs. Statistical methods are often used to estimate data required in predictive models. For example, historical data is used to compute the mean demand; quartiles or percentiles are used in the model to evaluate different scenarios. However, even if data are not available, using a good subjective estimate is better than sacrificing the completeness of a model that may be useful.

Diff: 1 Blooms: Remember Topic: Logic-Driven Modeling LO1: Develop analytic models mathematically using logic-driven approaches.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 60) Discuss how overbooking decisions are made by service businesses.

Answer: An important operations decision for service businesses such as hotels, airlines, and car-rental companies is the number of reservations to accept to effectively fill capacity knowing that some customers may not use their reservations or tell the business. If a hotel, for example, holds rooms for customers who do not show up, they lose revenue opportunities. A common practice in these industries is to overbook reservations. When more customers arrive than can be handled, the business usually incurs some cost to satisfy them. Therefore, the decision becomes how much to overbook to balance the costs of overbooking against the lost revenue for underuse.

Diff: 1 Blooms: Remember Topic: Logic-Driven Modeling LO1: Describe how overbooking decisions can be modeled on spreadsheets.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 61) How can managers judge the validity of a model?

Answer: Models cannot capture every detail of the real problem, and managers must understand the limitations of models and their underlying assumptions. Validity refers to how well a model represents reality. One approach for judging the validity of a model is to identify and examine the assumptions made in a model to see how they agree with our perception of the real world; the closer the agreement, the higher the validity. A "perfect" model corresponds to the real world in every respect; unfortunately, no such model has ever existed and never will exist in the future, because it is impossible to include every detail of real life in one model. To add more realism to a model generally requires more complexity and analysts have to know how to balance these.

Diff: 1 Blooms: Remember Topic: Logic-Driven Modeling LO1: Explain how model validity can be assessed.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

30 .

62) When are logarithmic functions used in predictive analysis?

Answer: Logarithmic functions are used when the rate of change in a variable increases or decreases quickly and then levels out, such as with diminishing returns to scale. Logarithmic functions are often used in marketing models where constant percentage increases in advertising, for instance, result in constant, absolute increases in sales.

Diff: 1 Blooms: Remember Topic: Data-Driven Modeling LO1: List the common types of mathematical functions used in predictive modeling.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 63) Explain how a two-way data table is created.

Answer: To create a two-way data table, type a list of values for one input variable in a column and a list of input values for the second input variable in a row, starting one row above and one column to the right of the column list. In the cell in the upper left-hand corner immediately above the column list and to the left of the row list, enter the cell reference of the output variable you wish to evaluate. Select the range of cells that contain this cell reference and both the row and column of values. On the What-If Analysis menu, click Data Table. In the Row input cell of the dialog box, enter the reference for the input cell in the model that corresponds to the input values in the row. In the Column input cell box, enter the reference for the input cell in the model that corresponds to the input values in the column. Then click OK. Diff: 1 Blooms: Remember Topic: Analyzing Uncertainty and Model Assumptions LO1: Construct one- and two-way data tables.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 64) How does a tornado chart help make sense of inputs in analyzing data and models?

Answer: A tornado chart shows which inputs are the most influential on the output and which are the least influential. If these inputs are uncertain, then you would probably want to study the more influential ones to reduce uncertainty and its effect on the output. If the effects are small, you might ignore any uncertainty or eliminate those effects from the model. They are also useful in helping you select the inputs that you would want to analyze further with data tables or scenarios.

Diff: 1 Blooms: Remember Topic: Model Analysis Using Risk Solver Platform LO1: Create data tables and tornado charts using Risk Solver Platform.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

31 .

Business Analytics (Evans) Chapter 9 Regression Analysis 1) A regression model that involves a single independent variable is called ________.

A) single regression B) unit regression C) simple regression D) individual regression Answer: C Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Explain the purpose of regression analysis and provide examples in business.

LO2: Identify the components of simple linear regression models and discuss their applications 2) Regression models of ________ data focus on predicting the future.

A) missing B) time-series C) panel D) cross-sectional Answer: B Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Explain the purpose of regression analysis and provide examples in business.

LO2: Identify the components of simple linear regression models and discuss their applications

1 .

The following table exhibits the age of antique furniture and the corresponding prices. Use the table to answer the following question(s). (Hint: Use scatter diagram and the Excel Trendline tool where necessary).

Number Value of years ($) 78 930 91 1010 83 970 159 1950 134 1610 210 2880 88 980 178 2010 124 1370 72 900 3) What is the relationship between the age of the furniture and their values?

A) Nonlinear B) Linear C) Curvilinear D) No relationship Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use a scatter chart to identify the type of relationship between two variables.

LO2: Identify the components of simple linear regression models and discuss their applications 4) Which of the following equations correctly expresses the relationship between the two variables?

A) Value = (-181.16) + 13.493 × Number of years B) Number of years = Value / 12.537 C) Value = (459.34 / Number of years) × 4.536 D) Number of years = (17.538 × Value) / (-157.49) Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use the Excel Trendline tool to find the best-fitting simple linear regression model.

LO2: Identify the components of simple linear regression models and discuss their applications

2 .

5) What is the expected value for a 90 year-old piece of furniture?

A) $1002.45 B) $997.98 C) $934.56 D) $1033.21 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use the Excel Trendline tool to find the best-fitting simple linear regression model.

LO2: Identify the components of simple linear regression models and discuss their applications 6) In a linear relationship, which of the following accounts for the many possible values of the dependent variable that vary around the mean?

A) the coefficient of the dependent variable X B) the value of the intercept ß0 C) the random error term ε D) the standard error SYX Answer: C Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Explain how least-squares regression finds the best-fitting regression model.

LO2: Identify the components of simple linear regression models and discuss their applications 7) Which of the following is true about the observed errors associated with estimating the value of the dependent variable using the regression line?

A) They are the horizontal distances between slopes and y-intercepts.

B) The errors are also referred to as critical values.

C) They are always maximized by the regression lines.

D) The errors can be negative or positive.

Answer: D Diff: 2 Blooms: Understand Topic: Simple Linear Regression LO1: Explain how least-squares regression finds the best-fitting regression model.

LO2: Identify the components of simple linear regression models and discuss their applications

3 .

8) For an independent variable Y, the error associated with the ith observation is: A) ei = Yi - Ŷi B) Yi = (ei)2 - Ŷi C) (Ŷi)2 ei = Yi D) ei = (Yi + Ŷi)2 Answer: A Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Explain how least-squares regression finds the best-fitting regression model.

LO2: Identify the components of simple linear regression models and discuss their applications Use the data given below to answer the following question(s).

Following is an extract from the database of a construction company. The table shows the height of walls in feet and the cost of raising them. The estimated simple linear regression equation is given as Ŷ = b0 + b1X. (Hint: Use Excel functions).

Height (ft) 4 3 7 9 6 8 5 11

Cost ($) 670 430 810 1100 790 880 760 1200

9) What is the value of the coefficient b0?

A) -2.25321 B) 0.010697 C) 254.8371 D) 86.81704 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use Excel functions to find least-squares regression coefficients.

LO2: Identify the components of simple linear regression models and discuss their applications

4 .

10) What is the value of the coefficient b1?

A) 86.81704 B) 254.8371 C) 0.010697 D) -2.14625 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use Excel functions to find least-squares regression coefficients.

LO2: Identify the components of simple linear regression models and discuss their applications 11) What is the estimated cost of raising a 10-inch wall?

A) 1505.786 B) 1103.578 C) 968.6109 D) 1123.008 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use Excel functions to find least-squares regression coefficients.

LO2: Identify the components of simple linear regression models and discuss their applications 12) Which of the following statements is true when using the Excel Regression tool?

A) The range for the independent variable values must be specified in the box for the Input Y Range.

B) Checking the option Constant is Zero forces the intercept to zero.

C) The Regression tool can be found in the Tools tab under Insert group.

D) Adding an intercept term reduces the analysis' fit to the data.

Answer: B Diff: 2 Blooms: Understand Topic: Simple Linear Regression LO1: Use the Excel Regression tool for both single and multiple linear regressions.

LO2: Identify the components of simple linear regression models and discuss their applications

5 .

13) Which of the following generates a scatter chart in Excel with the values predicted by the regression model included?

A) Trendline B) Residual Plots C) R Square D) Line Fit Plots Answer: D Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Use the Excel Regression tool for both single and multiple linear regressions.

LO2: Identify the components of simple linear regression models and discuss their applications 14) Which of the following is true about Excel outputs Multiple R? A) It is often referred to as the coefficient of determination.

B) A value of 0 indicates positive correlation.

C) A negative slope of the regression line denotes a positive Multiple R. D) It is another name for the sample correlation coefficient, r.

Answer: D Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Interpret the regression statistics of the Excel Regression tool.

LO2: Identify the components of simple linear regression models and discuss their applications 15) The R2 value: A) is the variability of the observed Y-values from the predicted values.

B) indicates that as the independent variable increases, the intercept term does too.

C) gives the proportion of variation in the dependent variable that is explained by the independent variable.

D) transforms the cumulative probability scale (vertical axis) so that the graph of the cumulative normal distribution is a straight line.

Answer: C Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Interpret the regression statistics of the Excel Regression tool.

LO2: Identify the components of simple linear regression models and discuss their applications

6 .

16) For a simple linear regression model, significance of regression is: A) a measure of how well the regression line fits the data.

B) a hypothesis test of whether the regression coefficient ß1 is zero.

C) a statistic that modifies the value of R2 by incorporating the sample size and the number of explanatory variables in the model.

D) the variability of the observed Y-values from the predicted values.

Answer: B Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Interpret significance of regression from the Excel Regression tool output.

LO2: Identify the components of simple linear regression models and discuss their applications 17) Which of the following Excel functions is applied to test for significance of regression?

A) COVAR B) ANOVA C) SINH D) TREND Answer: B Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Interpret significance of regression from the Excel Regression tool output.

LO2: Identify the components of simple linear regression models and discuss their applications 18) While testing hypotheses for regression coefficients, the t-test for the slope is expressed as: A) t = B) t = C) t = D) t = Answer: A Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Draw conclusions for tests of hypotheses about regression coefficients.

LO2: Identify the components of simple linear regression models and discuss their applications

7 .

19) ________ provide information about the unknown values of the true regression coefficients, accounting for sampling error.

A) Standard errors B) Confidence intervals C) Adjusted R Squares D) P-values Answer: B Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Interpret confidence intervals for regression coefficients LO2: Identify the components of simple linear regression models and discuss their applications 20) Standard residuals: A) help detect outliers that may bias the results of a regression analysis.

B) cause differences in the regression equation by changing the slope and intercept.

C) point out the ranges for the population intercept and slope at a 95% confidence level.

D) provide information for testing hypothesis associated with the intercept and slope.

Answer: A Diff: 2 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: Calculate standard residuals.

LO2: Identify the components of simple linear regression models and discuss their applications 21) A(n) ________ is an extreme value that is different from the rest of the data.

A) critical value B) standard error C) expected value D) outlier Answer: D Diff: 1 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: Calculate standard residuals.

LO2: Identify the components of simple linear regression models and discuss their applications

8 .

22) While checking for linearity by examining the residual plot, the residuals must: A) exhibit a linear trend.

B) form a parabolic shape.

C) be randomly scattered.

D) be below the x-axis.

Answer: C Diff: 1 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: Calculate standard residuals.

LO2: Identify the components of simple linear regression models and discuss their applications 23) Which of the following is true when testing for normality of errors?

A) Normality is verified by inspecting for a bell-shaped distribution.

B) It is easier to evaluate normality with small sample sizes.

C) A scatter diagram of the whole data is always used to verify normality.

D) Errors are normally distributed when the scatter diagram shows a straight-line distribution.

Answer: A Diff: 1 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: List the assumptions of regression analysis and describe methods to verify them.

LO2: Identify the components of simple linear regression models and discuss their applications 24) ________ means that the variation about the regression line is constant for all values of the independent variable.

A) Autocorrelation B) Normality of errors C) Homoscedasticity D) Linearity Answer: C Diff: 1 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: List the assumptions of regression analysis and describe methods to verify them.

LO2: Identify the components of simple linear regression models and discuss their applications

9 .

25) Which of the following helps in evaluation of autocorrelation?

A) Breusch-Pagan test B) Durbin-Watson statistic C) Hosmer-Lemeshow test D) Cochran-Mantel-Haenszel statistics Answer: B Diff: 1 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: List the assumptions of regression analysis and describe methods to verify them.

LO2: Identify the components of simple linear regression models and discuss their applications 26) In multiple regression, R Square is referred to as the: A) multiple correlation coefficient.

B) coefficient of autocorrelation.

C) coefficient of multiple determination.

D) multiple significance coefficient.

Answer: C Diff: 1 Blooms: Remember Topic: Multiple Linear Regression LO1: Explain the differences in the Excel Regression tool output for simple and multiple linear regression models.

LO2: Develop and test a multiple regression model 27) Which of the following is true about multiple linear regression?

A) It is a linear regression model with more than one dependent variable.

B) The regression coefficients are called fractional regression coefficients.

C) It uses least squares to estimate the intercept and slope coefficients.

D) The ANOVA tests for the significance of each variable separately.

Answer: C Diff: 1 Blooms: Understand Topic: Multiple Linear Regression LO1: Explain the differences in the Excel Regression tool output for simple and multiple linear regression models.

LO2: Develop and test a multiple regression model

10 .

28) When using the t-statistic in multiple regression to determine if a variable should be removed: A) R2 will increase if the variable is removed.

B) if |t| > 1, the standard error will decrease.

C) a large number of independent variables is convenient.

D) if |t| < 1, the standard error will increase.

Answer: A Diff: 2 Blooms: Understand Topic: Building Good Regression Models LO1: Apply a systematic approach to build good regression models.

LO2: Develop and test a multiple regression model 29) When two or more independent variables in the same regression model can predict each other better than the dependent variable, the condition is referred to as ________.

A) autocorrelation B) heteroscedasticity C) multicollinearity D) homoscedasticity Answer: C Diff: 1 Blooms: Remember Topic: Building Good Regression Models LO1: Explain the importance of understanding multicollinearity in regression models.

LO2: Develop and test a multiple regression model 30) Which of the following is true about multicollinearity?

A) The effect of a dependent variable on another becomes difficult to isolate.

B) Regression coefficients become clearer and are easier to interpret.

C) P-values reduce significantly leading to rejection of null hypothesis.

D) It is best measured using the statistic variance inflation factor (VIF).

Answer: D Diff: 1 Blooms: Remember Topic: Building Good Regression Models LO1: Explain the importance of understanding multicollinearity in regression models.

LO2: Develop and test a multiple regression model

11 .

31) Categorical variables that have been coded are called ________.

A) limited dependent variables B) dummy variables C) instrumental variables D) observable variables Answer: B Diff: 1 Blooms: Remember Topic: Regression with Categorical Independent Variables LO1: Build regression models for categorical data using dummy variables.

LO2: Develop and test a multiple regression model 32) Interaction is: A) the principle of having a model with maximum explanatory variables.

B) the process of coding categorical variables.

C) a measure to determine the correlation between dependent variables.

D) the dependence between two independent variables.

Answer: D Diff: 1 Blooms: Remember Topic: Regression with Categorical Independent Variables LO1: Test for interactions in regression models with categorical variables.

LO2: Develop and test a multiple regression model 33) How many additional dummy variables are required if a categorical variable has 4 levels?

A) 2 B) 3 C) 1 D) 4 Answer: B Diff: 1 Blooms: Understand Topic: Regression with Categorical Independent Variables LO1: Build regression models for categorical data using dummy variables.

LO2: Develop and test a multiple regression model

12 .

34) When a scatter chart of data shows a nonlinear relationship, the nonlinear model can be expressed as: A) Y = β0 + β1X + β2X2 + ε B) Y = β0 + β1X + (β2X)2 + ε C) Y = β0 + β1X + β2X D) Y = β0 + β1X2 + β2X2 + ε Answer: A Diff: 1 Blooms: Remember Topic: Regression Models with Nonlinear Terms LO1: Identify when curvilinear regression models are more appropriate than linear models.

LO2: Develop and test a multiple regression model 35) In a curvilinear regression model, the ________ represents the curvilinear effect.

A) intercept B) error term C) slope D) R Square Answer: C Diff: 1 Blooms: Remember Topic: Regression Models with Nonlinear Terms LO1: Identify when curvilinear regression models are more appropriate than linear models.

LO2: Develop and test a multiple regression model

13 .

Use the data given below to answer the following question(s).

Following is an extract from a firm's database detailing the number of hours spent on the job by employees and their corresponding pay. (Note: Assume a level of significance of 0.05 wherever necessary.)

Hours spent on the job Salary ($) 4 340 12 850 7 570 5 470 11 820 8 610 9 630 13 900 10 800 6 480 36) Construct a scatter diagram and use the Excel Trendline tool to find the best-fitting simple linear regression model.

Answer:

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Use a scatter chart to identify the type of relationship between two variables. Use the Excel Trendline tool to find the best-fitting simple linear regression model.

LO2: Identify the components of simple linear regression models and discuss their applications

14 .

37) Is the hours spent on the job a statistically significant variable in explaining the variation in pay of employees? (Hint: Use Regression tool).

Answer: Hypothesis test for significance of regression: H0 : β1 = 0 H1 : β1 ≠ 0 where, β1 is the slope of the intercept.

Significance F, that is, the p-value associated with the hypothesis test is essentially zero (2.525 × 10-7). Therefore, assuming a level of significance of 0.05, the null hypothesis must be rejected and conclude that the slope–the coefficient for number of hours spent on the job–is not zero. This means that work hours is a statistically significant variable in explaining the variation in employee pay.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Interpret significance of regression from the Excel Regression tool output.

LO2: Identify the components of simple linear regression models and discuss their applications 38) Draw conclusions for test of hypothesis for regression coefficients.

Answer: Hypothesis test for regression coefficients: H0 : β1 = 0 H1 : β1 ≠ 0 where, β1 is the slope of the intercept.

The t-test for the slope: t=

= 61.27272727 / 3.868357187 = 15.83946991

Because the P-value for both coefficients is essentially zero, it can be concluded that neither coefficient is statistically equal to zero.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Draw conclusions for tests of hypotheses about regression coefficients.

LO2: Identify the components of simple linear regression models and discuss their applications

15 .

39) Interpret the confidence intervals.

Answer: A 95% confidence interval for the intercept is [46.15, 206.22]. Similarly, a 95% confidence interval for the slope is [52.35, 70.19]. Although the regression model is Ŷ = 126.18 + 61.273X, the confidence intervals suggest a bit of uncertainty about predictions using the model. Although, it can be estimated that an employee who spent 10.5 hours on the job will receive a pay of 126.18 + (61.273 × 10.5) = $769.5465, if the true parameters are at the extremes of the confidence intervals, the estimate might be as low as 46.15 + (52.35 × 10.5) = $595.825 or as high as 206.22 + (70.19 × 10.5) = $943.215.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simple Linear Regression LO1: Interpret confidence intervals for regression coefficients LO2: Identify the components of simple linear regression models and discuss their applications 40) Interpret residual output.

Answer: From the data, the first observation has a salary of $340 and the regression model predicts $371.27. Thus the residual is 340 - 371.27 = - $31.27. By dividing this residual by its standard deviation, the standardized residual for the first observation is - 0.944. This means that the first observation is about 0.94 standard deviations below the regression line. There are no standardized residuals outside of ± 3 standard deviations. It can be concluded that there are no outliers.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Residual Analysis and Regression Assumptions LO1: Calculate standard residuals.

LO2: Identify the components of simple linear regression models and discuss their applications 41) The best-fitting line maximizes the residuals.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Explain how least-squares regression finds the best-fitting regression model.

LO2: Identify the components of simple linear regression models and discuss their applications 42) Creating a scatter chart with an added trendline is visually superior to the scatter chart generated by line fit plots.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Use a scatter chart to identify the type of relationship between two variables.

LO2: Identify the components of simple linear regression models and discuss their applications

16 .

43) The standard error may be assumed to be large if the data are clustered close to the regression line.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Simple Linear Regression LO1: Interpret the regression statistics of the Excel Regression tool.

LO2: Identify the components of simple linear regression models and discuss their applications 44) An increase in adjusted R2 indicates that the regression model has improved.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Building Good Regression Models LO1: Interpret the regression statistics of the Excel Regression tool.

LO2: Develop and test a multiple regression model 45) A good regression model has the fewest number of explanatory variables providing an adequate interpretation of the dependent variable.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Building Good Regression Models LO1: Apply a systematic approach to build good regression models.

LO2: Develop and test a multiple regression model 46) Why is regression analysis necessary in business? What categories of regression models are used?

Answer: Regression analysis is a tool for building statistical models that characterize relationships among a dependent variable and one or more independent variables, all of which are numerical. Two broad categories of regression models are used often in business settings: (1) regression models of cross-sectional data and (2) regression models of time-series data, in which the independent variables are time, or some function of time, and the focus is on predicting the future. Time-series regression is an important tool in forecasting.

Diff: 2 Blooms: Remember Topic: Simple Linear Regression LO1: Explain the purpose of regression analysis and provide examples in business.

LO2: Identify the components of simple linear regression models and discuss their applications

17 .

47) While conducting regression analysis, how is constructing a normal probability plot useful?

Answer: While conducting regressions analysis using the Excel Regression tool, a normal probability plot for the dependent variable may be chosen to be constructed. It transforms the cumulative probability scale (vertical axis) so that the graph of the cumulative normal distribution is a straight line. The closer the points are to a straight line, the better the fit to a normal distribution.

Diff: 2 Blooms: Understand Topic: Simple Linear Regression LO1: Use the Excel Regression tool for both single and multiple linear regressions.

LO2: Identify the components of simple linear regression models and discuss their applications 48) Briefly explain the assumptions on which the statistical hypothesis tests associated with regression analysis are predicated.

Answer: The statistical hypothesis tests associated with regression analysis are predicated on some key assumptions about the data.

(1) Linearity: This is usually checked by examining a scatter diagram of the data or examining the residual plot. If the model is appropriate, then the residuals should appear to be randomly scattered about zero, with no apparent pattern.

(2) Normality of errors: Regression analysis assumes that the errors for each individual value of X are normally distributed, with a mean of zero.

(3) Homoscedasticity: This means that the variation about the regression line is constant for all values of the independent variable.

(4) Independence of errors: Residuals should be independent for each value of the independent variable.

Diff: 1 Blooms: Remember Topic: Residual Analysis and Regression Assumptions LO1: List the assumptions of regression analysis and describe methods to verify them.

LO2: Identify the components of simple linear regression models and discuss their applications 49) List the systematic approach to building good multiple regression models.

Answer: (1) Construct a model with all available independent variables. Check for significance of the independent variables by examining the p-values.

(2) Identify the independent variable having the largest p-value that exceeds the chosen level of significance.

(3) Remove the variable identified in step 2 from the model and evaluate adjusted R2. (Don't remove all variables with p-values that exceed α at the same time, but remove only one at a time.)

(4) Continue until all variables are significant.

Diff: 1 Blooms: Remember Topic: Building Good Regression Models LO1: Apply a systematic approach to build good regression models.

LO2: Develop and test a multiple regression model 18 .

50) Explain the concept of curvilinear regression model.

Answer: Linear regression models are not appropriate for every situation. A scatter chart of the data might show a nonlinear relationship, or the residuals for a linear fit might result in a nonlinear pattern. In such cases, a nonlinear model is proposed to explain the relationship. For instance, a second-order polynomial model would be: Y = β0 + β1X + β2X2 + ε Sometimes this is called a curvilinear regression model. In this model, β1 represents the linear effect of X on Y, and β2 represents the curvilinear effect. However, although this model appears to be quite different from ordinary linear regression models, it is still linear in the parameters. In other words, all terms are a product of a beta coefficient and some function of the data, which are simply numerical values. In such cases least squares can still be applied to estimate the regression coefficients.

Diff: 2 Blooms: Understand Topic: Regression Models with Nonlinear Terms LO1: Identify when curvilinear regression models are more appropriate than linear models.

LO2: Develop and test a multiple regression model

19 .

Business Analytics (Evans) Chapter 10 Forecasting Techniques 1) The Delphi method used for forecasting: A) obtains forecasts through a comparative analysis with a previous situation.

B) uses measures that are believed to influence the behavior of a variable that the researcher wishes to forecast.

C) uses a single measure that weights multiple indicators and provides a measure of overall expectation.

D) uses a panel of experts, whose identities are typically kept confidential from one another, to respond to a sequence of questionnaires.

Answer: D Diff: 1 Blooms: Remember Topic: Qualitative and Judgmental Forecasting LO1: Explain how judgmental approaches are used for forecasting.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 2) Before launching a new line of toys, Toys Inc. used the method of historical analogy to obtain a forecast. In this scenario, Toys Inc.: A) noted the behavior of its current customers while they use their products.

B) used a panel of experts, whose identities were kept confidential from one another, to respond to a sequence of questionnaires.

C) noted the consumer response to similar previous products to marketing campaigns and used the responses as a basis to predict how the new marketing campaign might fare.

D) used a brainstorming session among a group of experts to draw new ideas.

Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Qualitative and Judgmental Forecasting LO1: Explain how judgmental approaches are used for forecasting.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

1 .

3) In forecasting, what is an index?

A) It is a single measure that weights multiple indicators and provides a measure of overall expectation.

B) It is a stream of historical data, such as weekly sales.

C) It is a time series that does not have trend, seasonal, or cyclical effects but is relatively constant and only exhibits random behavior.

D) It is a measure that provides a complete forecast.

Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Qualitative and Judgmental Forecasting LO1: Explain how judgmental approaches are used for forecasting.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 4) What is a stream of historical data known as?

A) a time series B) an index C) a complex number D) an orthopole Answer: A Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: List different types of statistical forecasting models.

5) Time-series models may exhibit seasonal effects or cyclical effects. A seasonal effect differs from a cyclical effect in that a seasonal effect: A) has no trend, is relatively constant, and only exhibits random behavior.

B) describes ups and downs over a time frame such as several years.

C) is one that repeats at fixed intervals of time, typically a year, month, week, or day.

D) is based on analysis of historical time-series data and are predicated on the assumption that the future is an extrapolation of the past.

Answer: C Diff: 2 Blooms: Understand Topic: Statistical Forecasting Models LO1: List different types of statistical forecasting models.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

2 .

6) The data for the number of hand-held gaming devices sold for the past 5 weeks are 15 units, 20 units, 25 units, 30 units, and 17 units respectively. The time series appears to be relatively stable, without trend, seasonal, or cyclical effects; thus, a moving average model would be appropriate. Setting k = 3 the three-period moving average forecast for week 6 is ________.

A) 20 units B) 24 units C) 30 units D) 17 units Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: Apply moving average and exponential smoothing models to stationary time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 7) If the actual value of a time series at time t and the forecast value for time t is denoted by At and Ft respectively, then the formula for the mean absolute deviation over a range of forecasted values is ________.

A) MAD =

B) MAD =

C) MAD =

D) MAD = Answer: A Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

3 .

8) Identify the formula used to calculate the root mean square error over a range of forecasted values, if the actual value of the time series at time t and the forecast value for time t are denoted

by At and Ft respectively.

A) RMSE =

B) RMSE =

C) RMSE =

D) RMSE = Answer: C Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

4 .

9) The actual value of the time series at time t and the forecast value for time t is denoted by At and Ft respectively. What is the formula used for calculating the mean absolute percentage error over a range of forecasted values?

A) MAPE =

B) MAPE =

C) MAPE =

D) MAPE =

× 100

Answer: D Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

5 .

Use the data given below to answer the following question(s).

The details of the clock sales at a supermarket for the past 6 weeks are shown in the table below.

The time series appears to be relatively stable, without trend, seasonal, or cyclical effects. The simple moving average value of k is set at 2.

Week 1 2 3 4 5 6

Units sold 88 44 54 65 72 85

10) For the given data, the simple moving average mean absolute deviation is ________.

A) 0.21 B) 20.12 C) 14.25 D) 207.13 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

11) For the given data, what is the value of the simple moving average mean square error?

A) 0.21 B) 20.12 C) 14.25 D) 207.13 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

6 .

12) Using the data, determine the value of the simple moving average root mean square error.

A) 0.21 B) 14.39 C) 20.12 D) 207.13 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

13) For the given data, calculate the value of the simple moving average mean absolute percentage error.

A) 20.90 B) 23.45 C) 14.39 D) 25.56 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

14) If the smoothing constant is assumed to be 0.7, and setting F1 and F2 = A1, the exponential smoothing sales forecast for week 7 is approximately ________.

A) 50 clocks B) 80 clocks C) 60 clocks D) 70 clocks Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

7 .

Use the data given below to answer the following question(s).

The table provided below gives the sales details of the number of android smart phones at an electronic retail store for the past 6 weeks. The time series appears to be relatively stable, without trend, seasonal, or cyclical effects. The value of k is set at 3. (Hint: Optimize α value.)

Week 1 2 3 4 5 6

Units sold 88 44 54 65 72 85

15) Calculate the value of the mean absolute percentage error for the given data.

A) 20.90 B) 16.60 C) 21.72 D) 31.08 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

16) Which of the following is the value of the root mean square error for the given data?

A) 11.56 B) 21.72 C) 13.87 D) 20.13 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

8 .

17) What is the forecasted value for the 3rd week?

A) 53 phones B) 64 phones C) 71 phones D) 49 phones Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 18) What is the difference between the forecasted and the actual value for the 3rd week?

A) 5 phones B) 6 phones C) 4 phones D) 3 phones Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

19) What is the forecasted value for the 7th week?

A) 53 phones B) 84 phones C) 71 phones D) 49 phones Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Statistical Forecasting Models LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

9 .

20) In the linear trend equation, Ft+k = at + btk, at is known as the ________.

A) level B) trend C) slope D) forecast Answer: A Diff: 1 Blooms: Remember Topic: Forecasting Models for Time Series with a Linear Trend LO2: Identify the components of simple linear regression models and discuss their applications 21) In the linear trend equation Ft+k = at + btk, identify the term that signifies the trend.

A) bt B) k C) at D) Ft + k Answer: A Diff: 1 Blooms: Remember Topic: Forecasting Models for Time Series with a Linear Trend LO2: Identify the components of simple linear regression models and discuss their applications 22) What is the formula used to calculate the value of at in the linear trend equation Ft+k = at + btk while using double exponential smoothing?

A) at = β(bt - bt-1) + (1 -β)bt-1 B) at = αFt-1 + (1 - α)(at +1 + bt+1) C) at = αFt + (1 - α)(at -1 + bt-1) D) at = β(bt + bt-1) + (1 + γ)bt-1 Answer: C Diff: 1 Blooms: Remember Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply double exponential smoothing models to time series with a linear trend.

LO2: Identify the components of simple linear regression models and discuss their applications

10 .

23) What is the formula used to calculate the value of bt in the linear trend equation Ft+k = at + btk while using double exponential smoothing?

A) bt = β(bt - bt-1) + (1 -β)bt-1 B) bt = αFt-1 + (1 - α)(at +1 + bt+1) C) bt = αFt + (1 - α)(at -1 + bt-1) D) bt = β(at - at-1) + (1 -β)bt-1 Answer: D Diff: 1 Blooms: Remember Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply double exponential smoothing models to time series with a linear trend.

LO2: Identify the components of simple linear regression models and discuss their applications Use the data given below to answer the following question(s).

The worldwide sales of cars from 1981-1990 are shown in the table below. Given: α = 0.2 and β = 0.15 (Hint: Use XLMiner)

Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Units sold in thousands 888 900 1000 1200 1100 1300 1250 1150 1100 1200

24) Calculate the value of the mean absolute percentage error using double exponential smoothing for the given data.

A) 1.80 B) 8.10 C) 91.27 D) 11976.17 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

11 .

25) Identify the value of the mean square error using double exponential smoothing for the given set of data.

A) 8.10 B) 1.80 C) 91.27 D) 11976.17 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

26) Using the double exponential smoothing, calculate the value of the mean absolute deviation for the given data.

A) 8.10 B) 1.80 C) 91.27 D) 11976.17 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

27) Using the double exponential smoothing, find the value of the root mean square error for the given data.

A) 8.10 B) 91.27 C) 11976.17 D) 109.44 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

12 .

28) Which of the following equations is the trend line equation for the given data?

A) 60.123x + 481.56 B) 48.16x + 481.86 C) 32.17x + 931.87 D) 57.15x + 503.81 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

29) For the given data, what is the sales forecast for the year 1992 (in thousands)?

A) 1256.87 B) 1317.91 C) 1285.74 D) 1350.08 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

13 .

Use the data given below to answer the following question(s).

The worldwide sales of cars from 1981-1990 are shown in the table below. Given: α = 0.2 and γ = 0.05. (Hint: Use XLMiner).

Year 1 2 3 4 5 6 7 8 9 10

Units sold in thousands 750 823 1034 1945 1556 1300 1346 1150 967 1200

30) Calculate the value of the mean absolute percentage error using the Holt-Winters no-trend model for the given data.

A) 8.10 B) 18.39 C) 21.70 D) 10.97 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Use Holt-Winters and regression models to forecast time series with seasonality.

LO2: Use a modern software tool to perform statistical calculations.

31) Determine the value of the mean absolute deviation using the Holt-Winters no-trend model for the given data.

A) 367.35 B) 18.39 C) 21.70 D) 252.55 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Use Holt-Winters and regression models to forecast time series with seasonality.

LO2: Use a modern software tool to perform statistical calculations.

14 .

32) Which of the following is the value of the root mean square error for the given data?

A) 252.55 B) 367.35 C) 21.70 D) 109.76 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Use Holt-Winters and regression models to forecast time series with seasonality.

LO2: Use a modern software tool to perform statistical calculations.

33) Which of the following is the forecast value for the 6th year?

A) 1256.06 B) 1328.04 C) 1321.31 D) 1327.24 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Use Holt-Winters and regression models to forecast time series with seasonality.

LO2: Use a modern software tool to perform statistical calculations.

34) If the given time series has no trend and no seasonality, the most appropriate forecasting model to determine the forecast of the time series is the ________ model.

A) single moving average B) Holt-Winters no-trend smoothing C) double exponential smoothing D) Holt-Winters additive Answer: A Diff: 1 Blooms: Remember Topic: Selecting Appropriate Time-Series-Based Forecasting LO1: Identify the appropriate choice of forecasting model based on the characteristics of a time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

15 .

35) If the given time series has a trend and no seasonality, the most appropriate forecasting model to determine the forecast of the time series is the ________ model.

A) single exponential smoothing B) Holt-Winters no trend smoothing C) double exponential smoothing D) Holt-Winters additive Answer: C Diff: 1 Blooms: Remember Topic: Selecting Appropriate Time-Series-Based Forecasting LO1: Identify the appropriate choice of forecasting model based on the characteristics of a time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 36) If the given time series has a trend and seasonality, the most appropriate forecasting model to determine the forecast of the time series is the ________ model.

A) multiple regression B) Holt-Winters no trend smoothing C) double exponential smoothing D) Holt-Winters multiplicative Answer: D Diff: 1 Blooms: Remember Topic: Selecting Appropriate Time-Series-Based Forecasting LO1: Identify the appropriate choice of forecasting model based on the characteristics of a time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

16 .

Use the data given below to answer the following question(s).

The table below provides the sales data for JD Inc. for the year 1998. Given: α = 0.2, β = 0.15, and γ = 0.05 (Hint: Classify the data into quarters for the following question(s).)

Umbrella Sales of JD Inc. Year Month Units 1 Jan 3980 1 Feb 4000 1 Mar 4740 1 April 4720 1 May 4920 1 Jun 5140 1 July 4640 1 Aug 4520 1 Sep 4480 1 Oct 4690 1 Nov 4210 1 Dec 4418 37) Using an appropriate Holt-Winters trend model, calculate the value of the mean absolute percentage error for the given data.

A) 8.10 B) 330.01 C) 384.83 D) 7.21 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

38) What is the value of the mean absolute deviation for the given data?

A) 8.10 B) 346.26 C) 14.82 D) 7.62 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

17 .

39) Calculate the value of the mean square error using an appropriate Holt-Winters trend model for the given data.

A) 8.10 B) 346.26 C) 148092.89 D) 7.62 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

40) What will be the predicted sales for umbrellas for the month of February of the next quarter?

A) 4530.19 B) 4645.06 C) 4883.76 D) 4818.07 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply Holt-Winters forecasting models to time series with both trend and seasonality.

LO2: Use a modern software tool to perform statistical calculations.

18 .

Use the data shown below to answer the following question(s).

The table below is the data set of the Shiller Real Home Price Index for the years 1946-1956.

Year 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956

Real Home Price Index 106.5058955 109.3296707 101.2225795 100.0466076 105.8948393 103.8986687 103.9743275 114.7133093 114.199126 115.4621261 115.3166155

41) Setting k = 3, determine the simple moving average forecast for the year 1950.

Answer: Year 1950 forecast = (100.0466076 + 101.2225795 + 109.3296707)/3 = 103.5329526 ≈ 104.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Stationary Time Series LO1: Apply moving average and exponential smoothing models to stationary time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 42) Setting k = 5, calculate the simple moving average forecast for the year 1951.

Answer: Year 1951 forecast = (106.5058955 + 109.3296707 + 101.2225795 + 100.0466076 + 105.8948393)/5 = 104.5999185 ≈ 105.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Stationary Time Series LO1: Apply moving average and exponential smoothing models to stationary time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

19 .

43) Setting k = 3, determine the value of mean absolute deviation.

Answer: Ft At — Ft |At — Ft| Year Real Home Price Index 1946 106.5058955 1947 109.3296707 1948 101.2225795 1949 100.0466076 105.6860486 -5.63944 5.639441 1950 105.8948393 103.5329526 2.361887 2.361887 1951 103.8986687 102.3880088 1.51066 1.51066 1952 103.9743275 103.2800385 0.694289 0.694289 1953 114.7133093 104.5892785 10.12403 10.12403 1954 114.199126 107.5287685 6.670358 6.670358 1955 115.4621261 110.9622543 4.499872 4.499872 1956 115.3166155 114.7915205 0.525095 0.525095 SUM 32.02563

MSE =

=

(At — Ft)2

31.80329 5.578509 2.282093 0.482037 102.496 44.49367 20.24885 0.275725 207.6602

= 4.00

The mean absolute deviation is 4.00.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Stationary Time Series LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

20 .

44) Setting k = 3, determine the value of root mean square of errors.

Answer: At — Ft |At — Ft| (At — Ft)2 Year Real Home Price Index Ft 1946 106.5058955 1947 109.3296707 1948 101.2225795 1949 100.0466076 105.6860486 -5.63944 5.639441 31.80329 1950 105.8948393 103.5329526 2.361887 2.361887 5.578509 1951 103.8986687 102.3880088 1.51066 1.51066 2.282093 1952 103.9743275 103.2800385 0.694289 0.694289 0.482037 1953 114.7133093 104.5892785 10.12403 10.12403 102.496 1954 114.199126 107.5287685 6.670358 6.670358 44.49367 1955 115.4621261 110.9622543 4.499872 4.499872 20.24885 1956 115.3166155 114.7915205 0.525095 0.525095 0.275725 SUM 32.02563 207.66

MSE =

=

= 25.95752173

RMSE = = 5.09 The value of root mean square errors is 5.09.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Stationary Time Series LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

21 .

45) Setting k = 3, determine the value of mean absolute percentage of error.

Answer: At — Ft |At — Ft| Year Real Home Price Index Ft 1946 106.5058955 1947 109.3296707 1948 101.2225795 1949 100.0466076 105.6860486 -5.63944 5.639441 1950 105.8948393 103.5329526 2.361887 2.361887 1951 103.8986687 102.3880088 1.51066 1.51066 1952 103.9743275 103.2800385 0.694289 0.694289 1953 114.7133093 104.5892785 10.12403 10.12403 1954 114.199126 107.5287685 6.670358 6.670358 1955 115.4621261 110.9622543 4.499872 4.499872 1956 115.3166155 114.7915205 0.525095 0.525095 SUM 32.02563

MAPE =

× 100 =

0.056368 0.022304 0.01454 0.006678 0.088255 0.05841 0.038973 0.004554 0.290081

× 100 = 3.63

The value of mean absolute percentage of error is 3.63.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Forecasting Models for Stationary Time Series LO1: State three error metrics used for measuring forecast accuracy and explain the differences among them.

46) Indicators are measures that are believed to influence the behavior of a variable an individual wishes to forecast.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Qualitative and Judgmental Forecasting LO1: Explain how judgmental approaches are used for forecasting.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

22 .

47) The indexes in the forecasting indicators provide a complete forecast.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Qualitative and Judgmental Forecasting LO1: Explain how judgmental approaches are used for forecasting.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 48) A cyclical effect is one that repeats at fixed intervals of time, typically a year, month, week, or day.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: Apply moving average and exponential smoothing models to stationary time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 49) The Holt-Winters additive model applies to time series whose amplitude increases or decreases over time.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: Use Holt-Winters and regression models to forecast time series with seasonality.

50) If a time series has seasonality but no trend, the most appropriate model used for forecasting is the Holt-Winters multiplicative model.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: Use Holt-Winters and regression models to forecast time series with seasonality.

23 .

51) Write a short note on indicators and indexes used in forecasting.

Answer: Indicators are measures that are believed to influence the behavior of a variable an individual wishes to forecast. By monitoring changes in indicators, the individual expects to gain insight about the future behavior of the variable to help forecast the future.

Indicators are often combined quantitatively into an index, a single measure that weights multiple indicators, thus providing a measure of overall expectation. For example, financial analysts use the Dow Jones Industrial Average as an index of general stock market performance.

Indexes do not provide a complete forecast, but rather a better picture of direction of change, and thus play an important role in judgmental forecasting.

Diff: 1 Blooms: Remember Topic: Qualitative and Judgmental Forecasting LO1: Explain how judgmental approaches are used for forecasting.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 52) What is simple exponential smoothing?

Answer: A versatile, yet highly effective approach for short-range forecasting is simple exponential smoothing. The basic simple exponential smoothing model is: Ft+1 = (1 - α)Ft + aAt = Ft + α(At - Ft) where Ft+1 is the forecast for time period t + 1, Ft is the forecast for period t, At is the observed value in period t, and α is a constant between 0 and 1 called the smoothing constant.

Diff: 1 Blooms: Remember Topic: Statistical Forecasting Models LO1: Apply moving average and exponential smoothing models to stationary time series.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches

24 .

53) Explain the significance of using double moving average and double exponential smoothing models.

Answer: For time series with a linear trend but no significant seasonal components, double moving average and double exponential smoothing models are more appropriate than using simple moving average or exponential smoothing models. Both methods are based on the linear trend equation: Ft+k = at + btk That is, the forecast for k periods into the future from period t is a function of a base value at, also known as the level, and a trend, or slope, bt. Double moving average and double exponential smoothing differ in how the data are used to arrive at appropriate values for at and bt.

In double exponential smoothing, the estimates of at and bt are obtained from the following equations: at = αFt + (1 - α)(at -1 + bt-1) bt = β(αt - at -1) + (1 - β)bt-1) Diff: 2 Blooms: Remember Topic: Forecasting Models for Time Series with a Linear Trend LO1: Apply double exponential smoothing models to time series with a linear trend.

LO2: Discuss the applications of time-series forecasting, trend models, and qualitative approaches 54) Explain the different types of Holt-Winters models used in forecasting.

Answer: Holt-Winters models are similar to exponential smoothing models in that smoothing constants are used to smooth out variations in the level and seasonal patterns over time. For time series with seasonality but no trend, XLMiner supports a Holt-Winters method but does not have the ability to optimize the parameters.

Many time series exhibit both trend and seasonality. Such might be the case for growing sales of a seasonal product. These models combine elements of both the trend and seasonal models. Two types of Holt-Winters smoothing models are often used.

The Holt-Winters additive model is based on the equation: Ft+1 = at + bt + St -s+1 and the Holt-Winters multiplicative model is: Ft+1 = (at + bt)St -s+1 The additive model applies to time series with relatively stable seasonality, while the multiplicative model applies to time series whose amplitude increases or decreases over time.

Therefore, a chart of the time series should be viewed first to identify the appropriate type of model to use. Three parameters, α, β , and γ, are used to smooth the level, trend, and seasonal factors in the time series. XLMiner supports both models.

Diff: 2 Blooms: Remember Topic: Statistical Forecasting Models LO1: Use Holt-Winters and regression models to forecast time series with seasonality. Apply Holt-Winters forecasting models to time series with both trend and seasonality.

25 .

55) Explain econometric models used in forecasting with examples.

Answer: Student examples may vary.

Explanatory/causal models, often called econometric models, seek to identify factors that explain statistically the patterns observed in the variable being forecast, usually with regression analysis.

For instance, a manufacturer of hospital equipment might include such variables as hospital capital spending and changes in the proportion of people over the age of 65 in building models to forecast future sales.

Diff: 1 Blooms: Remember Topic: Regression Forecasting with Causal Variables LO1: Explain how regression techniques can be used to forecast with explanatory or causal variables.

26 .

Business Analytics (Evans) Chapter 11 Simulation and Risk Analysis 1) Which of the following best defines Monte Carlo simulation?

A) It is a tool for building statistical models that characterize relationships among a dependent variable and one or more independent variables.

B) It is a collection of techniques that seek to group or segment a collection of objects into subsets.

C) It is the process of selecting values of decision variables that minimize or maximize some quantity of interest.

D) It is the process of generating random values for uncertain inputs in a model and computing the output variables of interest.

Answer: D Diff: 1 Blooms: Remember Topic: Spreadsheet Models with Random Variables LO1: Use data tables to conduct simple Monte Carlo simulations.

2) Why is the ROUND function used in Excel?

A) to ensure that the values generated are whole numbers B) to ensure that the values generated are multiples of ten C) to ensure that the values generated are always positive D) to ensure that the values are even numbers Answer: A Diff: 1 Blooms: Remember Topic: Spreadsheet Models with Random Variables LO1: Use data tables to conduct simple Monte Carlo simulations.

3) Which of the following statements is true of a triangular distribution?

A) We are required to know only the smallest and largest possible values that the variable might assume.

B) These distributions depend on multiple parameters that one can easily identify based on managerial knowledge and judgment.

C) The distribution has a limited range and can be skewed in either direction.

D) The distribution is very positively skewed, with no negative values.

Answer: C Diff: 1 Blooms: Remember Topic: Spreadsheet Models with Random Variables LO1: Use data tables to conduct simple Monte Carlo simulations.

1 .

4) How does the Risk Solver Platform define an uncertain function cell?

A) It is a cell that contains a triangular distribution function.

B) It is a cell in which a distribution of output values is created from the model.

C) It is a cell in which an uncertain variable is used to define a distribution.

D) It is a cell that can only be defined by discrete distributions.

Answer: B Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

5) Which of the following is a parameter in the Normal Distribution Dialog of the Risk Solver Platform?

A) maximum value B) minimum value C) most likely value D) mean Answer: D Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

6) Which option in Risk Solver Platform allows you to choose the number of times random values can be generated for the uncertain cells in the model?

A) Trials per Simulation B) Simulations to Run C) Only Run D) Sim.Random Seed Answer: A Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

2 .

7) Monte Carlo sampling differs from Latin Hypercube sampling in that the Monte Carlo sampling ________.

A) results in a more even distribution of output values B) uses the entire range of the distribution in a more consistent manner C) selects random variates independently over the entire range of possible values of the distribution D) uses an uncertain variable whose probability distribution is divided into intervals of equal probability Answer: C Diff: 2 Blooms: Understand Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

8) Latin Hypercube sampling differs from Monte Carlo sampling in that the Latin Hypercube sampling ________.

A) selects random variates independently over the entire range of possible values of the distribution B) uses an uncertain variable whose probability distribution is divided into intervals of equal probability C) is used for evaluating the model performance under various what-if scenarios D) achieves less accurate forecast statistics for a fixed number of trials Answer: B Diff: 2 Blooms: Understand Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

3 .

Use the information below to answer the following question(s).

Consider the following spreadsheet for an outsourcing decision model.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

A Outsourcing Decision Model

B

Data Manufactured in-house Fixed cost Unit variable cost

$ 60,000 $ 130

Purchased from supplier Unit cost

$ 180

Demand volume

$ 1,600

Model Total manufacturing cost Total purchased cost Difference Decision

We assume that the production (demand) volume is normally distributed with a mean of 1,000 and a standard deviation of 100. For the unit cost, select the triangular distribution. It has a minimum value of $150, most likely value of $165, and a maximum value of $190. The number of trials per simulation is equal to 5,000 at a Sim. Random Seed of 1. Run the simulation and answer the following question(s) using the Risk Solver Platform.

9) What is the value of mean obtained from the simulation results? [Hint: Choose the nearest answer] A) $18,385 B) $21,663 C) $14,894 D) $23,946 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

4 .

10) What is the value of standard deviation obtained from the simulation results?

A) $9,135 B) $7,884 C) $3,860 D) $12,870 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

11) What is the value of mode obtained from the simulation results?

A) $28,435 B) $26,287 C) $27,198 D) $25,394 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

12) What is the value of mean absolute deviation obtained from the simulation results?

A) $10,893 B) $3,476 C) $7,412 D) $5,885 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

5 .

13) What is the expected loss determined from the simulation results?

A) $(78) B) $(120) C) $(60) D) $(39) Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

14) What is the cost difference lower cutoff if the likelihood is 60%?

A) approximately 13.63 B) approximately 22.45 C) approximately 29.67 D) approximately 38.97 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

15) What is the cost difference upper cutoff if the likelihood is 75%?

A) approximately 46 B) approximately 28 C) approximately 32 D) approximately 59 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

6 .

Use the information below to answer the following question(s).

Below is a spreadsheet for Trance Electronics.

A B 1 Trance Electronics 2 3 Data 4 5 Market size 2500000 6 Unit (monthly Rx) revenue $ 120.00 7 Unit (monthly Rx) cost $ 50.00 8 Discount rate 8% 9 10 Project costs 11 R&D $ 750,000,000 12 Clinical Trials $ 100,000,000 13 Total Project Costs 14 15 Model 16 17 Year 1 18 Market growth factor 19 Market size 20 Market share growth rate 21 Market share 7% 22 Sales 23 24 Annual revenue 25 Annual costs 26 Profit 27 Cumulative net profit 28 29 Net present value

C

D

E

F

2

3

4

5

4%

4%

4%

4%

18%

18%

18%

18%

Suppose that the project manager of Trance Electronics has identified the following uncertain variables in the model and the distributions and parameters that describe them, as follows: Market size: normal with mean of 2,000,000 units and standard deviation of 400,000 units.

R&D costs: uniform between $600,000,000 and $800,000,000.

Clinical trial costs: lognormal with mean of $150,000,000 and standard deviation $30,000,000.

Annual market growth factor: triangular with minimum = 2%, maximum = 6%, and most likely = 3%.

Annual market share growth rate: triangular with minimum = 15%, maximum = 25%, and most likely = 20%.

The number of trials per simulation is equal to 10,000 at a Sim. Random Seed of 2. Run the simulation and answer the following questions using the Risk Solver Platform.

7 .

16) What is the standard deviation obtained from the simulation results of the net present value?

[Hint: Choose the approximate value.]

A) $204,868,924 B) $162,135,408 C) $182,992,245 D) $148,384,456 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

17) What is the coefficient of variation obtained from the simulation results of the net present value?

A) 1.78392 B) -2.23958 C) -1.43288 D) 2.87645 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

18) What is the expected loss ratio obtained from the simulation results of the net present value?

A) 93.50% B) 72.45% C) 67.32% D) 85.42% Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

8 .

19) What is the expected value margin obtained from the simulation results of the net present value?

A) 0.864 B) -0.708 C) 0.343 D) -0.467 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

20) What is the risk that the net present value over the 5 years will not be positive?

A) approximately 40% B) approximately 57% C) approximately 24% D) approximately 76% Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

21) What are the chances that the product will show a cumulative net profit in the fourth year?

A) approximately 25% B) approximately 18% C) approximately 11% D) approximately 32% Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

9 .

22) What cumulative profit in the fifth year is likely to be realized with a probability of 0.50?

A) $78,244,098 B) $102,573,415 C) $144,058,696 D) $203,676,827 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

LO2: Use a modern software tool to perform statistical calculations.

23) What is the correlation of the market size with the NPV with reference to the sensitivity chart?

A) 0.043 B) 0.910 C) -0.341 D) -0.026 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

LO2: Use a modern software tool to perform statistical calculations.

24) What is the correlation of the R&D cost with the NPV with reference to the sensitivity chart?

A) -0.361 B) 0.028 C) 0.908 D) -0.194 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

LO2: Use a modern software tool to perform statistical calculations.

10 .

25) With reference to the trend chart, which year shows the highest mean net cumulative profit?

A) Year 1 B) Year 2 C) Year 4 D) Year 5 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

LO2: Use a modern software tool to perform statistical calculations.

26) With reference to the trend chart, which year shows the highest uncertainty in forecasting the future?

A) Year 1 B) Year 3 C) Year 4 D) Year 5 Answer: D Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

LO2: Use a modern software tool to perform statistical calculations.

27) The Risk Solver Platform ________ feature allows you to determine the influence that each uncertain model input has individually on an output variable based on its correlation with the output variable.

A) trend chart B) sensitivity chart C) overlay chart D) box-whisker chart Answer: B Diff: 1 Blooms: Remember Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

11 .

28) The Risk Solver Platform ________ feature allows you to superimpose the frequency distributions from selected forecasts on one chart in order to compare differences and similarities that might not be apparent.

A) trend chart B) sensitivity chart C) overlay chart D) box-whisker chart Answer: C Diff: 1 Blooms: Remember Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

29) If a simulation has multiple output variables that are related to one another, the distributions of all output variables can be viewed on a single Risk Solver Platform chart called a(n) ________.

A) trend chart B) sensitivity chart C) overlay chart D) box-whisker chart Answer: A Diff: 1 Blooms: Remember Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

30) The Risk Solver Platform ________ chart shows the minimum, first quartile, median, third quartile, and maximum values in a data set graphically.

A) trend B) sensitivity C) overlay D) box-whisker Answer: D Diff: 1 Blooms: Remember Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

12 .

Answer the following question(s) using the Risk Solver Platform (5000 trials per simulation).

Consider the spreadsheet for a Newsvendor Model.

A 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

B

C

Newsvendor Model Data Selling price Cost Discount price

$ 18.00 $ 12.00 $ 9.00

Model Demand Purchase Quantity

44 44

Quantity Sold Surplus Quantity Profit

D Historical Candy Sales 50 45 40 46 43 43 46 42 44 43 47 41 41 45 51 43 45 42 44 48

E $ 264.00 $ 264.00 $ 264.00 $ 228.00 $ 264.00 $ 255.00 $ 255.00 $ 264.00 $ 246.00 $ 264.00 $ 255.00 $ 264.00 $ 237.00 $ 237.00 $ 264.00 $ 264.00 $ 255.00 $ 264.00 $ 246.00 $ 264.00 $ 264.00

Average Profit

31) Which of the following cells is defined as the uncertain function cell?

A) B12 B) B14 C) B15 D) B17 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Newsvendor Model LO1: Conduct Monte Carlo simulation using historical data and resampling techniques.

13 .

32) What is the value of mean profit?

A) $255.90 B) $251.45 C) $245.98 D) $264.00 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Newsvendor Model LO1: Conduct Monte Carlo simulation using historical data and resampling techniques.

33) What is the value of standard deviation?

A) $12.50 B) $10.99 C) $15.86 D) $20.25 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Newsvendor Model LO1: Conduct Monte Carlo simulation using historical data and resampling techniques.

34) What is the value of mode?

A) $228 B) $245 C) $255 D) $264 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Newsvendor Model LO1: Conduct Monte Carlo simulation using historical data and resampling techniques.

35) What is the value of mean absolute deviation?

A) $8.91 B) $5.45 C) $12.35 D) $15.64 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Newsvendor Model LO1: Conduct Monte Carlo simulation using historical data and resampling techniques.

14 .

36) What is the purchase quantity lower cutoff if the likelihood is 75%?

A) 264 B) 255 C) 246 D) 228 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Newsvendor Model LO1: Conduct Monte Carlo simulation using historical data and resampling techniques.

Use the information below to answer the following question(s).

Below is a spreadsheet for a hotel overbooking model.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

A Hotel Overbooking Model

B

C

Data Rooms available Price Overbooking cost

350 $ 120 $ 100

Model Reservation limit Customer demand Reservations made Cancellations Customer arrivals

350 320

D Demand 290 295 300 305 310 315 320 325 330 335 340 345

E Probability 0.03 0.05 0.08 0.12 0.15 0.20 0.15 0.10 0.05 0.02 0.14 0.05

15

Overbooked customers Net revenue

Assume that each reservation has a constant probability p = 0.04 of being cancelled. Answer the question(s) using the Risk Solver Platform.

15 .

37) With respect to B12, what is the range for values given in the Parameters section in the Discrete dialog?

A) $E$2:$E$13 B) $D$2:$D$8 C) $D$2:$D$13 D) $E$2:$E$8 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Overbooking Model LO1: Define and use custom distributions in Monte Carlo simulations.

38) With respect to B12, what is the range of weights given in the Parameters section in the Discrete dialog?

A) $E$2:$E$13 B) $D$2:$D$8 C) $D$2:$D$13 D) $E$2:$E$8 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Overbooking Model LO1: Define and use custom distributions in Monte Carlo simulations.

39) With respect to B14, what should the number of trials correspond to in the Parameters section of the Binomial dialog?

A) reservation limit B) customer demand C) reservations made D) customer arrivals Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Overbooking Model LO1: Define and use custom distributions in Monte Carlo simulations.

16 .

40) Which of the following cells is defined as an output cell?

A) B13 B) B14 C) B15 D) B17 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Overbooking Model LO1: Define and use custom distributions in Monte Carlo simulations.

41) A normal distribution has a limited range and can be skewed in either direction.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

42) Uniform or triangular distributions are used in the absence of data.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

43) As Monte Carlo simulation is essentially statistical sampling, the larger the number of trials used, the more precise is the result.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

44) Using an empirical distribution precludes sampling values outside the range of the actual data.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Newsvendor Model LO1: Use fitted distributions to define uncertain variables in a simulation.

17 .

45) Monte Carlo simulation is an inappropriate tool to analyze cash budgets because of the inherent uncertainty of the sales forecasts on which most cash budgets are based.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Cash Budget Model LO1: Correlate uncertain variables in a simulation model using Risk Solver Platform.

46) What is Monte Carlo simulation?

Answer: Monte Carlo simulation is the process of generating random values for uncertain inputs in a model, computing the output variables of interest, and repeating this process for many trials in order to understand the distribution of the output results. It can easily be accomplished for the outsourcing model using a data table.

Diff: 1 Blooms: Remember Topic: Spreadsheet Models with Random Variables LO1: Use data tables to conduct simple Monte Carlo simulations.

47) Explain the process of running a simulation using Risk Solver Platform.

Answer: To run a simulation, first click on the Options button in the Options group in the Risk Solver Platform ribbon. This displays a dialog in which the number of trials and other options to run the simulation are specified. Trials per Simulation allows the user to choose the number of times that Risk Solver Platform will generate random values for the uncertain cells in the model and recalculate the entire spreadsheet. The larger the number of trials, the more precise will be the result. Every time the model is run, slightly different results are produced because of sampling error. This can be controlled by changing the value of Sim. Random Seed in the dialog.

Diff: 1 Blooms: Remember Topic: Monte Carlo Simulation Using Risk Solver Platform LO1: Use Risk Solver Platform to develop, implement, and analyze Monte Carlo simulation models.

48) What are the benefits of a Risk Solver Platform sensitivity chart?

Answer: The sensitivity chart feature allows the user to determine the influence that each uncertain model input has individually on an output variable based on its correlation with the output variable. It provides three benefits: (1) It tells the user which uncertain variables influence output variables the most and which would benefit from better estimates. (2) It tells the user which uncertain variables influence output variables the least and can be ignored or discarded altogether. (3) By providing understanding of how the uncertain variables affect the model, it allows the development of more realistic spreadsheet models and improves the accuracy of the results.

Diff: 1 Blooms: Remember Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

18 .

49) What are three types of Risk Solver Platform charts used to obtain multiple simulation results?

Answer: The overlay chart feature allows you to superimpose the frequency distributions from selected forecasts on one chart in order to compare differences and similarities that might not be apparent.

If a simulation has multiple output variables that are related to one another, the distributions of all output variables can be viewed on a single chart called a trend chart. A box-whisker chart shows the minimum, first quartile, median, third quartile, and maximum values in a data set graphically.

Diff: 1 Blooms: Remember Topic: New-Product Development Model LO1: Construct and interpret sensitivity, overlay, trend, and box-whisker charts for a simulation model.

50) Explain the concept of the "flaw of averages."

Answer: The average values for the uncertain inputs cannot be used in a decision model and therefore, the need for Monte Carlo simulation cannot be eliminated. Dr. Sam Savage, a strong proponent of spreadsheet modeling, coined the term the "flaw of averages" to describe this phenomenon. This states that the evaluation of a model output using the average value of the input is not necessarily equal to the average value of the outputs when evaluated with each of the input values.

Diff: 1 Blooms: Remember Topic: Newsvendor Model LO1: Explain the significance of the "flaw of averages."

19 .

Business Analytics (Evans) Chapter 12 Introduction to Data Mining 1) Which of the following is included in the data mining approach of data exploration and reduction?

A) analyzing data to predict how to classify a new data element B) identifying groups in which the elements of the groups are in some way similar C) creating rules for target marketing based on association of variables D) developing analytic models to describe the relationship between metrics Answer: B Diff: 1 Blooms: Remember Topic: The Scope of Data Mining LO1: Define data mining and some common approaches used in data mining.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 2) Spam filtering for e-mails can be seen as an example of which of the following types of approaches of data mining?

A) reduction B) association C) cause-and-effect modeling D) classification Answer: D Diff: 1 Blooms: Remember Topic: The Scope of Data Mining LO1: Define data mining and some common approaches used in data mining.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 3) U-botit.com is an electronic commerce company that sells music online. It keeps a tab of what genre of music their registered customers buy. If u-botit.com were to use the data mining approach of association, which of the following actions would it take?

A) send recommendations to customers based on their buying habits B) conduct surveys to customers to gauge customer satisfaction C) classify the customers based on the genre of music they listen to D) provide discounts to certain genre buyers where sales are less Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: The Scope of Data Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

1 .

4) The data mining approach called ________ involves the developing of analytic models to describe the relationship between metrics that drive business performance like profitability, customer satisfaction, or employee satisfaction.

A) association B) reduction C) cause-and-effect modeling D) classification Answer: C Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: The Scope of Data Mining LO1: Define data mining and some common approaches used in data mining.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 5) Sendstars is a package delivering company that recently made a study on its customer retention and service renewal metrics. They found that most customers defected from using Sendstars' services due to customer dissatisfaction stemming from delivery personnel being rude or ill-mannered. To curb this issue, Sendstars gave special training to its employees in customer service. Which of the following data mining approaches did Sendstars employ when they decided to train their employees in customer care based on the study?

A) association B) cause-and-effect modeling C) classification D) reduction Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: The Scope of Data Mining LO1: Define data mining and some common approaches used in data mining.

LO2: Discuss ways in which statistics are used for quality management 6) ________ is a collection of techniques that seek to group or segment a collection of objects or observations into subsets, such that those within each subset are more closely related to one another than objects assigned to different subsets.

A) Association rule mining B) Discriminant analysis C) Cluster analysis D) Logistic regression Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 2 .

7) Which of the following is true of cluster analysis?

A) It is a cause-and-modeling type of analytic model.

B) It does not provide a definitive answer from analyzing the data.

C) It is primarily a prescriptive analytical method.

D) It uses clustered data that are not affected by the specific method used.

Answer: B Diff: 2 Blooms: Understand Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 8) Which of the following is true of hierarchical clustering?

A) All clusters must have the same number of data.

B) No single cluster can have all objects C) The data are not partitioned into a particular cluster in a single step.

D) All clusters must have more than one object in it.

Answer: C Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 9) Which of the following is the first stage of joining clusters in agglomerative hierarchical clustering?

A) by separating clusters into finer groups B) by joining two clusters farthest away from each other C) by joining two clusters that are not at a Euclidean distance D) by joining two clusters that are closest to each other Answer: D Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

3 .

10) Divisive clustering method is different from agglomerative clustering methods in that divisive clustering methods ________.

A) can only have a pair of subjects in each cluster B) separate objects into a particular cluster in one step C) separate n objects successively into finer groupings D) can only have a single subject in each cluster Answer: C Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 11) If the Euclidean distance were to be represented in a right triangle, which of the following would be considered the distance between two objects of a cluster?

A) the hypotenuse B) the small leg C) the long leg D) the average of the sum of both the legs Answer: A Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 12) Which of the following formulas calculates the Euclidean distance between X and Y? A) B) C) D) Answer: C Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

4 .

13) In the ________ method, the distance between groups is defined as the distance between the closest pair of objects, where only pairs consisting of one object from each group are considered.

A) Ward's linkage clustering B) single linkage clustering C) divisive clustering D) average group linkage clustering Answer: B Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 14) Which of the following is a definition of distance between two clusters in a complete linkage clustering?

A) the average of distances between all pairs of objects, where each pair is made up of one object from each group B) the distance between the most distant pair of objects, one from each group C) the sum of squares of the distance between clusters D) the distance between the value of the shortest link between the clusters Answer: B Diff: 2 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 15) Which of the following uses the sum of squares between the objects in the cluster when measuring their distances?

A) divisive clustering B) average group linkage clustering C) Ward's hierarchical clustering D) single linkage clustering Answer: C Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

5 .

16) In classification, which of the following would be considered as a categorical variable of interest for a credit approval decision for a requester?

A) age of the requester B) income of the requester C) revolving balance of the requester D) reject or accept credit approval Answer: D Diff: 2 Blooms: Remember Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 17) Which of the following features of classification, used in Excel, for a particular database will necessarily be coded to a certain value?

A) categorical variables B) non-numerical variables C) predictor variables D) numerical variables Answer: B Diff: 1 Blooms: Remember Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 18) The effectiveness of a classification rule can be judged making a probability of misclassification errors and summarizing the results in a ________.

A) classification matrix B) classification hierarchy C) dendogram D) classification algorithm Answer: A Diff: 1 Blooms: Remember Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

6 .

19) Which of the following data sets provides the most realistic estimate of the performance of a model on completely unseen data?

A) validation data set B) test data set C) training data set D) linear regression data set Answer: B Diff: 1 Blooms: Remember Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 20) Which of the following is true of a training data set?

A) They are primarily used to fine-tune models.

B) They provide the most realistic estimate for a model's performance.

C) They are used to build models where the data is unknown.

D) They have known outcomes.

Answer: D Diff: 1 Blooms: Remember Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 21) Validation data sets differ from training data sets in that validation data sets ________.

A) have known outcomes B) test a model with unseen data C) are used to teach data-mining algorithms D) provide the most realistic test for models with known data Answer: B Diff: 1 Blooms: Remember Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

7 .

22) Which of the following is true of random partitioning?

A) It cannot be used for creating training data sets.

B) It can contain any non-negative value from the observations.

C) It can include negative-value observations in its data.

D) It selects its data based on observations that have similar properties.

Answer: B Diff: 2 Blooms: Understand Topic: Classification LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 23) The ________ algorithm is a classification scheme that attempts to find records in a database that are similar to one we wish to classify.

A) linear regression B) logistic regression C) k-Nearest Neighbors D) discriminant analysis Answer: C Diff: 1 Blooms: Understand Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 24) In a k-Nearest Neighbors algorithm, similarity of records is based on the ________.

A) closeness of a record to numerical predictors in the other records B) sum of the squares of the distance between the numerical predictors C) set of linear functions of predictors called discriminant functions D) nearness of a record to its own observations Answer: A Diff: 1 Blooms: Understand Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

8 .

25) Which of the following is true of the value of k in the k-Nearest Neighbors algorithm?

A) The value of k is always taken as a constant and is equal to 1.

B) If the value of k is large, it drastically increases variability.

C) If the value k is very large, it introduces biases into the classification decisions.

D) If the value k is large, the classification of a record is very sensitive to the classification of the single record to which it is closest.

Answer: C Diff: 2 Blooms: Understand Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 26) ________ is a data-mining technique used for classifying a set of observations into predefined classes.

A) Logistic regression B) k-Nearest Neighbors algorithm C) Discriminant analysis D) Linear regression Answer: C Diff: 1 Blooms: Remember Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 27) The weights for determining the discriminant functions are determined by ________.

A) assessing the number of outliers that are present in each group B) calculating the distance between the two closest observations in each group C) measuring the closeness between predictor values of each set D) maximizing the between-group variance relative to the within-group variance Answer: D Diff: 2 Blooms: Understand Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

9 .

28) If bs are weights, Xs are input values, and c is a constant or intercept, provide the equation for discriminant functions, L. A) L = B) L = b1X1 + b2X2 + ... + bnXn + c

C) L = D) L = Answer: B Diff: 1 Blooms: Understand Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 29) Logistic regression is different from discriminant analysis in that logistic regression ________.

A) does not predict the weights B) sets observation into predefined classes C) does not depend on assumptions D) depends on assumptions such as normalization of independent variables Answer: C Diff: 1 Blooms: Understand Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 30) Which of the following is true of logistic regression as a classifying method?

A) Its dependent variable is always categorical.

B) Its independent variable is always continuous or numerical.

C) It predicts the probability of output variables based on dependent variables.

D) It cannot be used when the dependent variable is binary.

Answer: A Diff: 1 Blooms: Remember Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 10 .

31) When using logistic regression, where p being the probability that the dependent variable Y = 1, X1, X2 ..., Xk are the independent variables, and β0, β1, β2 ..., βk are unknown regression coefficients, ________ is called the odds of belonging to category 1(Y = 1).

A) p(β0 + β1X1 + β2X2 + ...+ βkXk) B) C)

D) Answer: C Diff: 2 Blooms: Remember Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 32) Which of the following is true of association rule mining?

A) It develops analytic models to describe the relationship between metrics that drive business performance.

B) It identifies attributes that occur frequently together in a given data set.

C) It seeks to classify a categorical outcome into one of two or more categories.

D) It is a data reduction technique that reduces large information into smaller heterogeneous groups.

Answer: B Diff: 1 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 33) Which of the following types of data-mining methods provide probabilistic if-then statements?

A) association rule B) logistic regression C) reduction D) cause-and effect modeling Answer: A Diff: 1 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 11 .

34) Which of the following typically describes the support for the association rule?

A) the number of transactions that include all items that are in the antecedent parts of the rule B) the number of transactions that include all items in the antecedent and consequent parts of the rule C) the number of transactions that include half from the antecedent and half from the consequent D) the number of transactions that include all items that are in the consequent parts of the rule Answer: B Diff: 1 Blooms: Understand Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 35) ________ is the ratio of the number of transactions that include all items in the consequent as well as the antecedent to the number of transactions that include all items in the antecedent.

A) Lift B) Logit C) Support for the association rule D) Confidence of the association rule Answer: D Diff: 1 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 36) The strength of the association rule, known as lift, is calculated as the ratio of the ________.

A) sum of the antecedents and the consequents to the antecedents B) antecedents to the consequents C) support to the confidence level D) confidence to expected confidence Answer: D Diff: 1 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

12 .

37) Which of the following is true of the lift value in association rule?

A) Its strength is a direct proportional to the strength of the association rule.

B) It cannot have a value that is more than 1 to be considered a good minimum.

C) It provides information on the increase of the antecedent given the consequent.

D) It does not require the expected confidence to be calculated.

Answer: A Diff: 1 Blooms: Understand Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 38) In the cause-and-effect modeling, internal metrics, such as employee satisfaction, productivity, and turnover are considered to be ________ measures.

A) logit B) life C) leading D) lagging Answer: C Diff: 1 Blooms: Remember Topic: Cause-and-Effect Modeling LO1: Use correlation analysis for cause-and-effect modeling LO2: Identify different business uses for statistics and the major statistical tools businesses use 39) Which of the following would be considered a lagging measure in a restaurant using the cause-and-modeling method of data mining?

A) a manager who is having trouble meeting the daily demands B) a waiter's behavior toward a customer C) an accurately billed meal D) a satisfied customer Answer: D Diff: 1 Blooms: Understand Topic: Cause-and-Effect Modeling LO1: Use correlation analysis for cause-and-effect modeling LO2: Identify different business uses for statistics and the major statistical tools businesses use

13 .

40) A musical instruments retailer has 10,000 point-of-sale transactions out of which 1500 sales included both items of electric guitars and guitar cases, and out of which 750 had sales of new strings. If the electric guitars are considered A, the guitar cases are considered B, and the strings are considered C, then the associate rule for these sales become "If A and B are purchased, then C is also purchased." Calculate the confidence level, expected confidence level, and lift for this rule, given that total transactions for C is 3000.

Answer: Total sales = 10,000 Sales of A and B = 1,500 Sales of A, B, and C = 750 The association rule "If A and B are purchased, then C is also purchased" has a support of 750 out of 1500 sales. confidence = P (consequent | antecedent) = P(antecedent + consequent) / P(antecedent) Therefore the confidence level = Total support / Total sales = 750 / 1,500 = 50%.

The total number of transactions for C is given as 3000.

Expected confidence is the number of transactions that include the consequent divided by the total number of transactions.

Therefore the expected confidence level = 3,000 / 10,000 = 30%.

The lift is calculated as confidence / expected confidence = 50% / 30% = 1.67.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Discuss ways in which statistics are used for quality management 41) In cluster analysis, the objects within clusters should exhibit a high amount of dissimilarity.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 42) In the average linkage clustering, the distance between two clusters is defined as the average of distances between all pairs of objects, where each pair is made up of one object from each group.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Data Exploration and Reduction LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

14 .

43) The accuracy of the model on the test data gives a realistic estimate of the performance of the model on completely unseen data.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Classification LO1: Identify different business uses for statistics and the major statistical tools businesses use LO2: Identify different business uses for statistics and the major statistical tools businesses use 44) Logistic regression cannot be employed when the dependent variable is binary.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 45) In association analysis, the antecedent and consequent are sets of items that do not have any items in common.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 46) Expected confidence assumes independence between the consequent and the antecedent.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 47) The market share of a business would be considered a lagging measure in the cause-andeffect modeling of data mining.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Cause-and-Effect Modeling LO1: Use correlation analysis for cause-and-effect modeling LO2: Identify different business uses for statistics and the major statistical tools businesses use

15 .

48) Lagging and leading measures in cause-and-effect modeling are uncorrelated.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Cause-and-Effect Modeling LO1: Use correlation analysis for cause-and-effect modeling LO2: Identify different business uses for statistics and the major statistical tools businesses use 49) Briefly explain classification as a data-mining tool with an example.

Answer: Classification is the process of analyzing data to predict how to classify a new data element. An example of classification is spam filtering in an e-mail client. By examining textual characteristics of a message, the message is classified as junk or not. Classification methods can help predict whether a credit-card transaction may be fraudulent, whether a loan applicant is high risk, or whether a consumer will respond to an advertisement.

Diff: 1 Blooms: Remember Topic: The Scope of Data Mining LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 50) How are objects clustered in agglomerative hierarchical clustering?

Answer: An agglomerative hierarchical clustering procedure produces a series of partitions of the data, Pn, Pn-1, ..., P1 . Pn consists of n single-object clusters, and consists of a single group containing all n observations. At each particular stage, the method joins together the two clusters that are closest together. At the first stage, this consists of simply joining together the two objects that are closest together. The most commonly used measure of distance between objects is Euclidean distance. Some clustering methods use the squared Euclidean distance (that is, without the square root) because it speeds up the calculations.

Diff: 2 Blooms: Remember Topic: Classification LO1: Explain how cluster analysis is used to explore and reduce data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

16 .

51) Exemplify the k-Nearest Neighbor algorithm of classification.

Answer: Suppose we have a record X that we want to classify. If we use the k-Nearest Neighbor method, the nearest neighbor to that record in the training data set is the one that that has the smallest distance from it. The 1-NN rule then classifies record X in the same category as its nearest neighbor. We can extend this idea to a k-NN rule by finding the k-Nearest Neighbors in the training data set to each record we want to classify and then assigning the classification as the classification of majority of the k-Nearest Neighbors. The choice of k is somewhat arbitrary. If k is too small, the classification of a record is very sensitive to the classification of the single record to which it is closest. A larger k reduces this variability, but making k too large introduces bias into the classification decisions. For example, if k is the count of the entire training dataset, all records will be classified the same way.

Diff: 2 Blooms: Remember Topic: Classification Techniques LO1: Explain the purpose of classification methods, how to measure classification performance, and the use of training and validation data.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 52) How is the strength of an association measured?

Answer: To measure the strength of association, an association rule has two numbers that express the degree of uncertainty about the rule. The first number is called the support for the association rule. The support is simply the number of transactions that include all items in the antecedent and consequent parts of the rule. The second number is the confidence of the association rule. Confidence is the ratio of the number of transactions that include all items in the consequent as well as the antecedent to the number of transactions that include all items in the antecedent. Another measure of the strength of an association rule is lift, which is defined as the ratio of confidence to expected confidence. Expected confidence is the number of transactions that include the consequent divided by the total number of transactions. The higher the lift ratio, the stronger the association rule; a value greater than 1.0 is usually a good minimum.

Diff: 2 Blooms: Remember Topic: Association Rule Mining LO1: Describe association rule mining and its use in market basket analysis.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

17 .

53) Explain how data-mining using lagging and leading measures of the cause-and-effect model can help managers make business decisions.

Answer: Managers are always interested in results, such as profit, customer satisfaction and retention, production yield, and so on. These are divided as either lagging measures or leading measures. Customer satisfaction results in regard to sales or service transaction would be a lagging measure; employee satisfaction, sales representative behavior, billing accuracy, and so on, would be examples of leading measures that might influence customer satisfaction. If employees are not satisfied, their behavior toward customers could be negatively affected, and customer satisfaction could be low. If this can be explained using business analytics, managers can take steps to improve employee satisfaction, leading to improved customer satisfaction.

Therefore, it is important to understand what controllable factors significantly influence key business performance measures that managers cannot directly control. Correlation analysis can help to identify these influences and lead to the development of cause-and-effect models that can help managers make better decisions today that will influence results tomorrow.

Diff: 2 Blooms: Remember Topic: Cause-and-Effect Modeling LO1: Use correlation analysis for cause-and-effect modeling LO2: Identify different business uses for statistics and the major statistical tools businesses use

18 .

Business Analytics (Evans) Chapter 13 Linear Optimization 1) Which of the following best defines decision variables in an optimization model?

A) They are limitations, requirements, or other restrictions that are imposed on any solution.

B) They are the quantities that the model seeks to maximize or minimize.

C) They are quantities for which no feasible solutions exist.

D) They are unknown values that the model seeks to determine.

Answer: D Diff: 1 Blooms: Remember Topic: Building Linear Optimization Models LO1: Apply the four-step process to show a mathematical model for an optimization problem.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 2) Which of the following best defines objective functions?

A) They are limitations, requirements, or other restrictions that are imposed on any solution in an optimization model.

B) They are quantities that an optimization model seeks to maximize or minimize.

C) They are quantities for which no feasible solutions exist in an optimization model.

D) They are unknown values that an optimization model seeks to determine.

Answer: B Diff: 1 Blooms: Remember Topic: Building Linear Optimization Models LO1: Apply the four-step process to show a mathematical model for an optimization problem.

3) Which of the following best defines constraints in an optimization problem?

A) They are limitations, requirements, or other restrictions that are imposed on any solution.

B) They are quantities that an optimization model seeks to maximize or minimize.

C) They are quantities for which no feasible solutions exist.

D) They are unknown values that the model seeks to determine.

Answer: A Diff: 1 Blooms: Remember Topic: Building Linear Optimization Models LO1: Apply the four-step process to show a mathematical model for an optimization problem.

1 .

Use the following information to answer the following question(s), using the SUMPRODUCT function.

Stone Age Surfboards is a small manufacturer of two types of popular high-tide surfboards, the Rockwell and the Limestone models. The manufacturing process consists of two departments: fabrication and finishing. The fabrication department has 15 skilled workers, each of whom works 5 hours per day. The finishing department has 5 workers, who also work a 5-hour shift.

Each pair of Rockwell surfboards requires 3 labor hours in the fabrication department and 1.5 labor hours in finishing. The Limestone model requires 4.5 labor-hours in fabrication and 2 labor-hours in finishing. The company operates 6 days a week. It makes a per-unit profit of $60 on the Rockwell model and $75 on the Limestone model. Approximately 4.1 Rockwell models and 8.4 Limestone models are produced per day.

4) What is the total number of hours used for fabrication?

A) 42.58 B) 50.10 C) 35.64 D) 22.95 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Implementing Linear Optimization Models on Spreadsheets LO1: Implement linear optimization models on spreadsheets.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

2 .

5) What is the total number of hours used for the finishing operation?

A) 42.58 B) 50.10 C) 35.64 D) 22.95 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Implementing Linear Optimization Models on Spreadsheets LO1: Implement linear optimization models on spreadsheets.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 6) What is the total profit generated?

A) $ 876.00 B) $ 675.50 C) $ 480.50 D) $ 965.00 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Implementing Linear Optimization Models on Spreadsheets LO1: Implement linear optimization models on spreadsheets.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

3 .

Consider the spreadsheet for Stone Age Surfboards provided below. Use this data to answer the following question(s), using the Standard Solver.

Stone Age Surfboards is a small manufacturer of two types of popular low-tide surfboards, the Graystone and the Lava models. The manufacturing process consists of two departments: fabrication and finishing. The fabrication department has 8 skilled workers, each of whom works 9.25 hours per day. The finishing department has 5 workers, each of whom works a 6-hour shift per day. Each pair of Graystone surfboards requires 2.5 labor hours in the fabrication department and 2 labor hours in finishing. The Lava model requires 4.2 labor-hours in fabrication and 3.6 labor-hours in finishing. The company operates 6 days a week. It makes a per unit profit of $40 on the Graystone model and $60 on the Lava model.

7) What is the total number of hours used for fabrication?

A) 54.5 B) 30.0 C) 35.5 D) 43.8 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 4 .

8) What is the total number of hours used for the finishing operation?

A) 18.7 B) 30.0 C) 35.5 D) 24.2 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

9) What is the total profit generated?

A) $ 675.68 B) $ 920.57 C) $ 521.74 D) $ 788.32 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

10) What is the value of slack obtained from the answer report?

A) 46.78 B) 38.46 C) 59.24 D) 23.85 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

5 .

11) What is the Allowable Increase for Lava surfboards produced?

A) 30 B) 24 C) 12 D) 18 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

12) What is the Allowable Decrease for Graystone surfboards produced?

A) 30.74 B) 80.00 C) 12.33 D) 6.67 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

13) What is the shadow price for the finishing hours used?

A) 32.46 B) 17.39 C) 8.33 D) 6.67 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

6 .

14) What is the Allowable Increase in the finishing hours used?

A) 32.46 B) 8.33 C) 26.84 D) 16.67 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

15) What is the Allowable Decrease in the fabrication hours used?

A) 26.84 B) 16.67 C) 8.33 D) 38.46 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

16) What will be the total profit contribution from Lava surfboards?

A) $ 391.30 B) $ 521.74 C) $ 130.43 D) $ 276.65 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

7 .

17) What will be the total profit contribution from Graystone surfboards?

A) $ 391.30 B) $ 521.74 C) $ 130.43 D) $ 276.65 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

18) If the unit profit on Graystone surfboards is increased by $10, what is the total profit generated?

A) $ 489.13 B) $ 521.74 C) $ 423.91 D) $ 554.35 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

19) If the unit profit on Graystone surfboards is increased by $10, what is the Allowable Increase for Lava surfboards?

A) 30.00 B) 85.00 C) 16.67 D) 58.75 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

8 .

20) If the unit profit on Graystone surfboards is increased by $10, what is the Allowable Decrease for Lava surfboards?

A) 30.00 B) 85.00 C) 16.67 D) 58.75 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

21) If the unit profit on Graystone surfboards is increased by $10, what is the shadow price for the finishing hours used?

A) 18.48 B) 17.39 C) 15.42 D) 14.15 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

22) If the unit profit on both Graystone and Lava surfboards is increased by $10, what is the total profit generated?

A) $ 521.74 B) $ 505.43 C) $ 423.91 D) $ 619.57 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

9 .

23) If the unit profit on both Graystone and Lava surfboards is increased by $10, what is the Allowable Decrease for Lava surfboards?

A) 95.00 B) 38.46 C) 20.00 D) 11.11 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

24) If the unit profit on both Graystone and Lava surfboards is increased by $10, what is the shadow price for the finishing hours used?

A) -4.35 B) 8.33 C) 20.65 D) 32.46 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

25) Due to decreasing profits, if the production of Graystone surfboards is stopped, compute the total profit the firm can earn.

A) $ 521.74 B) $ 489.13 C) $ 423.91 D) $ 456.52 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Using Optimization Models for Prediction and Insight LO1: Use Solver for conducting what-if analysis of optimization models.

10 .

26) Which of the following solving methods is selected in the Solver dialog for linear and linear integer optimization problems?

A) GRG Nonlinear B) Simplex LP C) SOCP Barrier Engine D) Evolutionary Answer: B Diff: 1 Blooms: Remember Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

Use the following information to answer the question(s) below.

Cerebro Manufacturing produces four types of structural support fittings-plugs, rails, rivets, and clips-which are machined on two CNC machining centers. The machining centers have a capacity of 250,000 minutes per year. The gross margin per unit and machining requirements are shown in the spreadsheet below.

A 1 2

3 4 5 6 7 8

B

C

D

E

F

Cerebro Manufacturing Model

Product Plugs Gross margin/unit $ 0.40 Minutes/unit 1 Gross margin/minute Maximum production Profit

Rails $ 1.20 2

Rivets $ 0.80 3

27) What is the gross margin per minute of plugs manufactured?

A) $ 0.60 B) $ 0.73 C) $ 0.40 D) $ 0.27 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: How Solver Works LO1: Explain how Solver works.

11 .

Clips $ 1.10 1.5

Machine Capacity (mins./year) 250,000

28) What is the gross margin per minute of rivets manufactured?

A) $ 0.60 B) $ 0.73 C) $ 0.40 D) $ 0.27 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: How Solver Works LO1: Explain how Solver works.

29) What is the maximum possible production of rails based on the machine capacity?

A) 250,000.00 B) 83,333.33 C) 166,666.67 D) 125,000.00 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: How Solver Works LO1: Explain how Solver works.

30) What is the maximum production of clips based on the machine capacity?

A) 250,000.00 B) 83,333.33 C) 166,666.67 D) 125,000.00 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: How Solver Works LO1: Explain how Solver works.

31) What is the total profit generated from the manufacture of only plugs?

A) $ 66,666.67 B) $ 100,000.00 C) $ 183,333.33 D) $ 150,000.00 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: How Solver Works LO1: Explain how Solver works.

12 .

32) What is the total profit generated from the manufacture of rivets?

A) $ 66,666.67 B) $ 100,000.00 C) $ 183,333.33 D) $ 150,000.00 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: How Solver Works LO1: Explain how Solver works.

33) Which of the following options is used if Solver gives an error message that linearity is not satisfied?

A) Ignore Integer Constraints B) Show Iteration Results C) Use Automatic Scaling D) Use Multistart Answer: C Diff: 1 Blooms: Remember Topic: How Solver Works LO1: Explain how Solver works.

34) When a model has a unique optimal solution, it means that ________.

A) the objective is maximized or minimized by more than one combination of decision variables B) there is no solution that simultaneously satisfies all the constraints C) the Allowable Increase or Allowable Decrease values for changing cells are zero D) there is exactly one solution that will result in the maximum or minimum objective Answer: D Diff: 1 Blooms: Remember Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

13 .

35) If a model has alternative optimal solutions, ________.

A) the objective is maximized or minimized by more than one combination of decision variables B) there is no solution that simultaneously satisfies all the constraints C) the objective can be increased or decreased to infinity or negative infinity D) there is exactly one solution that will result in the maximum or minimum objective Answer: A Diff: 1 Blooms: Remember Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

36) Alternate optimal solutions exist when the ________.

A) reduced cost is equal to the shadow price B) ratio of the objective coefficient to the constraint coefficient is one C) Allowable Increase values for changing cells are zero D) final value of the changing cells is greater than that of the constraints Answer: C Diff: 1 Blooms: Remember Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

37) An unbounded problem is one for which ________.

A) the objective is maximized or minimized by more than one combination of decision variables B) there is no solution that simultaneously satisfies all the constraints C) the objective can be increased or decreased to infinity or negative infinity while the solution remains feasible D) there is exactly one solution that will result in the maximum or minimum objective Answer: C Diff: 2 Blooms: Remember Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

14 .

38) An infeasible problem is one for which ________.

A) the objective is maximized or minimized by more than one combination of decision variables B) there is no solution that simultaneously satisfies all the constraints C) the objective can be increased or decreased to infinity or negative infinity D) there is exactly one solution that will result in the maximum or minimum objective Answer: B Diff: 1 Blooms: Remember AACSB: Analytic Skills Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

39) The ________ indicates how much the value of the objective function will change as the right-hand side of a constraint is increased by 1.

A) objective coefficient B) shadow price C) binding constraint D) reduced cost Answer: B Diff: 1 Blooms: Remember Topic: Using Optimization Models for Prediction and Insight LO1: Interpret the Solver sensitivity report.

40) Which of the following approaches provided by the Risk Solver Platform can automatically run multiple optimizations while varying model parameters within a predefined range?

A) sensitivity analysis B) breakdown analysis C) parameter analysis D) uncertainty analysis Answer: C Diff: 1 Blooms: Remember Topic: Using Optimization Models for Prediction and Insight LO1: Use the Sensitivity Report to evaluate scenarios.

41) A constraint function is a function of the decision variables in the problem.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Building Linear Optimization Models LO1: Apply the four-step process to show a mathematical model for an optimization problem.

15 .

42) Any solution that satisfies all constraints of a problem is called a feasible solution.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Solving Linear Optimization Models LO1: Implement linear optimization models on spreadsheets.

43) A binding constraint is one for which the Cell Value is greater than the right-hand side of the value of the constraint.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Solving Linear Optimization Models LO1: Use the standard and premium Solver add-ins to solve linear optimization models in Excel.

44) Infeasible problems can occur when the demand requirement is higher than the available capacity.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

45) Whenever a constraint has positive slack, the shadow price is equal to one.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Using Optimization Models for Prediction and Insight LO1: Interpret the Solver sensitivity report.

46) What are the two basic properties of a linear optimization model?

Answer: A linear optimization model has two basic properties: (1) The objective function and all constraints are linear functions of the decision variables. This means that each function is simply a sum of terms, each of which is some constant multiplied by a decision variable. (2) All variables are continuous, meaning that they may assume any real value. This assumption may not be realistic for a practical business problem, but it simplifies the solution method.

Diff: 1 Blooms: Remember Topic: Building Linear Optimization Models LO1: State the properties that characterize linear optimization models.

16 .

47) What are the Excel functions to avoid in linear optimization?

Answer: Several common functions in Excel can cause difficulties when attempting to solve linear programs using Solver because they are discontinuous and no longer satisfy the conditions of a linear model. Common Excel functions to avoid are ABS, MIN, MAX, INT, ROUND, IF, and COUNT. Diff: 1 Blooms: Remember Topic: Implementing Linear Optimization Models on Spreadsheets LO1: Implement linear optimization models on spreadsheets.

48) Explain the simplex method used by Solver.

Answer: Solver uses a mathematical algorithm called the simplex method. It characterizes feasible solutions algebraically by solving systems of linear equations. It moves systematically from one corner point to another to improve the objective function until an optimal solution is found. Because of the linearity of the constraints and objective function, the simplex method is guaranteed to find an optimal solution if one exists and usually does so quickly and efficiently.

Diff: 1 Blooms: Remember Topic: How Solver Works LO1: Explain how Solver works.

49) What are the four possible outcomes that can be obtained by solving a linear optimization model?

Answer: • When a model has a unique optimal solution, it means that there is exactly one solution that will result in the maximum (or minimum) objective.

• If a model has alternative optimal solutions, the objective is maximized (or minimized) by more than one combination of decision variables.

• An unbounded problem is one for which the objective can be increased or decreased without bound.

• An infeasible problem is one for which no feasible solution exists.

Diff: 1 Blooms: Remember Topic: Solver Outcomes and Solution Messages LO1: List the four possible outcomes when solving a linear optimization model and recognize them from Solver messages.

17 .

50) What is the importance of Shadow Price in the Sensitivity Report?

Answer: The Constraints section of the Sensitivity Report lists the final value of the constraint function (the left-hand side), a number called the shadow price, the original right-hand side value of the constraint, and an Allowable Increase and Allowable Decrease. The Shadow Price tells how much the value of the objective function will change as the right-hand side of a constraint is increased by 1. Whenever a constraint has positive slack, the shadow price is zero. When a constraint involves a limited resource, the shadow price represents the economic value of having an additional unit of that resource.

Diff: 1 Blooms: Remember Topic: Using Optimization Models for Prediction and Insight LO1: Interpret the Solver sensitivity report.

18 .

Business Analytics (Evans) Chapter 14 Applications of Linear Optimization 1) Which of the following is an example of a simple bounds constraint?

A) confirming that production does not go beyond a certain unit value B) reducing production due to scarcity of resources C) meeting targets for a specific sales job D) equaling production in September with the resources available at the end of August Answer: A Diff: 1 Blooms: Understand Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 2) Problem statements such as production must be sufficient to meet promised customer orders would be categorized as a ________ constraint.

A) limitations B) requirements C) proportional relationships D) balance Answer: B Diff: 1 Blooms: Remember Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 3) ________ constraints essentially state that input = output and ensure that the flow of material or money is accounted for at locations or between time periods.

A) Requirements B) Proportional relationships C) Balance D) Limitations Answer: C Diff: 1 Blooms: Remember Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

1 .

4) Which of the following would be considered as an example of a proportional relationships constraint?

A) making certain that only a certain amount of units are produced B) guaranteeing that a certain amount of workforce will be available for a certain month C) balancing the input to the output during production D) ensuring that the budget allocated to marketing is thrice that of research and development Answer: D Diff: 1 Blooms: Understand Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 5) Problem statements such as the amount of material used in production cannot exceed the amount available in inventory would be categorized as a ________ constraint.

A) proportional relationships B) limitations C) requirements D) simple bounds Answer: B Diff: 1 Blooms: Understand Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

2 .

Use the table below to answer the following question(s).

Remington Textiles has a mill that produces three types of fabrics on a make-to-order basis. The mill operates on a 24/7 basis. The key decision facing the plant manager is about the type of loom needed to process each fabric during the coming 12 weeks to meet demands for the three fabrics and not exceed the capacity of the looms in the mill. Two types of looms are used: Jaquard and Northrop. Jaquard looms can be used to make all fabrics and are the only looms that can weave certain fabrics, such as plaids. Demands, variable costs for each fabric, and production rates on the looms are given in the table below. The mill has 10 Northrop looms and 2 Jaquard looms. Any fabrics that cannot be woven in the mill because of limited capacity will be purchased from an external supplier, finished at the mill, and sold at the selling price. In addition to determining which looms to use to process the fabrics, the manager also needs to determine which fabrics to buy externally.

Remington Textiles Data

Fabric 1 2 3

Demand (yards) 50,000 62,000 35,000

Jaquard Capacity (yards/hour) 5.6 5.2 4.8

Northrop Capacity (yards/hour) 0 4.8 4.5

Mill Cost ($/yard) 0.53 0.6 0.71

Outsourcing Cost ($/hour) 0.81 0.85 0.84

Answer the following questions using a linear optimization model.

6) According to the model, what is the total amount of Fabric 1 to be produced on Jaquard?

A) 50,000 B) 0 C) 27,420.8 D) 22,579.2 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

3 .

7) According to the model, what is the total amount of Fabric 1 to be purchased?

A) 27,420.8 B) 50,000 C) 22,579.2 D) 32,595 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

8) According to the model, what is the total amount of Fabric 2 to be produced with Northrop?

A) 0 B) 62,000 C) 20,160 D) 32,595 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

9) According to the model, what is the total amount of Fabric 2 to be purchased?

A) 50,000 B) 62,000 C) 0 D) 2,405 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

4 .

10) According to the model, what is the total amount of Fabric 3 to be produced with Northrop?

A) 0 B) 35,000 C) 2,405 D) 32,595 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

11) According to the model, what is the total amount of Fabric 3 to be purchased?

A) 2,405 B) 0 C) 32,595 D) 35,000 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

12) According to the model, what is the total cost incurred by Remington for producing the three fabrics?

A) $96,540.47 B) $149,240.47 C) $96,227.82 D) $88,862.65 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

5 .

13) From the Sensitivity Report, what amount (cost/hour) would make it feasible to purchase Fabric 2 rather than produce it?

A) $0.6 B) $0.25 C) $0.128 D) $1.1 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

14) From the Sensitivity Report, which of the following would reduce the total cost by $1.568 for each additional hour of capacity for the Jaquard looms?

A) decreasing the Northrop loom cost per hour by $0.58 B) decreasing the Northrop loom capacity down by 534.4 C) increasing the Jaquard loom capacity up by 4896.5 hours D) increasing the Jaquard loom capacity up by 4032 hours Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Process Selection Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

6 .

Use the table below to answer the following question(s).

Qualis Investments is a private limited business that manages personal financial portfolios. The company manages six mutual funds and has a client that has acquired $750,000 from an inheritance. Characteristics of the funds are given in the table below.

Qualis Mutual Fund Data

1 2 3 4 5 6

Expected Annual Return Qualis Low-priced Stock Fund 7.23% Qualis Multinational Fund 8.42% Qualis Mid-cap Stock Fund 6.66% Qualis Mortgage Fund 2.72% Qualis Income Equity Fund 8.89% Qualis Balanced Fund 3.50%

Risk Measure 11.87 12.62 13.72 3.37 8.4 6.91

The company recommends that no more than $300,000 be invested in any individual fund, and that at least $80,000 be invested in each of the mid-cap stock and mortgage fund. The total amount invested in the low-priced and multinational funds are at least 35% of the total investment. The client would like an average return of at least 6%. Assume that through represents the dollar amount invested in funds 1 through 6, respectively.

15) Which of the following is the objective function minimize total risk?

A) 11.87 X1 + 12.62 X2 + 13.72 .X3 + 3.37 X4 + 8.4 X5 + 6.91 X6 B) 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 C) 11.87 X1 + 12.62 X2 + 13.72 .X3 + 3.37 X4 + 8.4 X5 + 6.91 X6 / 750,000 D) 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 ≥ 6% Answer: C Diff: 2 Blooms: Apply Topic: Portfolio Investment Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 16) Which of the following is the constraint for the weighted return?

A) X1 + X2 + X3 + X4 + X5 + X6 = 750,000 B) 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 ≥ 6.00 C) 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 / 750,000 ≥ 6.00 D) 7.23 X1 + 8.42 X2 + 6.66 .X3 + 2.72 X4 + 8.89 X5 + 3.5 X6 / 750,000 Answer: C Diff: 2 Blooms: Apply Topic: Portfolio Investment Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 7 .

17) Which of the following is the constraint for investment in low-priced and multinational funds?

A) X1 + X2 ≥ 0.35(750,000) B)

≥ 0.35(750,000)

C) X1 + X2 + X3 + X4 + X5 + X6 ≥ 0.35(750,000) D)

≥ 0.35

Answer: A Diff: 2 Blooms: Apply Topic: Portfolio Investment Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 18) Which of the following describes the constraint on the mid-cap fund?

A) X3 ≥ 0.35(750,000) B) X3 ≥ 80,000 C) X3 ≥ 0.35(80,000) D) X3 ≤ 670,000 Answer: B Diff: 2 Blooms: Apply Topic: Portfolio Investment Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

8 .

Use the table below to answer the following question(s).

The Riviera Transport Company (RTC) produces car accessories at two plants: Dallas and Atlanta. They ship them to major distribution centers in Houston, San Jose, Jacksonville, and Memphis. The accounting, production, and marketing departments have provided the information in the table below, which shows the unit cost of shipping between any plant and distribution center, plant capacities over the next planning period, and distribution center demands. RTC's supply chain manager faces the problem of determining how much to ship between each plant and distribution center to minimize the total transportation cost, not exceed available capacity, and meet customer demand.

Assume Xij = amount shipped from plant i to distribution center j, where i = 1 represents Dallas, i = 2 represents Atlanta, j = 1 represents Houston, and so on.

Transportation Model Data

Plant Dallas Atlanta Demand

Distribution Center Houston 13.00 10.75 175

San Jose 15.25 15.16 325

Jacksonville 10.99 9.65 480

Memphis 18.48 18.50 950

Capacity 1250 750

Answer the following question(s) using a linear optimization model.

19) Which of the following is the objective function for cost minimization?

A) minimize cost = 13 X11 +15.25 X12 +10.99 X13 +18.48 X14 / 10.75 X21 +15.16 X22 +9.65 X23 +18.5 X24 B) minimize cost = 13 X11 +15.25 X12 +10.99 X13 +18.48 X14 + 10.75 X21 +15.16 X22 +9.65 X23 +18.5 X24 C) minimize cost = 13 X11 +15.25 X12 +10.99 X13 +18.48 X14 - 10.75 X21 +15.16 X22 +9.65 X23 +18.5 X24 D) minimize cost = (13 X11 +15.25 X12 +10.99 X13 +18.48 X14 - 10.75 X21 +15.16 X22 +9.65 X23 +18.5 X24 )(1,250 / 750) Answer: B Diff: 2 Blooms: Apply Topic: Transportation Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

9 .

20) Which of the following is the constraint for total amount shipped from Dallas?

A) X11 + X12 + X13 + X14 ≤ 1,250 B) X21 + X22 + X23 + X24 ≤ 1,250 C) X21 + X22 + X23 + X24 ≤ 750 D) X11 + X12 + X13 + X14 - X21 + X22 + X23 + X24 ≤ 850 Answer: A Diff: 2 Blooms: Apply Topic: Transportation Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 21) Which of the following is the constraint for total amount shipped from Atlanta?

A) X11 + X12 + X13 + X14 - X21 + X22 + X23 + X24 ≤ 850 B) X21 + X22 + X23 + X24 ≤ 750 C) X21 + X22 + X23 + X24 ≤ 1250 D) X11 + X12 + X13 + X14 ≤ 1250 Answer: B Diff: 2 Blooms: Apply Topic: Transportation Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 22) Which of the following gives the constraint for the demand met at a distribution center?

A) X11 + X21 = 1,250 B) X13 + X23 ≥ 210 C) X13 + X23 = 770 D) X13 + X23 = 480 Answer: D Diff: 2 Blooms: Apply Topic: Transportation Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

10 .

23) Which of the following is the constraint of nonnegativity for all values of i and j?

A) 13 X11 +15.25 X12 +10.99 X13 +18.48 X14 / 10.75 X21 +15.16 X22 + 9.65 X23 +18.5 X24 ≤ 0 B) Xij ≥ 0, for all i and j C) Xij ≤ 0, for all i and j D) Answer: B Diff: 1 Blooms: Apply Topic: Transportation Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 24) According to the transportation model, which of the following is the amount shipped from Dallas to Houston?

A) 0 B) 175 C) 1,180 D) 750 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

25) According to the transportation model, which of the following is the amount shipped from Dallas to San Jose?

A) 0 B) 95 C) 230 D) 325 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

11 .

26) According to the transportation model, what is the amount shipped from Atlanta to Jacksonville?

A) 950 B) 480 C) 0 D) 95 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

27) According to the transportation model, what is the amount shipped from Atlanta to Memphis?

A) 480 B) 0 C) 230 D) 950 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

28) According to the transportation model, what is the total shipment from Dallas?

A) 750 B) 1,180 C) 430 D) 950 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

12 .

29) According to the transportation model, what is the total cost incurred by Riviera Transport Company?

A) $29,016.95 B) $26,698.95 C) $20,331.35 D) $41,978.75 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

30) According to the Sensitivity report on the model, by what price should the unit cost of shipment reduce to make shipment from Dallas to Houston feasible?

A) $8.68 B) $2.16 C) $10.84 D) $3.41 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

31) From the Sensitivity Report on the model, to which of the following cities can Atlanta not ship to without reducing unit cost of production?

A) Houston B) San Jose C) Jacksonville D) Memphis Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

13 .

32) Based on the Sensitivity Report on the model, which of the following is the savings on a reduction of demand of 2 units at Jacksonville?

A) $2.5 B) $1.25 C) $19.48 D) $16.98 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

33) According to the Sensitivity Report, which of the following is true if the capacity at Atlanta is increased by 230 units?

A) the total cost can be reduced by $.09 per unit B) the total cost at Atlanta increases by $9 C) the total cost per unit will reduce by $.09 to Memphis D) the shadow price at Atlanta will increase to $0.09 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

34) In a sensitivity report, a solution is considered a(n) ________ solution if the right-hand-side value of any constraint has a zero Allowable Increase or Allowable Decrease.

A) algorithmic B) unbounded C) infeasible D) degenerate Answer: D Diff: 1 Blooms: Remember Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

14 .

Use the table below to answer the following question(s).

Letherin Hides is a company that makes boots specifically targeting college students. Forecasts of sales for the next year are 200 in the summer, 450 in the autumn, and 500 in the winter.

Accessories that are used on the boots are purchased from a supplier for $31.66. The cost of capital is estimated to be 24% per year (or 6% per quarter); thus, the holding cost per item is 0.06($31.66) = $1.9 per quarter (rounded figure). Letherin Hides hires freelance art designers at part-time to craft designs during the summer, and they earn $6 per hour. In the autumn, labor is more difficult to keep, and the owner must pay $6.5 per hour to retain qualified help. Because of the high demand for part-time help during the winter holiday season, labor rates are higher in the winter, and workers earn $7.75 per hour. Each boot design takes 2 hours to complete. How should production be planned over the three quarters to minimize the combined production and inventory holding costs?

The table below provides information on Letherin Hides boot design cost and production.

Letherin Hides Data Summer Unit Production Cost 12 Unit Inventory Holding Cost 1.9 Demand 200

Autumn Winter 13

15.5

1.9 450

1.9 500

Use a linear optimization model based on the data to answer the following questions.

35) According to the linear optimization model, what is the total amount to be produced in summer?

A) 200 B) 100 C) 550 D) 0 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Multiperiod Production Planning Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

15 .

36) According to the linear optimization model, what is the inventory held at the end of summer?

A) 450 B) 0 C) 200 D) 550 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Multiperiod Production Planning Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

37) According to the linear optimization model, what is the inventory held at the end of autumn?

A) 0 B) 200 C) 950 D) 500 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Multiperiod Production Planning Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

38) According to the linear optimization model, what is the net production for autumn?

A) 200 B) 500 C) 450 D) 50 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Multiperiod Production Planning Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

16 .

39) According to the linear optimization model, what is the net production for winter?

A) 0 B) 950 C) 200 D) 500 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Multiperiod Production Planning Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

40) According to the linear optimization model, what is the total cost incurred by Letherin Hides for the combined seasons?

A) $17,075 B) $15,605 C) $15,700 D) $18,700 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Multiperiod Production Planning Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

17 .

Use the table below to answer the following question(s).

Pickson Luthiers Corporation makes four models of electric guitars, ScarCT, Dela Mort, Warax, and Invazen. Each guitar must flow through five departments, assembly, painting, sound testing, inspection, and packaging. The table below shows the relevant data. Production rates are shown in units/hour. (ScarCT is assembled elsewhere). Pickson wants to determine how many guitars to make to maximize monthly profit.

Pickson Luthiers Corporation Data Guitar Model ScarCT Dela Mort Warax Invazen

Selling price/Unit 750.00 788.00 800.00 850.00

Production rates (units/hour) ScarCT Assembly Painting 35 Sound Testing 20 Inspection 10 Packaging 9

Variable cost/Unit 660.00 680.00 700.00 800.00

Min Sales 0 0 100 80

Dela Mort 35 20 10 12 10

Warax 25 15 20 8 5

Max Sales 2500 2000 1000 500

Invazen 20 10 18 5 8

Hours Available 220 220 220 220 220

Use a linear optimization model based on the data to answer the following question.

41) According to the linear optimization model, what would be the total time spent on inspecting the Dela Mort models?

A) 158.33 B) 12.5 C) 85 D) 48 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

18 .

42) According to the linear optimization model, what would be the total time spent for sound testing the Warax model?

A) 5 B) 4 C) 6 D) 10.5 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

43) According to the linear optimization model, what would be the total time spent for assembling the Invazen models?

A) 8 B) 4 C) 16 D) 10 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

44) According to the linear optimization model, what would be the total time spent for packaging the Invazen models?

A) 8 B) 16 C) 20 D) 10 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

19 .

45) According to the linear optimization model, what is the total hours spent for painting all the models?

A) 220 B) 94.94 C) 109.67 D) 199.44 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

46) According to the linear optimization model, which of the following departments uses all the time that it is allocated to finish its job?

A) assembly B) painting C) inspection D) packaging Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

47) According to the linear optimization model, what is the total number of ScarCTs produced?

A) 2500 B) 750 C) 0 D) 100 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

20 .

48) According to the linear optimization model, what is the net profit per unit on Dela Mort?

A) $205,200 B) $108 C) $680 D) $90 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

49) According to the linear optimization model, what is the total profit contribution by the Invazen model?

A) $205,200 B) $20,000 C) $10,000 D) $4,000 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

50) According to the linear optimization model, what is the total profit for the Pickson Luthiers Corporation?

A) $10,000 B) $199,880 C) $205,200 D) $219,200 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Use a modern software tool to perform statistical calculations.

21 .

51) According to the Sensitivity Report, by how much should the unit profit on ScarCT be reduced in order for its production to be feasible?

A) $30 B) $90 C) $60 D) $120 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Models with Bounded Variables LO1: Correctly interpret the Solver Sensitivity report for models that have bounded variables.

LO2: Use a modern software tool to perform statistical calculations.

22 .

52) Keychain Publishing is planning to release two books, simultaneously, by the same author.

One is a fictional book, while the other is the author's autobiography. The details of its cost, production, and demand are given in the table below.

Keychain Publishing Data Cost/book Price/book

Fictional $1.75 $11.49

Base demand 50,000 Increase/$1 Adv. 25 Min. percent requirement 35% Max. percent limitation 70% Total Budget

Autobiography $1.50 $9.86 65,000 35

$150,000

Keychain Publishing has $150,000 available to bind books and advertise them with an objective of maximizing profit contribution. Provide the objective function for maximizing profits, along with its constraints.

Answer: To formulate this model, let F = number of the fictional copies produced B = number of the autobiographical copies produced Af = dollar amount spent on the fictional copies Ab = dollar amount spent on the autobiographical copies The objective is to maximize the profits, which is, revenue minus costs. = (11.49F + 9.86B) - (1.75F + 1.5B + Af + Ab) = 9.74F + 8.36B -Af - Ab The constraints are defined as follows: 1. Budget cannot be exceeded: 1.75F + 1.5B + Af + Ab ≤ $150,000 2. Contractual requirements must be met: .35 ≤ F / (F + B) ≤ 0.7 3. Production must not exceed demand: F ≤ 50,000 + 25Af B ≤ 65,000 + 35Ab

23 .

4. Nonnegativity: All variables F, B, Af, Ab ≥ 0 Diff: 3 Blooms: Apply Topic: A Production/Marketing Allocation Model LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 53) The mathematical form Y ≤ 450 would be considered as representing a simple bounds constraint.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 54) Nonnegativity of the decision variables is an example of an explicit constraint.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 55) Degeneracy does not impact the interpretation of sensitivity analysis information.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 56) Linear optimization cannot be used on problems having multiple time periods.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Multiperiod Production Planning Models LO1: Build linear optimization models for a variety of applications.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

24 .

57) When interpreting sensitivity analysis information for changes in model parameters, all other model parameters are held constant.

Answer: TRUE Diff: 1 Blooms: Remember Topic: A Production/Marketing Allocation Model LO1: Ensure that assumptions underlying the use of sensitivity information hold when interpreting Solver reports.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 58) List out the different types of constraints that help model formulation.

Answer: The most challenging aspect of model formulation is identifying constraints.

Understanding the different types of constraints can help in proper identification and modeling.

Constraints generally fall into one of the following categories: • Simple Bounds • Limitations • Requirements • Proportional Relationships • Balance Constraints Diff: 1 Blooms: Remember Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 59) Give an account of balance constraints with some examples of verbal clues.

Answer: Balance constraints essentially state that input = output and ensure that the flow of material or money is accounted for at locations or between time periods. Examples include production in June plus any available inventory must equal June's demand plus inventory held to July, the total amount shipped to a distribution center from all plants must equal the amount shipped from the distribution center to all customers, or the total amount of money invested or saved in March must equal the amount of money available at the end of February.

Diff: 1 Blooms: Remember Topic: Types of Constraints in Optimization Models LO1: Describe the different categories of constraints that are typically used in optimization models.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

25 .

60) What is degeneracy in linear optimization? Give an example.

Answer: Linear optimization solutions can exhibit degeneracy. A solution is a degenerate solution if the right-hand-side value of any constraint has a zero Allowable Increase or Allowable Decrease. For example, reduced costs and shadow prices may not be unique, and objective function coefficients may have to be changed beyond their allowable increases or decreases before the optimal solution will change.

Diff: 1 Blooms: Remember Topic: Transportation Models LO1: Use Excel to evaluate scenarios for linear optimization models and gain practical insights into the solutions.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 61) How does Solver handle simple lower bounds and upper bounds compared to ordinary constraints?

Answer: Solver handles simple lower bounds (e.g., C ≥500) and upper bounds (e.g., D≤1,000) quite differently from ordinary constraints in the Sensitivity report. In Solver, lower and upper bounds are treated in a manner similar to nonnegativity constraints, which also do not appear explicitly as constraints in the model. Solver does this to increase the efficiency of the solution procedure used; for large models this can represent significant savings in computer-processing time.

Diff: 1 Blooms: Remember Topic: Models with Bounded Variables LO1: Correctly interpret the Solver Sensitivity report for models that have bounded variables.

LO2: Identify different business uses for statistics and the major statistical tools businesses use 62) How does Excel's Solver help interpret reduced cost as shadow price for bounded variables?

Answer: Interpreting reduced costs as shadow prices for bounded variables can be confusing.

Excel's Solver has a unique feature to make this easier. In the spreadsheet model, define auxiliary variables–a new set of cells for any decision variables that have upper- or lower-bound constraints by referencing, not copying, the original changing cells. Then in the Solver model, use these auxiliary variable cells–not the changing variable cells as defined–to define the bound constraints.

Diff: 1 Blooms: Remember Topic: Models with Bounded Variables LO1: Use auxiliary variables to model bound constraints and obtain more complete sensitivity information.

LO2: Identify different business uses for statistics and the major statistical tools businesses use

26 .

Business Analytics (Evans) Chapter 15 Integer Optimization 1) ________ is the parameter that specifies when the Solver algorithm will terminate.

A) Mutation Rate B) Population Size C) Integer Tolerance D) Convergence Answer: C Diff: 1 Blooms: Remember Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

2) What should be the value of Integer Tolerance in order to find the guaranteed optimal integer solution?

A) -1 B) 0 C) 0.5 D) 1 Answer: B Diff: 1 Blooms: Remember Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

1 .

Use the spreadsheet below for Stone Age Surfboards to answer the following question(s) using integer constraints on variables in the optimization models using the standard Solver.

3) Which of the following constraints is used in Solver?

A) $B$14:$C$14 = integer B) $D$15 > = $D$6 C) $D$16 > = $D$7 D) $D$19 < = 0 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

2 .

4) What is the quantity of Graystone surfboards produced?

A) 2 B) 5 C) 7 D) 10 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

5) What is the quantity of Lava surfboards produced?

A) 2 B) 5 C) 7 D) 10 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

6) What is the total number of hours used for fabrication?

A) 39.6 B) 34.4 C) 29.2 D) 24.8 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

3 .

7) What is the total number of hours used for the finishing operation?

A) 39.6 B) 34.4 C) 29.2 D) 24.8 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

8) What is the total profit generated?

A) $ 748.28 B) $ 687.46 C) $ 385.65 D) $ 500.00 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

4 .

Use the table below to answer the following question(s) using the standard Solver.

A company makes standard 130-inch-wide rolls of thin sheet metal and slits them into smaller rolls to meet customer orders for widths of 10, 14, and 25 inches. Suppose that the company has proposed the following cutting patterns:

Demands for the coming week are 950 10-inch rolls, 725 14-inch roles, and 640 25-inch rolls.

Answer the following questions using the standard Solver. Answer the following questions using the standard Solver.

9) What is the total number of 10-inch rolls produced?

A) 940 B) 946 C) 950 D) 960 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

10) What is the total number of 14-inch rolls produced?

A) 721 B) 725 C) 726 D) 740 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

5 .

11) What is the total number of 25-inch rolls produced?

A) 630 B) 635 C) 641 D) 645 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

12) What is the total scrap produced?

A) 1,389 B) 1,390 C) 1,427 D) 1,445 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

6 .

Use the table below to answer the following question(s) using the standard Solver.

Coppell Services contracts with outsourcing partners to handle various customer service functions. Based on a study of call volumes provided by one of the firm's partners, the minimum number of staff needed for each hour of the day is as follows: Hour 8-9 9-10 10-11 11-noon noon-1 1-2 2-3 3-4 4-5

Minimum Staff Required 6 10 12 10 8 16 15 20 15

Mr. Coppell hires 6 permanent employees and wants to staff the remaining requirements using part-time employees who work 4-hour shifts (four consecutive hours starting as early as 8 A.M. or as late as 1 P.M.).

13) How many part-time employees are present in the 8-9 time slot?

A) 4 B) 6 C) 9 D) 14 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Develop integer optimization models for practical applications such as workforce scheduling and location.

LO2: Use a modern software tool to perform statistical calculations.

7 .

14) How many excess employees are present in the noon-1 time slot?

A) 2 B) 4 C) 5 D) 6 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Develop integer optimization models for practical applications such as workforce scheduling and location.

LO2: Use a modern software tool to perform statistical calculations.

15) How many part-time employees are present in the 3-4 time slot?

A) 16 B) 14 C) 9 D) 7 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Develop integer optimization models for practical applications such as workforce scheduling and location.

LO2: Use a modern software tool to perform statistical calculations.

16) How many excess employees are present in the 4-5 time slot?

A) 0 B) 2 C) 4 D) 6 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Develop integer optimization models for practical applications such as workforce scheduling and location.

LO2: Use a modern software tool to perform statistical calculations.

8 .

17) What is the minimum number of part-time employees needed for each 4-hour shift to ensure meeting the staffing requirements?

A) 16 B) 28 C) 24 D) 20 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Solving Models with General Integer Variables LO1: Develop integer optimization models for practical applications such as workforce scheduling and location.

LO2: Use a modern software tool to perform statistical calculations.

18) Which of the following best defines a binary variable?

A) It is a general integer variable that is restricted to being between -1 and 1.

B) It is a general integer variable that is restricted to being a multiple of 2.

C) It is a general integer variable that is restricted to being between 0 and 1.

D) It is a general integer variable that is restricted to being greater than 2.

Answer: C Diff: 1 Blooms: Remember Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

9 .

Use the table below to answer the following question(s) by invoking the binary constraints on the variables using the standard Solver.

Below is the spreadsheet for a project selection model:

1 2 3 4 5 6

A B Project Selection Model

C

D

E

F

G

Project 3

Project 4

Project 5

Available

$125,000

$150,000 $225,000

Resources

$28,000

$52,000

$65,000

$175,000

2

6

4

10

Data Project 1 Project 2 Expected Return (NPV) $160,000 $200,000 Cash requirements $45,000 $70,000 Personnel requirements 7 4

7 8 9 Model 10 Project selection 11 decisions 12 Cash Used 13 Personnel Used 14 Return

19) Which of the following cells is set as the objective cell in Solver?

A) $G$12 B) $F$14 C) $G$14 D) $B$12 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

10 .

20) What is the amount of cash used for Project 2?

A) $ 105,000 B) $ 25,000 C) $ 115,000 D) $ 70,000 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

21) What is the amount of cash used for Project 5?

A) $ 65,000 B) $ 117,000 C) $ 13,000 D) $ 110,000 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

22) What is the total amount of cash used for all five projects?

A) $ 175,000 B) $ 163,000 C) $ 215,000 D) $ 260,000 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

11 .

23) What is the amount of personnel used for Project 2?

A) 3 B) 4 C) 6 D) 11 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

24) What is the total amount of personnel used for all five projects?

A) 23 B) 17 C) 10 D) 4 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

25) What is the return obtained from Project 3?

A) $ 200,000 B) $ 125,000 C) $ 275,000 D) $ 225,000 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

12 .

26) What is the return obtained from Project 5?

A) $ 200,000 B) $ 125,000 C) $ 275,000 D) $ 225,000 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

27) What is the total return obtained from all five projects?

A) $ 860,000 B) $ 550,000 C) $ 700,000 D) $ 395,000 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

13 .

Use the table below to answer the following question(s) using the standard Solver.

Below is the spreadsheet for a plant location model:

28) Which of the following constraints is used in Solver?

A) $F$16:$F$17 >= $F$6:$F$7 B) $B$20:$E$20 >= $B$10:$E$10 C) $B$18:$E$18 = binary D) $J$16:$J$17 > = 0 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

29) In which of the following plants is the total amount shipped to the distribution centers equal to zero?

A) Dallas B) Atlanta C) Detroit D) Baltimore Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

14 .

30) What is the total amount shipped by the Dallas plant to the distribution centers?

A) 750 B) 1,000 C) 1,250 D) 1,300 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

31) What is the total amount shipped by the Atlanta plant to the distribution centers?

A) 750 B) 1,000 C) 1,250 D) 1,300 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

32) What is the total amount shipped by the Baltimore plant to the distribution centers?

A) 750 B) 1,000 C) 1,250 D) 1,300 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

15 .

33) What is the total cost incurred?

A) $ 28,956 B) $ 35,233 C) $ 42,675 D) $ 47,864 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

16 .

Use the table below to answer the following question(s) using the standard Solver.

Below is the spreadsheet for Memphis Designs fixed cost model:

34) Which of the following constraints is used in Solver?

A) $B$14:$D$14 > = $B$18:$D$18 B) $B$16:$D$16 = binary C) $B$19:$D$19 < = $B$8:$D$8 D) $C$15:$D$15 = binary Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

17 .

35) What is the inventory at the end of the first quarter?

A) 600 B) 400 C) 50 D) 75 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

36) What is the binary constraint at the end of the third quarter?

A) 75 B) 200 C) 450 D) 600 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

37) What is the net production at the end of the first quarter?

A) 75 B) 200 C) 450 D) 600 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

18 .

38) What is the net production at the end of the second quarter?

A) 75 B) 200 C) 450 D) 600 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

39) What is the net production at the end of the third quarter?

A) 75 B) 200 C) 450 D) 600 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

40) What is the total cost incurred by the company?

A) $ 8,637.50 B) $ 10,756.80 C) $ 7,289.62 D) $ 9,582.75 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Mixed-Integer Optimization Models LO1: Develop and solve mixed-integer optimization models such as facility location and fixedcost models.

LO2: Use a modern software tool to perform statistical calculations.

19 .

41) Decision variables that are forced to be integers are called general integer variables.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Solving Models with General Integer Variables LO1: Recognize when to use integer variables in optimization models.

42) If the Integer Tolerance is set to 0.01, the Solver will stop if it finds an integer solution that is within 10% of the optimal solution.

Answer: FALSE Diff: 1 Blooms: Understand Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

43) Solver can generate a Sensitivity report for integer models.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

44) Mathematically, a binary variable x can be represented as x > 2 and integer.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

45) To invoke the binary constraints on the variables, the option bin is chosen from the dropdown box in the Add Constraint dialog.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

20 .

46) Explain the method of solving models with general integer variables.

Answer: Decision variables that are forced to be integers are called general integer variables. If the linear optimization model is solved without the integer restrictions and the optimal solution happens to have all integer values, then it clearly would have solved the integer model. However, this is generally not the case. The algorithm used to solve integer optimization models begins by solving the LP relaxation and proceeds to enforce the integer restrictions using a systematic research process that involves solving a series of modified linear optimization problems.

Diff: 1 Blooms: Remember Topic: Solving Models with General Integer Variables LO1: Recognize when to use integer variables in optimization models.

47) What is the importance of Integer Tolerance in Solver?

Answer: When using Solver, it is important to set a parameter called the Integer Tolerance. This value specifies when the Solver algorithm will terminate. By default, the Integer Tolerance is set to 0.05 within Solver. This means that Solver will stop if it finds an integer solution that is within 5% of the optimal solution. To find the guaranteed optimal integer solution, Integer Tolerance must be set to 0. To do this, click the Options button in the Solver Parameters dialog and change the value of Integer Optimality (%) to 0.

Diff: 1 Blooms: Remember Topic: Solving Models with General Integer Variables LO1: Incorporate integer variables into Solver models.

LO2: Use a modern software tool to perform statistical calculations.

48) What is the importance of binary variables in integer optimization models?

Answer: Many optimization models require binary variables, which are variables that are restricted to being either 0 or 1. Binary variables are used to model logical decisions in optimization models. They can be used to model whether to place (x=1) or not to place (x=0) a facility at a certain location, whether or not to run a production line, or whether or not to invest in a certain stock.

Diff: 1 Blooms: Remember Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

49) What is the purpose of a heat map?

Answer: As the amount of cash and personnel vary from the base case to the extreme, the optimal results can be found in the project selection models. The color-coded regions in the matrix show combinations of personnel and cash with the same minimal values of the return.

Such a visual display is often called a heat map. This information can help the manager evaluate the trade-offs between increasing the expected return and acquiring additional resources.

Diff: 1 Blooms: Understand Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

LO2: Use a modern software tool to perform statistical calculations.

21 .

50) Explain the implementation of a project-selection model.

Answer: A B C D E F G Project Selection 1 Model 2 3 Data Project 4 1 Project 2 Project 3 Project 4 Project 5 Available Expected Return $160,00 5 (NPV) 0 $200,000 $125,000 $150,000 $225,000 Resources Cash 6 requirements $45,000 $70,000 $28,000 $52,000 $65,000 $175,000 Personnel 7 requirements 7 4 2 6 4 10 8 9 Model 10 Project selection 11 decisions SUM(B12: 12 Cash Used B6*B11 C6*C11 D6*D11 E6*E11 F6*F11 F12) Personnel SUM(B13: 13 Used B7*B11 C7*C11 D7*D11 E7*E11 F7*F11 F13) SUM(B14: 14 Return B5*B11 C5*C11 D5*D11 E5*E11 F5*F11 F14) The decision variables are defined in cells B11:F11. By multiplying these values by the data for each project in rows 5-7, the total return, cash used, and personnel used for the projects that are selected, can be computed in rows 12-14. The objective function is computed in cell G14 as the sum of the returns for the selected projects. Similarly, the amounts of cash and personnel used are also summed for the projects selected, representing the constraint functions in cells G12 and G13. The binary constraints are invoked in the Solver.

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Integer Optimization Models with Binary Variables LO1: Formulate and solve optimization models with binary variables and logical constraints.

22 .

Business Analytics (Evans) Chapter 16 Nonlinear and Non-Smooth Optimization Use the table below to answer the following question(s).

Bolton Computer's Laptop Pricing Decision Inputs Price Model Sales

-3.85 × price + 1150.9

Outputs Total revenue

sales × price

1) Bolton Computers are planning to release a new line of low-end laptops. Using Excel's Solver, develop a nonlinear model to calculate the optimal price for the laptops, given that sales = -3.85 × price + 1150.9.

A) 342.40 B) 380.90 C) 719.70 D) 149.47 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

1 .

2) According to the nonlinear model, which of the following is the expected sales figure based on the computed price?

A) 149.47 B) 719.7 C) 575.45 D) 500 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

3) According to the nonlinear model, which of the following is the total revenue expected from the sales?

A) 22,340.91 B) 85,876.59 C) 107,571.78 D) 74,733.77 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

2 .

Use the table below to create a nonlinear model based on the table to answer the following question(s).

The Atlas Movies Theater is planning to reprice their ticket rates to maximize revenues. They have three classes of tickets: Classic, Silver, and Gold. The table below provides information on the average ticket sales, revenue and price elasticity on demand. They have a total seating capacity of 300. The table also provides the price range within which they plan to reduce their ticket rates.

4) According to the nonlinear model, what is the new price for Classic tickets?

A) $7.50 B) $12.45 C) $6.50 D) $8.20 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

5) According to the nonlinear model, what is the new price for Silver tickets?

A) $7.40 B) $12.17 C) $11.50 D) $12.50 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

3 .

6) According to the nonlinear model, what is the new price for Gold tickets?

A) $16.50 B) $15.50 C) $16 D) $16.11 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

7) According to the nonlinear model, which of the following is the projected sales figure for Classic tickets at the new price?

A) 32 B) 90 C) 175 D) 202 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

8) According to the nonlinear model, which of the following is the projected sales figure for Silver tickets at the new price?

A) 93 B) 178 C) 202 D) 101 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

4 .

9) According to the nonlinear model, which of the following is the projected sales figure for Gold tickets at the new price?

A) 32 B) 90 C) 33 D) 178 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

10) According to the nonlinear model, which of the following is the projected revenue figure for Classic tickets based on its new price?

A) $1,314.72 B) $1,116.03 C) $521.68 D) $1,312.52 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

11) According to the nonlinear model, which of the following is the projected revenue figure for Silver tickets based on its new price?

A) $1,163.02 B) $1,132.08 C) $1,224.63 D) $1,316.92 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

5 .

12) According to the nonlinear model, which of the following is the projected revenue figure for Gold tickets based on its new price?

A) $432.93 B) $1,316.92 C) $1,116.03 D) $523.29 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

13) According to the nonlinear model, which of the following is the total projected revenue for the new sales figures?

A) $1,637.72 B) $2,970.09 C) $1,316.92 D) $2,865.89 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

14) Which of the following is true of the nonlinear model created for the Atlas movie ticket repricing scenario?

A) The projected revenue for the Gold class is infeasible within the price range provided.

B) The projected value for most tickets sold is for the Silver class.

C) The total projected tickets sold exceed the total seating capacity.

D) The projected revenue is lowest for the Gold tickets.

Answer: D Diff: 3 Blooms: Understand AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

6 .

15) Which of the following is the rectilinear distance between the points A(13,15) and B(10,12)?

A) 4 B) 25 C) 6 D) 10 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

Use the table below to answer the following question(s).

Shirley Templeton is a real estate agent for Paralol Realty. Shirley is given the responsibility to manage potential customers for 5 of the Realty's bungalows. These 5 bungalows are situated in close proximity. In order to make traveling easire, Shirley decides to move to a location closer to the 5 bungalows. The table below gives the location (X and Y coordinates) of the 5 bungalows along with the number of trips she would have to make to each bungalow. Create a nonlinear model based on the data given in the table below noting that the objective is to reduce the weighted distance between Shirley's accommodation and the 5 bungalows.

Bungalow Location Data Location Bungalow 1 Bungalow 2 Bungalow 3 Bungalow 4 Bungalow 5

X-coordinate 0 25 20 90 60

Y-coordinate 0 100 75 80 100

Trips/Month 6 30 15 28 10

16) According to the model, what is the X-coordinate for the location of Shirley's new accommodation?

A) 54.62 B) 36.53 C) 25 D) 23.12 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

7 .

17) According to the model, what is the Y-coordinate for the location of Shirley's new accommodation?

A) 91.16 B) 25.08 C) 98.21 D) 54.62 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

18) According to the model, what is the distance between Shirley's new accommodation and Bungalow 1?

A) 36.53 B) 14.53 C) 98.21 D) 23.12 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

19) According to the model, what is the distance between Shirley's new accommodation and Bungalow 2?

A) 91.16 B) 23.12 C) 98.21 D) 14.53 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

8 .

20) According to the model, what is the distance between Shirley's new accommodation and Bungalow 3?

A) 54.62 B) 25.08 C) 36.53 D) 23.12 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

21) According to the model, what is the distance between Shirley's new accommodation and Bungalow 4?

A) 14.53 B) 250.78 C) 54.62 D) 98.21 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

22) According to the model, what is the distance between Shirley's new accommodation and Bungalow 5?

A) 54.62 B) 25.08 C) 14.53 D) 91.16 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

9 .

23) According to the model, what is the weighted distance between Shirley's new accommodation and Bungalow 1?

A) 589.25 B) 435.89 C) 346.77 D) 3152.08 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

24) According to the model, what is the weighted distance between Shirley's new accommodation and Bungalow 2?

A) 435.89 B) 250.78 C) 1529.39 D) 589.25 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

25) According to the model, what is the weighted distance between Shirley's new accommodation and Bungalow 3?

A) 3152.08 B) 1529.39 C) 346.77 D) 250.78 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

10 .

26) According to the model, what is the weighted distance between Shirley's new accommodation and Bungalow 4?

A) 589.25 B) 346.77 C) 1529.39 D) 3152.08 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

27) According to the model, what is the weighted distance between Shirley's new accommodation and Bungalow 5?

A) 435.89 B) 1529.39 C) 589.25 D) 250.78 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

28) According to the model, what is the total weighted distance that Shirley would travel between the bungalows?

A) 4151.29 B) 1529.39 C) 3152.08 D) 4305.30 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

11 .

29) According to the model, which of the following bungalows is Shirley's new accommodation closest to?

A) Bungalow 1 B) Bungalow 5 C) Bungalow 2 D) Bungalow 4 Answer: C Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

30) Given that Q = order quantity, D = annual demand, C = unit cost of the item, C0 = cost per order placed, i = inventory carrying charge per unit, which of the following represents the holding cost per unit?

A) D/Q B) iC C) (D/Q)C0 D) iCQ/2 Answer: B Diff: 2 Blooms: Remember Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

31) In EOQ model, ________ is the estimate on how long it takes an order to be received after it is placed.

A) lead time B) safety stock C) time limit D) cycle time Answer: A Diff: 2 Blooms: Remember Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

12 .

32) Which of the following is the ideal next step if you get the message "Solver has converged to the current solution./All constraints are satisfied," when using Solver for nonlinear optimization models?

A) Accept the values, but run Solver again from the current solution.

B) Do not accept the Solver values and re-run Solver with the starting values.

C) Accept the values and run simulations with different values.

D) Accept the values, and then tweak the values, and re-run Solver on tweaked values.

Answer: A Diff: 2 Blooms: Understand Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

13 .

Use the table below to answer the following question(s).

Jonathan Reese is considering three stocks in which to invest with a fixed budget. The table below provides information on Jonathan's expected returns for each stock. The table also provides information, collected from market researchers, on the variance-covariance matrix of the individual stocks. He expects a total return of at least 10%.

Develop a quadratic optimization model to find the optimal allocation of the budget to each stock, and variance calculations for squared terms and cross-products based on the variancecovariance matrix.

33) According to the model, what percentage of the budget should be allocated to Stock 1?

A) 10% B) 25% C) 50% D) 40% Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

14 .

34) According to the model, what percentage of the budget should be allocated to Stock 2?

A) 90% B) 25% C) 50% D) 75% Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

35) According to the model, what percentage of the budget should be allocated to Stock 3?

A) 40% B) 20% C) 25% D) 75% Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

36) According to the model, what is the squared term value for Stock 1 variance?

A) 0.00065 B) 0.00535 C) 0.01132 D) 0.00283 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

15 .

37) According to the model, what is the squared term value for Stock 2 variance?

A) 0.00236 B) -0.00031 C) 0.00080 D) 0.00430 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

38) According to the model, what is the squared term value for Stock 3 variance?

A) 0.00018 B) 0.00080 C) 0.00096 D) 0.00194 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

39) According to the model, what is the cross-product value for Stock 1 variance?

A) 0.00176 B) 0.00450 C) -0.00047 D) 0.00194 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

16 .

40) According to the model, what is the cross-product value for Stock 2 variance?

A) 0.00080 B) -0.00080 C) -0.00075 D) 0.01132 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

41) According to the model, what is the cross-product value for Stock 3 variance?

A) 0.00049 B) 0.00283 C) -0.00047 D) 0.00074 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

42) According to the model, what is the expected total return on all stocks?

A) 18% B) 10% C) 11% D) 12% Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

17 .

43) According to the model, what is the expected variance of the resulting portfolio?

A) 0.014 B) 0.010 C) 0.009 D) 0.012 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Quadratic Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

18 .

Use the table below to answer the following question(s).

Pickson Luthiers Corporation is studying where to locate a phone charging point on the factory floor. The locations of five production cells are expressed as X- and Y-coordinates on a rectangular grid of the factory layout. The daily demand for the charging point (measured as the number of trips to the charging point) at each production cell is also known. Because of the nature of the equipment layout in the factory and for safety reasons, workers must travel along marked horizontal and vertical aisles to access the charger. Thus, the distance from a cell to the charger is measured as rectilinear distance.

The table below provides the relevant information.

Pickson Luthiers Corporation

Phone Recharging Points

Data Cell Measurements Paint Electricals Testing Packaging

X-coordinate 2 1 4 3.5 3

Y-coordinate 5 3 2 5 3

Maximum

4

5

Demand 27 12 25 5 7

The optimal location should minimize the total weighted distance between the charging point and all production cells, where the weights are the daily number of trips to the phone charging point.

Create a nonsmooth optimization model, based on the data, to answer the following questions.

(Hint: Choose the closest answers.)

44) According to the model, which of the following is the X-coordinate for the phone charger location?

A) 2.00 B) 3.00 C) 3.50 D) 4.00 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

19 .

45) According to the model, which of the following is the Y-coordinate for the phone charger location?

A) 1.50 B) 1.00 C) 3.00 D) 5.00 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

46) According to the model, which of the following is the weighted distance between the phone charger and Measurements cell?

A) 12.00 B) 75.00 C) 7.00 D) 54.00 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

47) According to the model, which of the following is the weighted distance between the phone charger and Paint cell?

A) 36.00 B) 12.00 C) 24.00 D) 0 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

20 .

48) According to the model, which of the following is the weighted distance between the phone charger and Electricals cell?

A) 75.00 B) 125.00 C) 100.00 D) 112.50 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

49) According to the model, which of the following is the weighted distance between the phone charger and Testing cell?

A) 7.00 B) 17.50 C) 22.50 D) 27.50 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

50) According to the model, which of the following is the weighted distance between the phone charger and Packaging cell?

A) 10.50 B) 0 C) 7.00 D) 14.00 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

21 .

51) According to the model, what is the total weighted distance between the 5 production cells and the phone charger?

A) 253.50 B) 113.00 C) 172.50 D) 165.50 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

52) According to the model, which of the following production cells covers the most distance according to its demand when using the phone charger?

A) Measurements B) Paint C) Electricals D) Testing Answer: C Diff: 2 Blooms: Understand AACSB: Analytic Skills Topic: Evolutionary Solver for Non-smooth Optimization LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

22 .

53) From the data in the table below, calculate the total annual cost using the economic order quantity model.

Data Annual Demand Rate Ordering Cost Unit Cost Carrying Charge Rate Order Quantity

10,000 $150 $16 0.2 1,000

Answer: Using the data in the table given, the total annual cost can be calculated using the formula + where Q = order quantity = 1,000 D = annual demand = 10,000 C = unit cost of the item = $16 C0 = cost per order placed = $150 i = inventory carrying charge per unit = 0.2 Therefore, total annual cost = =

+

+

= 1,500 + 1,600 = 3,100.

Therefore the total annual cost is $3,100.

Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

23 .

54) Jonathan Reese is considering three stocks in which to invest with a fixed budget. The table below provides information on Jonathan's expected returns for each stock. The table also provides information, collected from market researchers, on the variance-covariance matrix of the individual stocks. He expects a total return of at least 10%.

Using the table above, provide the objective function for minimal variance, and the constraints for creating an optimization model.

Answer: The model here is a quadratic optimization model that seeks to minimize the risk of a portfolio of stocks subject to a constraint on the portfolio's expected return.

From the above data, the objective function for minimal variance = 0.0212

+ 0.070

+ 0.003

+ 2(0.018)x1x2 + 2(-0.003)x1x3 + 2(0.006)x2x3

where x1, x2, x3 are stock variables or the fractions of the portfolio to invest in stocks 1, 2, 3 respectively.

The constraints must first ensure that we invest 100% of our budget. Because the variables are defined as fractions, we must have x1 + x2 + x3 = 1 Second, the portfolio must have an expected return of at least 10%. The return on a portfolio is simply the weighted sum of the returns of the stocks in the portfolio. This results in the constraint 10x1 + 11x2 + 9x3 ≥ 10 Finally, we cannot invest negative amounts: x1, x2, x3 ≥ 0

24 .

Therefore, the complete model is 0.0212

+ 0.070

+ 0.003

+ 2(0.018)x1x2 + 2(-0.003)x1x3 + 2(0.006)x2x3

x1 + x2 + x3 = 1 10x1 + 11x2 + 9x3 ≥ 10 x1, x2,, x3 ≥ 0 Diff: 2 Blooms: Understand Topic: Quadratic Optimization LO1: Recognize a quadratic optimization model.

25 .

55) Pickson Luthiers Corporation is studying where to locate a phone charging point on the factory floor. The locations of five production cells are expressed as X- and Y-coordinates on a rectangular grid of the factory layout. The daily demand for the charging point (measured as the number of trips to the charging point) at each production cell is also known. Because of the nature of the equipment layout in the factory and for safety reasons, workers must travel along marked horizontal and vertical aisles to access the charger. Thus, the distance from a cell to the charger is measured as rectilinear distance.

The table below provides the relevant information.

Pickson Luthiers Corporation

Phone Recharging Points

Data Cell Measurements Paint Electricals Testing Packaging

X-coordinate 2 1 4 3.5 3

Y-coordinate 5 3 2 5 3

Maximum

4

5

Demand 27 12 25 5 7

The optimal location should minimize the total weighted distance between the charging point and all production cells, where the weights are the daily number of trips to the phone charging point.

From the above table, provide the objective function for the best location of the charging point.

What kind of solution technique from Solver can be used to make the optimization model based on the data?

Answer: To formulate an optimization model for the best location, define (X, Y) as the location coordinates of the charging point. The weighted distance between the charging point and each cell is expressed by the objective function minimize 27(|X-2|+|Y-5|) + 12(|X-1|+|Y-3|) + 25(|X4|+|Y-2|) + 5(|X-3.5|+|Y-5|) + 7(|X-3|+|Y-3|) The absolute value functions used in this objective function create a non-smooth model. Thus, Evolutionary Solver is the appropriate solution technique.

Diff: 1 Blooms: Knowledge Topic: Evolutionary Solver for Non-smooth Optimization LO1: Identify non-smooth optimization models and when to use Evolutionary Solver.

LO2: Use a modern software tool to perform statistical calculations.

26 .

56) Rectilinear distance is the measure of distance as a straight line between two points.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Identify non-smooth optimization models and when to use Evolutionary Solver.

LO2: Use a modern software tool to perform statistical calculations.

57) The economic order quantity is the amount to order that minimizes the total cost of ordering and holding.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

58) A global optimum solution is one for which all points close by are no better than the solution.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Develop and solve nonlinear optimization models for different applications.

LO2: Use a modern software tool to perform statistical calculations.

59) All quadratic optimization models have nonlinear constraints.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Quadratic Optimization LO1: Recognize a quadratic optimization model.

LO2: Use a modern software tool to perform statistical calculations.

60) For nonlinear models, the Lagrange multipliers are only approximate indicators of shadow prices.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Quadratic Optimization LO1: Interpret Solver reports for nonlinear optimization.

LO2: Use a modern software tool to perform statistical calculations.

27 .

61) Absolute value functions, in optimization models, result in non-smooth functions.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Evolutionary Solver for Non-smooth Optimization LO1: Identify non-smooth optimization models and when to use Evolutionary Solver.

LO2: Use a modern software tool to perform statistical calculations.

62) List the four major categories of inventory costs and explain how they are influenced by the timing of the ordering decision and amount ordered.

Answer: Inventory costs fall into four major categories: (1) Purchase costs–unit costs per item to purchase from suppliers.

(2) Order preparation costs–costs involve the time spent preparing and placing orders, such as clerical, telephone, receiving, and inspection time.

(3) Inventory-holding cost–all expenses associated with carrying inventory, such as rent on storage space, utilities, insurance, taxes, and the cost of capital.

(4) Shortage costs–additional costs for shipping, invoicing, and labor for back orders or lost profit opportunities and possible future loss of revenues because of lost sales.

These costs are influenced by the amount ordered and the timing of the ordering decision.

For example, if many small orders are placed, then the ordering cost will be high, but little inventory will be carried, reducing holding costs. On the other hand, if few large orders are placed, then ordering costs will be low, but inventory-holding costs will be high. Similarly, if orders are placed too early, excessive holding will result. If orders are placed too late, the firm risks running out of stock and incurring shortages. Thus, decision makers seek a minimum-cost balance among these costs.

Diff: 2 Blooms: Understand Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Recognize when to use nonlinear optimization models.

LO2: Describe the major tools and criteria for decision making.

63) What are the assumptions made when developing an economic order quantity model?

Answer: To develop an EOQ model, we need to make several important assumptions: (1) Only a single inventory item is considered.

(2) The entire quantity arrives at one time.

(3) The demand for the item is constant over time.

(4) No shortages are allowed.

Diff: 1 Blooms: Remember Topic: Modeling and Solving Nonlinear Optimization Problems LO1: Recognize when to use nonlinear optimization models.

LO2: Describe the major tools and criteria for decision making.

28 .

64) Explain how the Markowitz portfolio model is a quadratic optimization model.

Answer: The Markowitz portfolio model is a classic quadratic optimization model in finance that seeks to minimize the risk of a portfolio of stocks subject to a constraint on the portfolio's expected return. The decision variables are the percent of each stock to allocate to the portfolio.

In the Markowitz model, the objective function is to minimize the risk of the portfolio as measured by its variance. Because stock prices are correlated with one another, the variance of the portfolio must reflect not only variances of the stocks in the portfolio but also the covariance between stocks.

Define xj to be the fraction of the portfolio to invest in stock j. The variance of a portfolio is the weighted sum of the variances and covariances: variance of portfolio =

+

where = the sample variance in the return of stock i sy = the sample covariance between stocks i and j.

Diff: 1 Blooms: Remember Topic: Quadratic Optimization LO1: Recognize a quadratic optimization model.

LO2: Use a modern software tool to perform statistical calculations.

65) What is a job-sequencing problem? How can we find an optimal solution for such problems?

Answer: Job-sequencing problems involve finding an optimal sequence, or order, by which to process a set of jobs. For any job sequence, we may compute the completion time for each job by successively adding the processing times of that job and all that were completed before it. We may then compare the completion times with the requested due dates to determine if the job is either completed early or late. Lateness (Li) is the difference between the completion time (Ci) and the due date (Di), which can either be positive or negative. Tardiness (Ti) is the amount of time by which the completion time exceeds the due date; thus, tardiness is zero if a job is completed early). Hence, for job i, Li = Ci - Di Ti = max {0, Li} Researchers have shown that sequencing jobs in order of shortest processing time (SPT) first will minimize the average completion time for all jobs. Sequencing by earliest due date (EDD) first will minimize the maximum number of tardy jobs.

Diff: 1 Blooms: Understand Topic: Evolutionary Solver for Non-smooth Optimization LO1: Identify non-smooth optimization models and when to use Evolutionary Solver.

LO2: Describe the major tools and criteria for decision making.

29 .

66) Explain the travelling salesperson problem with examples.

Answer: The traveling salesperson problem (TSP) can be described as follows. A salesperson needs to visit each of n different cities and return home in the minimum total distance. A route that visits each city exactly once and returns to the start is called a tour. Many practical problems can be formulated as a TSP. For example, drivers for FedEx and UPS must deliver packages to customers and return to their central location. Soft-drink vendors must collect money and replenish bottles for a set of retail locations and then return to the warehouse. Other examples are programming drilling machines to drill holes in circuit boards and picking orders within a warehouse. In all these applications, the goal is to perform the task in minimum total time or distance.

Diff: 1 Blooms: Understand Topic: Evolutionary Solver for Non-smooth Optimization LO1: Identify non-smooth optimization models and when to use Evolutionary Solver.

LO2: Describe the major tools and criteria for decision making.

30 .

Business Analytics (Evans) Chapter 17 Optimization Models with Uncertainty Use the table below to answer the following question(s).

Below is a spreadsheet for Stone Age Surfboards.

Assume that the finishing time for a pair of Rockwell surfboards is triangular with a minimum value of 1.4, a most likely value of 1.5, and a maximum value of 1.8 and that finishing time for a pair of Limestone surfboards is also triangular with a minimum value of 1.8, a most likely value of 2.0, and a maximum value of 2.4. The number of trials per simulation is equal to 5000.

1) Which of the following cells is defined with a triangular distribution?

A) B6 B) D6 C) B7 D) D7 Answer: C Diff: 1 Blooms: Understand Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

1 .

2) Which of the following cells is defined as the uncertain output cell?

A) D15 B) D16 C) D19 D) D22 Answer: B Diff: 1 Blooms: Understand Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

3) What is the value of mean obtained from the simulation results?

A) 15.65 B) 25.91 C) 20.78 D) 30.42 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

4) What is the value of standard deviation obtained from the simulation results?

A) 1.21 B) 2.50 C) 3.80 D) 5.00 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

2 .

5) What is the mean absolute deviation obtained from the simulation results?

A) 1.25 B) 0.65 C) 0.24 D) 0.99 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

6) What is the coefficient of variation obtained from the simulation results?

A) 0.098 B) 0.134 C) 0.047 D) 0.020 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

7) How often will overtime be needed if 4.5 Rockwell and 9.0 Limestone surfboards, the optimal solution, are scheduled each day?

A) more than 60% B) more than 87% C) more than 75% D) more than 52% Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

3 .

Use the table below to answer the following question(s).

Below is the spreadsheet for an economic order quantity model.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

A Economic Order Quantity Model

B

C

Data Annual Demand Rate 20,000 Ordering Cost $ 250.00 Unit Cost $ 25.00 Carrying Charge Rate 0.2 Model Order Quantity Annual Demand Rate

1300

Ordering Cost Order Cost Carrying Charge Rate Unit Cost Inventory Cost Total Cost Lead time Lead time demand Reorder point

0.0245 500

Assume that the distribution of demand is normal with a mean of 20,000 and standard deviation of 2,000.

8) Which of the following cells is defined to be normally distributed using the function = PsiNormal(20000,2000)?

A) B5 B) B6 C) B7 D) B12 Answer: A Diff: 1 Blooms: Understand AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

4 .

9) Which of the following cells is defined as the uncertain output cell?

A) B13 B) C15 C) C19 D) B22 Answer: D Diff: 1 Blooms: Understand AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

10) What is the value of mean obtained from the simulation results?

A) 473.0 B) 520.0 C) 456.0 D) 490.0 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

11) What is the value of standard deviation obtained from the simulation results?

A) 35.01 B) 49.01 C) 56.01 D) 41.01 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

5 .

12) What is the mean absolute deviation obtained from the simulation results?

A) 39.10 B) 24.56 C) 58.75 D) 46.36 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

13) What is the coefficient of variation obtained from the simulation results?

A) 0.28 B) 0.10 C) 0.45 D) 0.60 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

14) What is the reorder point required to attain a 95% service level?

A) 460.0 B) 750.5 C) 571.0 D) 640.5 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

6 .

15) What is the value of safety stock?

A) 45 B) 71 C) 120 D) 95 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

16) What is the increase in total cost?

A) $ 280 B) $ 590 C) $ 355 D) $ 450 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

7 .

Use the table below to answer the following question(s).

The Atlas Movies Theater has repriced their ticket rates to maximize revenues. They have three classes of tickets: Classic, Silver, and Gold. The table below provides information on the average ticket sales, revenue and price elasticity on demand. They have a total seating capacity of 300.

The table also provides the new price for the three classes obtained using Solver.

1 2 3 4

5 6 7 8 9 10 11

A Atlas Movie Theater Ticketing

B

C

D

Current Rate $8.45 $13.25 $17.50

Average Daily Sold Elasticity 150 -1.5 80 -2 30 -1

E

F

Data

Ticket Class Classic Silver Gold

Total Seating Capacity 300

Model

New Projected Projected 12 Ticket Class Price Price Range Tickets Sold Revenue 13 Classic $7.50 $6.50 $7.50 14 Silver $12.17 $11.50 $12.50 15 Gold $16.50 $15.50 $16.50 16 Totals Assume the distributions of elasticities for three classes of tickets are uniform with minimum and maximum values equal to 75% and 125% of their estimated values, respectively. Under this assumption, use Monte Carlo simulation to answer the following questions. The model is simulated for 10,000 trials.

17) Which of the following cells are defined to be uniformly distributed?

A) B7:B9 B) C7:C9 C) D7:D9 D) B15:B17 Answer: C Diff: 1 Blooms: Understand AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

8 .

18) Which of the following cells is defined as the output cell?

A) E16 B) E18 C) F17 D) F18 Answer: B Diff: 1 Blooms: Understand AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

19) What is the value of mean obtained from the simulation results?

A) 450 B) 300 C) 400 D) 250 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

20) What is the value of standard deviation obtained from the simulation results?

A) 5 B) 4 C) 8 D) 10 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

9 .

21) What is the mean absolute deviation obtained from the simulation results?

A) 3 B) 6 C) 8 D) 10 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

22) What is the coefficient of variation obtained from the simulation results?

A) 0.086 B) 0.120 C) 0.014 D) 0.048 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

23) What is the probability that more than 300 tickets will be sold?

A) approximately 0.75 B) approximately 0.40 C) approximately 0.60 D) approximately 0.50 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

LO2: Use a modern software tool to perform statistical calculations.

10 .

Use the table below to answer the following question(s).

Below is the spreadsheet for a newsvendor model.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

A Newsvendor Model

B

Data Selling price Cost Discount price

$ 20.00 $ 14.00 $ 8.00

Model Demand Purchase Quantity

42

Quantity Sold Surplus Quantity Profit

Answer the following question(s) using multiple parameterized simulations. The range of the historical data is 40 to 51.

24) Which of the following is the best purchase quantity to maximize the expected profit?

A) 42 B) 45 C) 48 D) 51 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

11 .

25) Which of the following values of purchase quantity shows the least mean profit?

A) 42 B) 45 C) 48 D) 51 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

26) What is the value of mean profit if the purchase quantity is equal to 45?

A) $ 252.0 B) $ 234.0 C) $ 216.0 D) $ 222.0 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

12 .

Use the table below to answer the following question(s).

Below is a spreadsheet for a hotel overbooking model.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

A Hotel Overbooking Model

B

Data Rooms available Price Overbooking cost

400 $ 150 $ 100

Model Reservation limit Customer demand Reservations made Cancellations Customer arrivals Overbooked customers

350 300 20

Net revenue

Answer the following question(s) using multiple parameterized simulations. The range of the historical data is 400-430.

27) What is the number of reservations that will generate a net revenue of $59,000?

A) 400 B) 410 C) 420 D) 430 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

13 .

28) Which of the following is the best number of reservations to accept?

A) 400 B) 410 C) 420 D) 430 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

29) What is the number of reservations that will generate the least revenue?

A) 400 B) 410 C) 420 D) 430 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

30) If there are 425 reservations and 5 overbooked customers, what is the net revenue generated?

A) $ 58,000 B) $ 58,500 C) $ 59,000 D) $ 59,500 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

LO2: Use a modern software tool to perform statistical calculations.

14 .

Use the table below to answer the following question(s).

Below is the spreadsheet for a portfolio allocation model.

1 2 3 4

A Portfolio Allocation Model

B

C

D

E

Annual return 4.4% 8.4% 7.1% 4.0% $ 100,000

Minimum $ 3,500.00 $ 35,000.00 $ 18,000.00 none

Maximum $ 5,500.00 none none none Limit

Risk factor per dollar -0.5 1.8 2.1 -0.3 100,000

Data

5 6 7 8 9 10 11 12 13

Investment Life Insurance Bond mutual funds Stock mutual funds Savings Account Total amount available

14 15 16

Decision Variables Life insurance Bond mutual funds

Amount invested $ 5,500.00 $ 41,857.14

17 18 19

Stock mutual funds Savings Account Total amount invested

$ 18,000.00 $ 34,642.86 $ 100,000.00

Model Total weighted risk $ 100,000.00 Total expected return $ 6,421.71

Assume that the distributions of life insurance annual return is uniform distribution with minimum 4% and maximum 6%, bond mutual funds annual return is normal with mean 7% and standard deviation 1%, stock mutual funds annual return is lognormal with mean 11% and standard deviation 4%.

31) What is the value of the mean obtained from the simulation results for maximizing the total expected return? [Hint: Choose the approximate value.]

A) $ 5,876.28 B) $ 6,570.42 C) $ 7,257.45 D) $ 5,178.84 Answer: B

15 .

Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Use Risk Solver Platform to combine simulation modeling and optimization to maximize or minimize the expected value of a model output.

LO2: Use a modern software tool to perform statistical calculations.

32) What is the value of standard deviation obtained from the simulation results for maximizing the total expected return? [Hint: Choose the approximate value.]

A) $ 1,346.78 B) $ 1,890.25 C) $833.19 D) $ 1,578.64 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Use Risk Solver Platform to combine simulation modeling and optimization to maximize or minimize the expected value of a model output.

LO2: Use a modern software tool to perform statistical calculations.

33) What is the value of mode obtained from the simulation results for maximizing the total expected return? [Hint: Choose the approximate value.]

A) $ 6,553.02 B) $ 5,848.24 C) $ 5,281.79 D) $ 7,025.86 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Use Risk Solver Platform to combine simulation modeling and optimization to maximize or minimize the expected value of a model output.

LO2: Use a modern software tool to perform statistical calculations.

16 .

34) What is the mean absolute deviation obtained from the simulation results for maximizing the total expected return? [Hint: Choose the approximate value.]

A) $ 887.25 B) $ 735.86 C) $ 643.69 D) $ 967.36 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Use Risk Solver Platform to combine simulation modeling and optimization to maximize or minimize the expected value of a model output.

LO2: Use a modern software tool to perform statistical calculations.

35) What is the coefficient of variation obtained from the simulation results for maximizing the total expected return? [Hint: Choose the approximate value.]

A) 1.2451 B) 0.4865 C) 0.8917 D) 0.1268 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Use Risk Solver Platform to combine simulation modeling and optimization to maximize or minimize the expected value of a model output.

LO2: Use a modern software tool to perform statistical calculations.

17 .

Use the table below to answer the following question(s).

Below is the spreadsheet for a project selection model.

A

1 2 3 4

5 6 7 8

B

C

D

E

F

G

Project 2

Project 3

Project 4

Project 5

$240,000

$180,000

$120,000

$250,000 Resources

$24,000

$12,000

$12,000

$29,000

0.6

0.4

0.5

0.2

$80,000

$26,000

$53,000

$66,000

$180,000

4

3

4

5

14

1

1

0

1

Total

1 $237,997 $80,000

0 $$26,000

0 $$-

0 $$ 66,000

$237,997 $172,000

4

3

0

5

12

Project Selection Model Data Project 1 Mean Return (NPV) $160,000 Standard Deviation $18,000 Probability of Success 0.6

Cash 9 Requirements $58,000 Personnel 10 Requirements 6 11 12 Model 13 Project selection 14 decisions 0 Project 15 successful?

0 16 Return $17 Cash Used $Personnel 18 Used 0

36) Which of the following cells is defined as the output cell?

A) B16 B) G16 C) G17 D) G18 Answer: B

18 .

Available

Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Incorporate uncertainty into optimization models such as project selection.

LO2: Use a modern software tool to perform statistical calculations.

37) What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 405,897 B) $ 358,138 C) $ 266,603 D) $ 452,785 Answer: C Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Incorporate uncertainty into optimization models such as project selection.

LO2: Use a modern software tool to perform statistical calculations.

38) What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 89,236 B) $ 177,334 C) $ 236,745 D) $ 107,892 Answer: B Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Incorporate uncertainty into optimization models such as project selection.

LO2: Use a modern software tool to perform statistical calculations.

19 .

39) What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 141,901 B) $ 104,786 C) $ 188,995 D) $ 232,673 Answer: A Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Incorporate uncertainty into optimization models such as project selection.

LO2: Use a modern software tool to perform statistical calculations.

40) What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]

A) 0.386 B) 0.589 C) 0.415 D) 0.665 Answer: D Diff: 3 Blooms: Apply AACSB: Analytic Skills Topic: Simulation Optimization Using Risk Solver Platform LO1: Incorporate uncertainty into optimization models such as project selection.

LO2: Use a modern software tool to perform statistical calculations.

41) A chance constraint is one that specifies the fraction of trials in a simulation that must satisfy a constraint.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Solve optimization models with chance constraints.

42) A value at risk measure considers the magnitude of the violation when the constraint is not satisfied.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Solve optimization models with chance constraints.

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43) A value at risk measure is more conservative in nature than a conditional value at risk measure.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Solve optimization models with chance constraints.

44) A service level is a constraint that represents the probability that demand can be satisfied.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

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45) Below is the spreadsheet for an economic order quantity model.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

A Economic Order Quantity Model

B

Data Annual Demand Rate Ordering Cost Unit Cost Carrying Charge Rate

20,000 $ 250.00 $ 25.00 0.2

Order Quantity Annual Demand Rate Ordering Cost Order Cost Carrying Charge Rate Unit Cost Inventory Cost Total Cost

1300

Lead time Lead time demand Reorder point

0.0245

Model

500

Assume that the distribution of demand is normal with a mean of 20,000 and standard deviation of 2,000.The increase in total cost is calculated by adding the holding cost and the ordering cost.

Answer: FALSE Diff: 2 Blooms: Understand Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

46) Define a chance constraint.

Answer: A chance constraint is one that specifies the fraction of trials in a simulation that must satisfy a constraint. Suppose that a company wants to determine a daily schedule so that the probability of overtime is less than 0.1, or 10% of the time. This can be done using a chance constraint.

Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Solve optimization models with chance constraints.

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47) What is a value at risk constraint?

Answer: Chance constraints are defined by a percentile, or value at risk (VaR) measure. A VaR constraint with chance p% requires that the constraint be satisfied p% of the time. This does not consider the magnitude of the violation when the constraint is not satisfied.

Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Solve optimization models with chance constraints.

48) What is a conditional value at risk constraint?

Answer: A conditional value at risk (CVaR) constraint places a bound on the average magnitude of all violations of the constraint that may occur (1 — p)% of the time and is more conservative in nature. Generally, CVaR is better to use for very large problems because of its mathematical properties.

Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Solve optimization models with chance constraints.

49) What is a service level?

Answer: A service level is a constraint that represents the probability that demand can be satisfied. For example, the reorder point is calculated as the demand during the lead time, or r = Dt, where D is the annual demand and t is the lead time, the time from the placement of the order until it is received. If D is uncertain, then the demand during the lead time will also be uncertain.

This impacts how the reorder point should be chosen. This can be resolved by setting a service level.

Diff: 1 Blooms: Remember Topic: Risk Analysis in Optimization LO1: Evaluate risk in solutions to optimization models using Monte-Carlo simulation.

50) What are multiple parameterized simulations?

Answer: In certain models, the objective is to find the best value of the decision variables to maximize either the expected profit or net revenue. Although Risk Solver Platform makes it easy to conduct what-if analyses by changing the decision variables and quickly running new simulations, doing so can be tedious. Risk Solver Platform provides the capability, called multiple parameterized simulations, to automatically run simulations for a range of values and identify the best value for the decision variables.

Diff: 1 Blooms: Remember Topic: Optimizing Monte Carlo Simulation Models LO1: Use multiple parameterized simulations in Risk Solver Platform to find optimal solutions in simulation models with decision variables.

23 .

Business Analytics (Evans) Chapter 18 Decision Analysis 1) A(n) ________ is a matrix whose rows correspond to decisions and whose columns correspond to events.

A) decision tree model B) payoff table C) utility function table D) scoring model Answer: B Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Construct a payoff table for a decision situation.

LO2: Describe the major tools and criteria for decision making.

Use the information below to answer the following question(s).

Below is a payoff table that lists four mortgage options:

2) What is the average payoff for the 3-year ARM? A) $ 52,792 B) $ 45,212 C) $ 51,094 D) $ 55,278 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

1 .

3) What is the average payoff for the 5-year ARM? A) $ 49,514 B) $ 52,015 C) $ 53,395 D) $ 51,641 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

4) Which of the following decisions has the best average payoff?

A) 1-year ARM B) 3-year ARM C) 5-year ARM D) 30-year fixed Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

5) What is the best payoff rate for the 1-year ARM? A) $ 49,618 B) $ 43,650 C) $ 38,560 D) $ 66,645 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

2 .

6) What is the worst payoff rate for the 5-year ARM? A) $ 50,894 B) $ 48,134 C) $ 51,641 D) $ 55,895 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

7) A(n) ________ is also called a minimax regret strategy.

A) opportunity-loss strategy B) aggressive strategy C) conservative strategy D) average payoff strategy Answer: A Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

3 .

Use the information given below to answer the following question(s).

Below is a payoff table that lists three mortgage options:

8) What is the maximum opportunity loss incurred for the 2-year ARM? A) $ 8,626 B) $ 13,716 C) $ 14,369 D) $ 10,581 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

9) What is the maximum opportunity loss incurred for the 5-year ARM? A) $ 8,626 B) $ 13,716 C) $ 14,369 D) $ 10,581 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

4 .

10) What is the maximum opportunity loss incurred for the 25-year fixed decision?

A) $ 8,626 B) $ 13,716 C) $ 14,369 D) $ 10,581 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

Use the information below to answer the following question(s).

The payoff table given below lists four mortgage options:

The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.

11) What is the expected payoff for the 1-year ARM? A) $ 53,082.00 B) $ 16,951.00 C) $ 56,938.00 D) $ 18,979.30 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply expected values to a decision problem when probabilities of events are known.

LO2: Describe the major tools and criteria for decision making.

5 .

12) What is the expected payoff of the 5-year ARM? A) $ 17,872.90 B) $ 53,618.60 C) $ 48,805.20 D) $ 20,081.80 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply expected values to a decision problem when probabilities of events are known.

LO2: Describe the major tools and criteria for decision making.

13) Which of the following decisions has the largest expected payoff?

A) 1-year ARM B) 3-year ARM C) 5-year ARM D) 30-year fixed Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply expected values to a decision problem when probabilities of events are known.

LO2: Describe the major tools and criteria for decision making.

14) Which of the following is considered the best expected value decision?

A) 1-year ARM B) 3-year ARM C) 5-year ARM D) 30-year fixed Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Making Decisions with Uncertain Information LO1: Apply expected values to a decision problem when probabilities of events are known.

LO2: Describe the major tools and criteria for decision making.

6 .

Use the information below to answer the following question(s).

Below is a payoff table that lists four mortgage options:

The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1. Answer the following questions by creating a decision tree.

15) Which of the following is considered the best expected value decision?

A) 1-year ARM B) 3-year ARM C) 5-year ARM D) 30-year fixed Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Use Risk Solver Platform to construct decision trees.

LO2: Describe the major tools and criteria for decision making.

16) Which of the following is considered the worst expected value decision?

A) 1-year ARM B) 3-year ARM C) 5-year ARM D) 30-year fixed Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Use Risk Solver Platform to construct decision trees.

LO2: Describe the major tools and criteria for decision making.

7 .

Use the information below to answer the following question(s).

Below is a decision tree illustrating the R&D process for a new drug.

Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.

8 .

17) What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 119.0 B) $ 116.1 C) $ 105.7 D) $ 94.4 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

LO2: Describe the major tools and criteria for decision making.

18) What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 119.0 B) $ 116.1 C) $ 105.7 D) $ 94.4 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

LO2: Describe the major tools and criteria for decision making.

19) What is the value of mode obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 119.0 B) $ 116.1 C) $ 105.7 D) $ 94.4 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

LO2: Describe the major tools and criteria for decision making.

9 .

20) What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]

A) $ 119.0 B) $ 116.1 C) $ 105.7 D) $ 94.4 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

LO2: Describe the major tools and criteria for decision making.

21) What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]

A) 1.587 B) 1.126 C) 2.015 D) 1.890 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

LO2: Describe the major tools and criteria for decision making.

22) What is the probability that the drug will not reach the market? [Hint: Choose the approximate value.]

A) 0.95 B) 0.89 C) 0.77 D) 0.82 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

LO2: Describe the major tools and criteria for decision making.

10 .

Use the information below to answer the following question(s).

Below is a decision tree for the airline revenue management.

Create a one-way table and answer the following questions.

23) What is the expected value of the ticket when a discount is offered on the full fare? [Hint: Choose the approximate value.]

A) $ 442.50 B) $ 472.00 C) $ 410.00 D) $ 501.50 Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

24) If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?

A) $ 442.50 B) $ 472.00 C) $ 501.50 D) $ 531.00 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: Decision Trees LO1: Incorporate Monte Carlo simulation in decision trees.

11 .

25) The expected value of perfect information (EVPI) is equal to the ________.

A) EMV with perfect information minus the EMV without any information B) EMV with perfect information divided by the EMV without any information C) sum of the EMV with information and the EMV without any information D) EMV without any information minus the EMV with perfect information Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: The Value of Information LO1: Compute the expected value of perfect information.

Use the below information to answer the following question(s).

Below is a payoff table with three mortgage options:

26) What is the expected opportunity loss for the 1-year ARM? A) $ 7,979.60 B) $ 3,959.40 C) $ 6,853.50 D) $ 8,621.40 Answer: D Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: The Value of Information LO1: Compute the expected value of perfect information.

27) What is the expected opportunity loss for the 3-year ARM? A) $ 7,979.60 B) $ 3,959.40 C) $ 6,853.50 D) $ 8,621.40 Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: The Value of Information LO1: Compute the expected value of perfect information.

12 .

28) What is the expected opportunity loss for the 30-year fixed decision?

A) $ 7,979.60 B) $ 3,959.40 C) $ 6,853.50 D) $ 8,621.40 Answer: B Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: The Value of Information LO1: Compute the expected value of perfect information.

29) The expected value of sample information (EVSI) is equal to the ________.

A) EMV without sample information divided by the EMV with sample information B) EMV without sample information minus the EMV with sample information C) sum of the EMV with sample information and the EMV without sample information D) EMV with sample information minus the EMV without sample information Answer: D Diff: 1 Blooms: Remember Topic: The Value of Information LO1: Compute the expected value of perfect information.

Use the information below to answer the following question(s) Misty Inc. launches a new range of perfumes for men and women. The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4. The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.

30) What is the likelihood for high demand knowing that the market report is favorable?

A) 84% B) 90% C) 87% D) 80% Answer: C Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: The Value of Information LO1: Incorporate sample information in decision trees and apply Bayes's rule to compute conditional probabilities.

LO2: Identify and apply the basic concepts and tools of probability

13 .

31) If the marketing report is unfavorable, what is the probability of low demand?

A) 84% B) 90% C) 87% D) 80% Answer: A Diff: 2 Blooms: Apply AACSB: Analytic Skills Topic: The Value of Information LO1: Incorporate sample information in decision trees and apply Bayes's rule to compute conditional probabilities.

LO2: Identify and apply the basic concepts and tools of probability 32) A children's welfare fundraiser involves selling one thousand $70 tickets to win a $20,000 grand prize. If the probability of winning is only 0.005, what is the expected payoff?

A) -$40 B) -$50 C) $30 D) $60 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

33) Greg is indifferent between receiving $2,000 and taking a chance at $2,500 with probability 0.7 and losing $1200 with probability 0.5. What is the expected value of this gamble?

A) $ 1,150 B) $ 1,800 C) $ 1,460 D) $ 2,045 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

14 .

Use the information below to answer the following question(s).

Below are four options for an investment decision.

Decision/Event Bank CD Bond fund Index fund Growth fund

Rates Rise 0.80 -0.75 0 -0.30

Rates Stable 0.80 0.86 0.90 0.70

Rates Fall 0.80 1.50 1.20 1.40

34) Which of the following is the average utility for the bond fund decision?

A) 1.18 B) 0.38 C) 0.54 D) 0.43 Answer: C Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

35) Which of the following is the average utility for the index fund decision?

A) 1.05 B) 0.70 C) 0.60 D) 0.45 Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

15 .

36) Identify the average utility for the growth fund decision.

A) 1.05 B) 0.70 C) 0.20 D) 0.60 Answer: D Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

37) Based on the average utility, which of the following is considered the best decision?

A) bank CD B) bond fund C) index fund D) growth fund Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

38) Based on the average utility, which of the following is considered the worst decision?

A) bank CD B) bond fund C) index fund D) growth fund Answer: B Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

16 .

39) Which of the following formulas is used to determine the exponential utility function?

A) U(x) = 1 + e—x/R B) U(x) = 1× ex/R C) U(x) = 1/ exR D) U(x) = 1 — e—x/R Answer: D Diff: 1 Blooms: Remember Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

40) If the payoff is $2200 and R is equal to $500, what is the utility function?

A) 0.9877 B) 0.6819 C) 0.7645 D) 0.4502 Answer: A Diff: 1 Blooms: Apply AACSB: Analytic Skills Topic: Utility and Decision Making LO1: Construct a utility function and use it to make a decision.

LO2: Describe the major tools and criteria for decision making.

41) A payoff table is a matrix whose rows correspond to events and whose columns correspond to decisions.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Construct a payoff table for a decision situation.

LO2: Describe the major tools and criteria for decision making.

42) For the average payoff strategy, the decision with the best average payoff is chosen.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Construct a payoff table for a decision situation.

LO2: Describe the major tools and criteria for decision making.

17 .

43) In a minimin strategy, the decision which minimizes the minimum payoff is chosen.

Answer: TRUE Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

44) The average payoff strategy weights the likelihood that the actual outcomes can occur.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

45) An outcome over which the decision maker has complete control is called an event node.

Answer: FALSE Diff: 1 Blooms: Remember Topic: Decision Trees LO1: Use Risk Solver Platform to construct decision trees.

LO2: Describe the major tools and criteria for decision making.

46) What are the three elements required to characterize decisions with uncertain consequences?

Answer: Many decisions involve a choice from among a small set of alternatives with uncertain consequences. Such decisions can be characterized by defining three things: (1) the decision alternatives (2) the outcomes that may occur once a decision is made (3) the payoff associated with each decision and outcome Diff: 1 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: List the three elements needed to characterize decisions with uncertain consequences.

LO2: Describe the major tools and criteria for decision making.

18 .

47) What are the differences between an aggressive strategy and a conservative strategy?

Answer: An aggressive decision maker might seek the option that holds the promise of minimizing the potential loss. For a minimization objective, this strategy is also often called a minimin strategy, that is, the decision that minimizes the minimum payoff is chosen. Aggressive decision makers are often called speculators, particularly in financial arenas because they increase their exposure to risk in hopes of increasing their return. A conservative decision maker, on the other hand, might take a more pessimistic attitude. Such a strategy is also known as a minimax strategy because we seek the decision that corresponds to the minimum value of the largest cost. Conservative decision makers are often called risk averse and are willing to forgo potential returns in order to reduce their exposure to risk.

Diff: 2 Blooms: Remember Topic: Making Decisions with Uncertain Information LO1: Apply average, aggressive, conservative, and opportunity-loss decision strategies for problems involving minimization and maximization objectives.

LO2: Describe the major tools and criteria for decision making.

48) Describe the steps involved in the construction of a decision tree.

Answer: A useful approach to structuring a decision problem involving uncertainty is to use a graphical model called a decision tree. Decision trees consist of a set of nodes and branches.

Nodes are points in time at which events take place. The event can be a selection of a decision from among several alternatives, represented by a decision node, or an outcome over which the decision maker has no control, an event node.

Diff: 1 Blooms: Remember Topic: Decision Trees LO1: Use Risk Solver Platform to construct decision trees.

LO2: Describe the major tools and criteria for decision making.

49) What is the expected value of perfect information?

Answer: The expected value of perfect information (EVPI) is the EMV with perfect information minus the EMV without any information. It represents the most a person is willing to pay for perfect information. Perfect information states with certainty what outcome will occur.

Diff: 1 Blooms: Remember Topic: The Value of Information LO1: Compute the expected value of perfect information.

50) What is the expected value of sample information?

Answer: The expected value of sample information (EVSI) is the EMV with sample information minus the EMV without sample information. It represents the most a person is willing to pay for the sample information. Sample information is the result of conducting some type of experiment, such as market research study.

Diff: 1 Blooms: Remember Topic: The Value of Information LO1: Compute the expected value of perfect information.

19 .