Quantitative techniques for planning and decision making multiple choice



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CHAPTER 6—QUANTITATIVE TECHNIQUES FOR PLANNING AND DECISION MAKING
MULTIPLE CHOICE
1. Juanita is a data-driven manager, so she

a.

minimizes interaction with people when working.

b.

bases her decisions on facts.

c.

finely tunes her intuition.

d.

emphasizes politics in her decision making.

ANS: B PTS: 1 DIF: E REF: p. 194

NAT: AACSB: Analytic, Motivation Concepts
2. Richard is a data-driven manager, so he tells subordinates,

a.

"Don't politic, use data."

b.

"Politic, don't use data."

c.

"Pay for your own lunch while on a business trip."

d.

"Donate 10 percent of your gross income to charity."

ANS: A PTS: 1 DIF: M REF: p. 195

NAT: AACSB: Reflective Thinking, Strategy
3. A judgmental forecast is

a.

based on a collection of subjective opinions..

b.

a qualitative forecasting method.

c.

both a & b

d.

a quantitative forecasting method.

ANS: C PTS: 1 DIF: M REF: p. 197

NAT: AACSB: Analytic, Strategy
4. A major reason that forecasting is so important in business is that

a.

customers often demand forecasts before they purchase equipment.

b.

forecasts accurately describe a company's history.

c.

forecasts are good for spotting errors in current operations.

d.

spotting trends can give you an edge over the competition.

ANS: D PTS: 1 DIF: E REF: p. 195

NAT: AACSB: Reflective Thinking, Strategy
5. The results of a time-series analysis are best represented by a(n)

a.

equation with two variables.

b.

chart or graph showing past trends and predicted future trends.

c.

verbal summary of expert opinions.

d.

pie chart of the various components of the analysis.

ANS: B PTS: 1 DIF: D REF: p. 198

NAT: AACSB: Analytic, Strategy
6. CEO Maria is so convinced that company sales will triple, that she commits the company to lavish new expenses without making contingency plans if the sales growth does not take place. Maria might be falling into the

a.

prudence trap.

b.

overconfidence trap.

c.

recallability trap.

d.

subjective thinking trap.

ANS: B PTS: 1 DIF: E REF: p. 198

NAT: AACSB: Analytic, Strategy
7. The World Future Society predicts that 100 million people with telecommute by the year 2015, illustrating a(n) ____ forecast.

a.

economic

b.

sales

c.

technological

d.

doomsday

ANS: A PTS: 1 DIF: M REF: p. 199

NAT: AACSB: Reflective Thinking, Strategy
8. The two major variables considered by Gantt charts and milestone charts are

a.

planned and actual work.

b.

past and present.

c.

time and motion.

d.

price and cost.

ANS: A PTS: 1 DIF: E REF: p. 202

NAT: AACSB: Analytic, Strategy
9. The numbers in a PERT network refer to the

a.

amount of time consumed by events.

b.

completion date for projects.

c.

time required to complete activities between events.

d.

average of the optimistic and pessimistic times.

ANS: C PTS: 1 DIF: D REF: p. 206

NAT: AACSB: Analytic, Strategy
10. The critical path is the path through the PERT network with the

a.

shortest completion time.

b.

longest completion time.

c.

most probable time.

d.

pessimistic time.

ANS: B PTS: 1 DIF: M REF: p. 206

NAT: AACSB: Analytic, Strategy
11. With a more refined application of PERT, the optimistic, pessimistic, and most probable times should be based on

a.

Bureau of Labor Statistics estimates.

b.

the intuition of someone new to the task.

c.

the intuition of a well-experienced worker.

d.

a frequency distribution of estimates.

ANS: D PTS: 1 DIF: D REF: p. 207

NAT: AACSB: Analytic, Creation of Value
12. In addition to estimating the time required for activities, advanced applications of PERT estimate the

a.

job satisfaction associated with the task.

b.

amount of resources to needed to accomplish the job.

c.

productivity bonuses paid to workers who finish on schedule.

d.

starting day of the project.

ANS: B PTS: 1 DIF: E REF: p. 208

NAT: AACSB: Strategy
13. The break-even point occurs when

a.

fixed costs and fixed revenues are equal.

b.

variable costs and variable revenues are equal.

c.

the units produced equal the units sold.

d.

total costs and total revenues are equal.

ANS: D PTS: 1 DIF: E REF: p. 209

NAT: AACSB: Analytic, Creation of Value
14. Break-even analysis indicates the ____ that will be necessary to justify a new expense.

a.

increase in sales.

b.

increase in costs.

c.

amount of profit.

d.

volume of activity.

ANS: A PTS: 1 DIF: M REF: p. 209

NAT: AACSB: Analytic, Creation of Value
15. Fixed cost in break-even analysis refers to the cost that

a.

remains constant no matter how many units are produced.

b.

covers the initial capital expenditures.

c.

covers everything but employee compensation.

d.

declines after the break-even point has been reached.

ANS: A PTS: 1 DIF: E REF: p. 210

NAT: AACSB: Analytic, Creation of Value
16. A decision tree graphically depicts

a.

the alternative solutions available to solve a problem.

b.

cause and effect relationships.

c.

how much inventory to keep on hand.

d.

the states of nature.

ANS: A PTS: 1 DIF: E REF: p. 211

NAT: AACSB: Analytic, Creation of Value
17. An expected value for a decision tree is the value you would expect if

a.

you calculated how much revenue is needed to break even.

b.

your business were sold within 30 days.

c.

a particular decision is made a large number of times.

d.

you took a poll of what people want.

ANS: C PTS: 1 DIF: E REF: p. 211

NAT: AACSB: Analytic, Creation of Value
18. A decision tree is considered particularly useful in

a.

evaluating costs over the life of a project.

b.

making a sequence of decisions.

c.

estimating the length of time required to achieve given return on investment.

d.

determining when to drop a product line.

ANS: B PTS: 1 DIF: M REF: p. 211

NAT: AACSB: Analytic, Strategy
19. The economic-order quantity (EOQ) suggests the

a.

right size orders to take.

b.

break-even point for storing inventory.

c.

break-even point for sales orders.

d.

right amount of inventory to store.

ANS: D PTS: 1 DIF: M REF: p. 213

NAT: AACSB: Analytic, Operations Management
20. Under a just-in-time inventory system, inventory is moved into a plant as soon as

a.

the supplier can deliver.

b.

the manufacturer has shelf space.

c.

it can be bought at the right price.

d.

it is needed.

ANS: D PTS: 1 DIF: E REF: p. 213

NAT: AACSB: Analytic, Operations Management
21. Just-in-time inventorys often referred to

a.

supply-chain management

b.

as lean manufacturing because waste of “fat” is minimized.

c.

operations management.

d.

as custom manufacturing.

ANS: B PTS: 1 DIF: M REF: p. 214

NAT: AACSB: Analytic, Operations Management
22. The just in time system of inventory control relies on

a.

cards, to communicate production requirements from the final point of assembly to the manufacturing operations that precede it.

b.

kanbans

c.

both a & b

d.

shipping directly from suppliers.

ANS: C PTS: 1 DIF: D REF: p. 214

NAT: AACSB: Analytic, Operations Management
23. Under the inventory system, FIFO, you sell

a.

by shipping directly from one of your suppliers.

b.

the first goods you obtained last

c.

the last goods you obtained first.

d.

the first goods you obtained first.

ANS: D PTS: 1 DIF: E REF: p. 216

NAT: AACSB: Analytic, Strategy
24. Sell the most recently received items first is called

a.

FIFO

b.

JIT

c.

LIFO

d.

wholesaling

ANS: C PTS: 1 DIF: E REF: p. 216

NAT: AACSB: Analytic, Creation of Value
25. A Pareto diagram is

a.

an inventory method

b.

a bar graph that ranks types of output variations by frequency of occurrence.

c.

a forecasting tool.

d.

a scenario for the future

ANS: B PTS: 1 DIF: D REF: p. 217

NAT: AACSB: Analytic, Operations Management
TRUE/FALSE
1. The data-driven decision maker relies mostly on intuition when making decisions.

ANS: F PTS: 1 DIF: M REF: p. 194

NAT: AACSB: Analytic, Individual Dynamics
2. Brett is a data-driven manager so he relies more on facts than human impressions when making decisions.

ANS: T PTS: 1 DIF: M REF: p. 194

NAT: AACSB: Analytic, Individual Dynamics
3. Data-driven management is more of an attitude and approach than a specific technique,

ANS: T PTS: 1 DIF: M REF: p. 195

NAT: AACSB: Analytic, Individual Dynamics
4. A technological forecast predicts what types of technological changes will take

place.


ANS: T PTS: 1 DIF: E REF: p. 200

NAT: AACSB: Technology, Information Technology


5. Time-series analysis is an historical approach to making forecasts.

ANS: T PTS: 1 DIF: D REF: p. 197

NAT: AACSB: Reflective Thinking, Creation of Value
6. If a manager recalls success stories from global expansion to Singapore, he might overestimate

the chances of succeeding in that country. This is an example of the recallability trap.

ANS: T PTS: 1 DIF: D REF: p. 198

NAT: AACSB: Reflective Thinking, Strategy


7. The overconfidence trap in making forecasts leads a person to overestimate the accuracy of his or her forecasts.

ANS: T PTS: 1 DIF: E REF: p. 198

NAT: AACSB: Analytic, Individual Dynamics
8. The prudence trap in making forecasts leads a person to make overly optimistic forecast so as not to appear too conservative.

ANS: F PTS: 1 DIF: M REF: p. 198

NAT: AACSB: Reflective Thinking, Strategy
9. Forecasts that are updated regularly with fresh data are referred to as rolling forecasts.

ANS: T PTS: 1 DIF: E REF: p. 199

NAT: AACSB: Analytic, Strategy
10. The information compiled in a Gantt chart is well suited as a control device.

ANS: T PTS: 1 DIF: M REF: p. 202

NAT: AACSB: Analytic, Operations Management
11. Janet is supervising the construction of an animal hospital. An example of a milestone in her project would the installation of the operating room.

ANS: T PTS: 1 DIF: M REF: p. 203

NAT: AACSB: Reflective Thinking, Operations Management
12. Much of the accuracy of a PERT chart depends upon estimates of the time necessary to complete each activity.

ANS: T PTS: 1 DIF: E REF: p. 206

NAT: AACSB: Analytic, Strategy
13. To speed up the completion of a project, the manager should attempt to give top priority to all activities not on the critical path.

ANS: F PTS: 1 DIF: M REF: pp. 206-207

NAT: AACSB: Analytic, Operations Management
14. In an advanced application of PERT, expected times are based on frequency distributions of how long certain events took place in the past.

ANS: T PTS: 1 DIF: D REF: p. 207

NAT: AACSB: Analytic, Strategy
15. With scenario planning, you prepare for what the future might look like.

ANS: T PTS: 1 DIF: M REF: p. 201

NAT: AACSB: Analytic, Leadership Principles
16. Break-even analysis assumes that unit costs vary in relation to sales volume.

ANS: F PTS: 1 DIF: M REF: p. 209

NAT: AACSB: Analytic, Creation of Value
17. Maintaining the right level of inventory is a major factor influencing the financial health of an organization.

ANS: T PTS: 1 DIF: D REF: p. 212

NAT: AACSB: Analytic, Operations Management
18. The inventory management system called LIFO, refers to selling your oldest inventory first.

ANS: F PTS: 1 DIF: M REF: p. 216

NAT: AACSB: Analytic, Creation of Value
19. A decision tree is a graphic illustration of the alternative solutions available to solve a problem.

ANS: T PTS: 1 DIF: E REF: p. 211

NAT: AACSB: Analytic, Strategy
20. The economic-order quantity (EOQ) is the inventory level that minimizes ordering and carrying costs.

ANS: T PTS: 1 DIF: E REF: p. 213

NAT: AACSB: Analytic, Operations Management
21. Under just-in-time inventory control, an ample safety stock is accumulated to deal with emergencies such as supplier problems and labor strikes.

ANS: F PTS: 1 DIF: M REF: p. 213

NAT: AACSB: Analytic, Operations Management
22. The just-in-time system emphasizes that customer demand is the most important factor in determining how much product to manufacture.

ANS: T PTS: 1 DIF: D REF: p. 215

NAT: AACSB: Technology, Information Technology
23. Just in time is applicable only to highly repetitive manufacturing operations such as car or residential furnace manufacturing.

ANS: T PTS: 1 DIF: D REF: p. 215

NAT: AACSB: Analytic, Operations Management
24. The 80/20 (Pareto) Principle is a general guide as to what percent activities are likely to cause most of the results in a given situation.

ANS: T PTS: 1 DIF: M REF: p. 217

NAT: AACSB: Analytic, Strategy
25. The Delphi Technique is a form of group decision making designed to provide group members with one another’s ideas and feedback while avoiding some of the problems associated with interacting groups

ANS: T PTS: 1 DIF: D REF: p. 201

NAT: AACSB: Analytic, Group Dynamics
ESSAY
1. Describe how a person might use a Gantt chart to plan an office party for 2,000 people. Use a diagram of a Gantt chart in your answer.

ANS:


A Gantt chart graphically depicts the planned and actual progress of work over the period of time encompassed by a project. Charts of this type are also called time-and-activity charts, because time and activity are the two key variables they consider. For the party time (4 months)is plotted on the horizontal axis; activities (preparing the guest list, selecting invitations, hiring the caterer, mailing the invitations, ordering the centerpieces, recording the rsvps) are listed on the vertical axis.

PTS: 1 DIF: M REF: p. 202 NAT: AACSB: Analytic, Strategy


2. Describe scenario planning.

ANS:


Scenario planning is the process of preparing responses to predicted changes in conditions. With scenario planning, you prepare for what the future might look like. A good use of scenario planning would be to figure out in advance how to deal with a serious disruption in business caused by a hurricane. At the same time, it would be helpful to plan for a substantial increase in business caused by a hurricane. A building-supply company might face this problem.

PTS: 1 DIF: M REF: pp. 200-201

NAT: AACSB: Reflective Thinking, Creation of Value
3. Explain the basics of a just-in-time (JIT) inventory system.

ANS:


The just-in-time (JIT) system is an inventory control method designed to minimize inventory and move it into the plant exactly when needed. Note also that JIT is part of a manufacturing

system that focuses on making manufacturing more efficient by eliminating waste wherever possible. The key principle of the system is to produce or purchasing parts, subassemblies, and final products only when—and in the exact amounts—needed.

PTS: 1 DIF: M REF: pp. 213-214

NAT: AACSB: Analytic, Operations Management


4. Suppose a small-business owner wants to repaint the walls inside the office. The office manager suggests buying a premium brand of paint because such paint stays fresher looking

longer and does not chip as readily. What would a data-driven manager say?

ANS:

The data-driven manager would say, “Where is the evidence that if we have the painter use premium paint the walls will look better longer and resist chipping? Show me the evidence.”



Data-driven management is more of an attitude and approach than a specific technique, and it is hardly new. You attempt to gather relevant facts before making a decision of consequence.

PTS: 1 DIF: D REF: p. 195



NAT: AACSB: Analytic, Creation of Value


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