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CHAPTER 12
1. Which of the following statements about quantitative methods is incorrect?
a. Every life-life decision may be modeled mathematically under certain assumptions and a
deterministic solution may be achieved.
b. Quantitative or mathematical models are usually over-simplifications of the real world; to
perform the calculations, assumptions must be made.
c. In applying quantitative methods, behavioral issues should never be taken into account.
d. In applying quantitative methods, some relevant variables may not be quantified and are
therefore not included, and the quantitative techniques can be very complex and costly.
2. Simulation is a technique for experimenting with logical or mathematical models with the use
of the computer. Which of the following statements about simulation models is false?
a. Simulation models are stochastic or probabilistic models
b. Simulation models mathematically estimate what performance would be under various
conditions
c. Simulation models are deterministic in nature
d. Simulation modeling samples the operation of a system
3. Exogenous variables, or input variables, are
a. The means of measuring the results of a decision after the fact.
b. Important to the decision-making process but are outside the control of the decision
maker.
c. Are under the decision maker’s control.
d. Are limitations that must be considered as part of the decision process.
4. It is a mathematical method for making decision about the likelihood of future events, such as
sales and profits, in the face uncertainty.
a. Learning curves
b. Probability distribution theory
c. Queuing theory
d. Gantt charting
5. Probability analysis or risk analysis is
a. Incompatible with sensitivity analysis
b. An extension of sensitivity analysis
c. Used only for situation involving 3 or fewer possible outcomes
d. Used only when the sum of probabilities is greater 1
6. It is found by multiplying the probability of each outcome by its payoff and summing the
products. It represents the long term average payoff for repeated trials.
a. Expected value
b. Face value
c. Present value
d. Maturity value
7. Which of the following statements about expected value of perfect information is incorrect?
a. It is the difference between the expected profit under certainty and the expected
monetary value of the best act under uncertainty
b. It is the excess of the total conditional profits under certainty over the profit from the best
decision under uncertainty
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c. It is the difference between the expected profit under certainty and the expected
opportunity lost
d. It is the difference between the expected value without perfect information and the
expected value under uncertainty
8. Jess Company operates 3 shipping terminals, A, B, and C. Terminals A, B, and C handle
approximately 60%, 30%, and 10% respectively of the total cargo shipped, with error rates of
3% for A, 4% for B, and 6% for C.

Jess Company’s internal auditor randomly selects 1 shipping document, ascertaining that this
document contains an error. What is the probability that the error occurred in Terminal B?
a. 33 1/3 %
b. 30%
c. 40%
d. 1.20%

ITEMS 9 AND 10 ARE BASED ON THE FOLLOWING INFORMATION:

Nitz’ Company is planning to produce a new product, Duhat Soap. A marketing consultant
prepared the following payoff probability distribution describing the relative likelihood of monthly
sales, volume sales, and relative contribution margin for Duhat Soap:

Monthly Sales Volume Probability Contribution Margin

15,000 units 40% P 75,000

18,000 30% 90,000

27,000 15% 135,000

36,000 10% 180,000

45,000 5% 225,000

9. If NItz’ Company decides to market Duhat Soap, the expected value of monthly sales volume is
a. P141,000
b. P705,000
c. P106,500
d. P21,300
10. If NItz’ Company decides to market Duhat Soap, the expected value of monthly contribution
margin is
a. P141,000
b. P705,000
c. P106,500
d. P21,300

ITEMS 11 AND 12 ARE BASED ON THE FOLLOWING INFORMATION:


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NGO, a charitable organization, was given a special permit by the city government to conduct gains of
chance for fund-raising purposes. From this project, NGO expects to earn profit from admission fees
and sales of refreshments, and wants to merely ‘break-even’ on the games of chance.

In one of the games, a player draws one card from a standard deck of 52 cards. If the player draws any
one of the 4 “queens,” he wins P50; if he draws any one of the 13 “hearts,” he wins P20.

11. What is the probability that a “heart” would be drawn?


a. 13
b. 25%
c. 39
d. 7.69%
12. How much price should be charged per draw so that the total amount paid for the winning
draws would be equal to the total amount received from all the draws?
a. P3.85
b. P5.00
c. P27.06
d. P 8.85
13. Leevoi Scan Company is developing its operating budget for 20B. it has developed the
following range of sales forecast and associated probabilities for the year:
Sales Estimates Probabilities
P48,000 10%
68,000 50%
80,000 40%

Leevoi Scan Company’s gross profit rate averages 20% of sales. What is the expected value of
Leevoi Scan Company’s budgeted cost of good sold for 20B?
a. P56,540
b. P70,800
c. P14,160
d. P52,260
14. The country has been experiencing frequent brownouts since its hydroelectric plants
experienced some technical problems. Statistics showed that the country has the following
average numbers of brownouts:

Number of brownouts Number of brownouts per month


2 o
3 4
3 6
4 8
For Lanie Company, each brownout costs P10,000. In view of this, the company is considering
to lease a generator for P40,000 per month to provide power during brownouts.

If Lanie Company would lease the generator in the coming year, how much is the estimated
savings (additional expense) per month next year?
a. (P11,700)
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b. P11,700
c. P140,400
d. P40,00

ITEMS 15 AND 16 ARE BASED ON THE FOLLOWING INFORMATION:

Video town sells original DVD movies, classified as Suspense, drama, and horror. Based on the past
sales data, Video Town’s manager has made random letter assignments to represent customers
choices, as follows:

Type of Movie letter Assignment Number of Letter Assigned

Suspense A to D 4

Drama E to F 2

Musical G to I 3

Horror J 1

Totals letters assigned 10

15. What is the probability that a customer will buy a musical video?
a. 40%
b. 20%
c. 30%
d. 10%
16. In running a simulation of the demand for the types of the movie being sold by the Video
Town, the following letters are drawn in sequence: H, F and B. The simulation indicates that
the first customer will buy a
a. Suspense movie
b. Drama
c. Musical
d. Horror
17. Leilani Company uses materials X and Y in the manufacture of its only product. The costs of
materials X to Y are expected to decrease in the coming monyhs.
The expected cost changes (which are independent of one another), as well as their
probabilities, were presented by the Purchasing Manager to the Budget Committee as follows:

PROBABILITIES
Decrease in Costs Material X Material Y
2% 20% 40%
6% 50% 10%
8% 30% 50%

The probability of a 6% decrease in the cost of both Material X and Y is


a. 60%
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b. 30%
c. 500%
d. 5%

ITEMS 18 AND 19 ARE BASED ON THE FOLLOWIN INFORMATION:

Health conscious, Inc. is planning to open a spa in the city. A market study conducted by an
independent market researcher shows the following estimates of the number of clients (and their
probabilities) during a period:

Number of Clients Probabilities

0-40 10%

41-80 40%

81-120 30%

121-160 20%

18. What is the probability of having between 81 to 160 clients in the spa during the period?
a. 30%
b. 20%
c. 50%
d. 25%
19. What is the best estimate of the expected number of clients in the spa during the period?
a. 84
b. 104
c. 80
d. 65
20. Miss Lalaine owns a piece of land that is adjacent to a big area of a vacant lot owned by the
city government. Recently, Miss Lalaine heard that the city government has plan a vacant lot.
She inquired about such plans and she was given the following, including each plan’s
probability of occurrence:
Probability
Plan A – Lease the lot a businessman who will
Construct a mail on the lot 60%
B – Construct a theme park on the vacant lot 30%
C – Construct a building that will house some
Of the city government’s offices 10%

Miss Lalaine knows that the values of her land, which she acquired ten years ago at a cost of
only P500 per square meter, will increase depending on which plan would materialize. Her
estimates are as follows:
Plan A - P5,000 per square meter
B - 2,000
C- 1,000
What is the expected value of the land?
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a. P5,000
b. P3,000
c. P2,667
d. P3,700

ITEMS 21 TO 23 ARE BASED ON THE FOLLOWING:

The local chapter of JPIA is planning to conduct a fund raising project by selling roses on Valentine’s
Day. The roses, which can be purchased from a nearby supplier at P5 each, will be sold to the students
for P15 each. Any unsold roses at the end of the day will be discarded

The estimated numbers of roses that can be sold on such day, as well as their probabilities, as follows:

Units of Roses Probability

600 0.20

800 0.30

1,000 0.40

1,200 0.10

21. What is the estimated sales of roses (in units) using an expected value approach?
a. 880
b. 1,000
c. 900
d. 400
22. What is the estimated unit sales of roses on Valentine’s Day using a deterministic approach
based on the most likely outcome? 880
a. 880
b. 1,000
c. 900
d. 400
23. What is the conditional profit of purchasing 1,00 units of roses but selling only 800 units?
a. P7,000
b. P8,000
c. P2,100
d. P2,800
24. Two companies share customers in the same market. Company X conducted a study of the
customers’ buying habits and obtained the following results:

Company X: 80% of its customers were repeat-customers each month, while 20%
went to Company Y
Company Y: 60% % of its customers were repeat-customers each month, while 20%
went to Company X
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If the customers’ buying habits continue for a long period, the percentage of customers each
company will have is

Company X Company Y
a. 80% 60%
b. 120% 80%
c. 66.6% 33.4%
d. 33.4% 66.6%

ITEMS 25 TO 27 BASED ON THE FOLLOWING INFORMATION:

Mr. Imbestigador is contemplating whether to investigate the efficiency variance in its variable
manufacturing costs. The investigation will cost P 10,000. If the production departments are formed to
be operating improperly, the company will incur P 25,000 (in addition to the cost of investigation) to
correct the operations.

If the productions departments are operating improperly and Mr. Imbestigador fails to investigate ,
operating costs from various inefficiencies are expected to amount to P 40,000.

25. What is the expected value of tha act “Investigate” if the probability of improper operations is
60%?
a. P15,000
b. P10,000
c. P25,000
d. P5,000
26. What is the expected value of tha act “Do not Investigate” if the probability of improper
operations is 60%?
a. P40,000
b. P24,000
c. P34,000
d. P30,000
27. Mr. Imbestigador would be indifferent between the two actions ‘Investigate’ and ‘Do not
investigate’ if the probability of improper operation is
a. 60%
b. 40%
c. 33 1/3%
d. 66 2/3%

ITEMS 28 TO 33 ARE BASED ON THE FOLLOWING:

The social canteen can sell either halo-halo or mami (hot noodle soup) on any given day. The
contribution margin that the canteen could earn from halo-halo and mami is affected by the weather,
as follows:

Items sold Contribution Margin


Hot weather Cold weather
Halo-halo P15,000 P6,000
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Mami 11,400 12,000

28. If the probability of hot weather on a given day at this time is 60%, what is the expected
payofffor selling halo-halo?
a. P11,400
b. P9,000
c. 13,560
d. 11,640
29. What is the expected payoff for selling the mami if the probability of hot weather on a given
day at this time is 60%?
a. P11,400
b. P6,840
c. P13,800
d. P11,640
30. If the probability of hot weather on a given day at this time is 60%, which item(S) should the
company sell?
a. Halo-halo, because this item is salable when weather is hot
b. Mami, because it has the higher expected payoff
c. Halo-halo amd mami, so tha canteen could maximize contribution margin
d. 60% halo-halo and 40% mami
31. If the canteen’s management could have perfect information, i.e., it could know with certainty
that the probability of hot weather on a given day at this time is 60%, what is the expected
payoff?
a. P9,000
b. P13,800
c. P15,000
d. P11,400
32. Refer to the Item #31. What is the expected value of perfect information?
a. P13,800
b. P11,640
c. P2,160
d. P9,000
33. Refer to the Itam # 32. If the experienced weather forecaster offers to give the canteen’s
management an accurate forecast of the weather fee, should the canteen’s management
accept the offer if the fee is P3,000?
a. yes, so the management could know the accurate weather forecast
b. yes, because the canteen would be able to maximize the contribution margin if its
management knows the accurate weather forecast
c. no, because nobody can forecast weather accurately
d. no, because the cost of information is greater than the expected value of perfect
information
34. decision tree analysis is
a. an approach to solving problems by dividing a large mathematical model into smaller,
more manageable pieces in such a way that once the smaller problems have been solved,
the result is the optimal solution to the overall model.
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b. A group of mathematical models of systems involving waiting lines


c. Used for situations involving a sequence of events with several possible outcomes
associated with each event
d. A network model used to help control large-scale, complex project
35. The following statements aplly to decision tee analysis,except:
a. Its use is appropriate for decision-making under conditions of risk
b. The sum of probabilities of the events is equal to one
c. All the events are mutually exclusive
d. Not all the events are included in the decision
36. Trixie Company needs a component part for the production of a new product. The component
part is available from local suppliers, but the company can make it with the use of aspecial
equipment which it can rent for P10,000 per month.

Each new product requires one component part. Thus, production requirement for the part is
the same as the demand for the new product, which could be high (5,000 units per month),
with probability of 70% or low (2,000 units per month)

The contribution margin pe unit of the new product is p12 if the company will make the part,
and P8 if the part is purchased from local suppliers.

The company’s management accountant prepared the following decision tree to help
management select the better alternative:

Decision Demand payoff(contribution)

Buy the component part 5,000 units (70%) P40,000


2,000 units (30%) 16,000

Make the component part 5,000 units (70%) 50,000

2,000 units (30%) 14,000

Which of the following statement is correct?

a. The expected value of buying the component part is P32,800


b. The expected value of making the component part is P39,200
c. Making the part is the better alternate
d. Buying the part is the better alternate
37. Krystyn Company’s management must decide whether to produce Product X or Product Y.
Expected sales volume can be classified as high or, low. How many different payoffs are
possible in a decision tree in this case?
a. 2
b. 4
c. 6
d. 8
38. Which of following statements about a Gantt Chart is correct?
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a. A Gantt chart is used for determining an optimal product mix.


b. A Gantt chart shows only the activities along the critical path of a network
c. A Gantt chart shows the activities to be completed but not their sequencing
d. A Gantt chart shows the critical path for a project
39. In the Grantt chart below, each of the bars represents the expected time necessary to
complete the activity and the shaded regions represent the portions completed:
Based on the Grantt chart,
a. Activities A and B are still in progress
b. The project is on schedule
c. The project is ahead of schedule
d. Activity C is one month behind schedule
40. Both PERT and CPM are network analysis techniques that are used for
a. Determining the appropriate number of tellers needed in a bank
b. Determining the optimal product mix
c. Project planning and control
d. Family planning and birth control
41. PERT is different from CPM in that
a. Unlike CPM, PERT is a network technique
b. PERT uses probabilities on the activity times, whereas CPM uses deterministic time and
cost estimates
c. PERT considers crash efforts and costs, while CPM does not.
d. PERT may be thought of as a mere subset of CPM
42. In PERT, the expected time (tₑ) for an activity given an optimistic time (tₒ), a most likely time
(tm) and a pessimistic time (tᵨ) is calculated by which one of the following fromulas?
a. (tₒ + tm+ tᵨ) / 3
b. [4(tₒ + tm+ tᵨ)] / 6
c. (tₒ + 6tm+ tᵨ) / 4
d. (tₒ + 4tm+ tᵨ) / 6

ITEMS 43 TO 44 ARE BASED ON THE FOLLOWING INFORMATION:

In a PERT network, the optimistic for a particular activity is 3weeks, the most likely time is
5weeks, and the pessimistic time is 7weeks.

43. The expected time to complete the activity is


a. 5 weeks
b. 2.5 weeks
c. 17 weeks
d. 30 weeks
44. The best estimate of the standard deviation for the activity is
a. 4 weeks
b. 2/3 weeks
c. 5 weeks
d. 1 2/3 weeks
45. An activity in a PERT network is expected to require 54 days to complete. This estimate was
calculated using the PERT formula based on an optimistic completion time of 48 days and a
most likely completion of 50 days.
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What estimate was used for the pessimistic completion time?


a. 54 days
b. 98 days
c. 76 days
d. 50 1/3 days
46. In a PERT network, the critical path is the path that
a. As the most number of activities
b. Requires the longest time to complete
c. Requires the shortest time to complete
d. Has the most slack
47. In a PERT network slack is the
a. Average of the time estimates for an activity
b. Path that requires the longest completion time
c. Time (numbers of days, weeks, etc.) an activity can be delayed without forcing a delay for
the entire project
d. Most likely time estimate for an activity
48. In CPM, crashing the network means
a. Abandoning the entire project for practical reasons
b. Finding the minimum cost for completing the project in minimum time
c. Minimizing the number of activities in the project
d. Working overtime to complete a noncritical path earlier than expected
49. When making a cost time trade of in CPM, the first activity that should be crash is the activity
a. With the lowest crash cost per unit
b. On the critical path with lowest crash per unit
c. A noncritical path
d. With the longest expected path to complete

ITEMS 50 TO 54 ARE BASED ON THE FOLLOWING INFORMATION:

Describe the interrelationship of several activities to complete the project the arrow represent the
activities. The numbers indicates the expected time in months to complete each activity

2 B 6

E
A
4

3
D
C 5

50. Which of the following statements about the PERT diagram incorrect?
a. The PERT diagram has 3 paths
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b. Activities A-B and A-C are parallel activities


c. Activities A-B and B-E are series of activities
d. All the paths in the PERT diagram have slack time
51. The critical path in the PERT diagram is
a. A-B-E
b. A-C-D-E
c. A-B-C-D-E
d. A-B-C
52. The shortest time to complete the entire project is
a. 8 months
b. 15 months
c. 18 months
d. 14 1/3 months
53. The slack time for path A-B-E is
a. 10 months
b. 8 months
c. 3 months
d. 18 months
54. The slack time for path A-B-C-D-E is
a. 18 months
b. 10 months
c. 3 months
d. 0
55. The following are taken from a PERT for a project:

Network Paths Expected Time to Complete

Path A: 0-1-2-5-7 72 weeks

Path B: 0-1-2-4-7 52 weeks

Path C: 0-1-3-4-7 36 weeks

Path D: 0-1-3-6-7 56 weeks

What is the critical path?

a. 72 weeks
b. Path A
c. Path C
d. 36 weeks

FOR ITEMS 56 AND 57 ARE BASED ON THE FOLLOWING INFORMATION:

The following network describes the logic of a particular project’s activities with the duration in days
shown in parenthesis: 12 16

14 B 16 D F

A C

E F
G
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8 9

56. Which of the following is not a path in the network?


a. Path A-B-C-D-H
b. Path A-E-D-H
c. Path A-E-G-F-D-H
d. Path A-E-F-D-H
57. Based on the network diagram, what is the minimum duration of the entire project?
a. 46 days
b. 42 days
c. 41 days
d. 40 days
58. Morales Builders Inc. uses the critical path method (CPM) to monitor construction projects. In
one of its projects (job 55), the company is 2 weeks behind schedule. Mr. Morales, the company
president, considering this delay in job 55 seriously because this project, per the contract with
the client, is subject to a 40,000 per week completion penalty.

To reduce the normal completion time of job 55, and at the same time, earn the highest possible
income from the project, Mr. Morales is considering to crash some of the activities in the project.
The PERT diagram for job 55 shows to path worth considering:

Path A-B-D-F-G-H-I with normal completion time of 20 weeks.


Critical path A-D-E-F-G-H-I with normal completion time of 22 weeks

From the aforementioned paths, the following activities can be crashed:


Activities Cost to Crash 1 week Cost to Crash 2 weeks
BD 15,000 29,000
FG 19,000 38,000
GH 17,000 40,000

To attain the company’s objectives, which activities should be crashed?


a. Activity BD and Activity GH for 1 week each
b. Activity BD for 2 weeks
c. Activities FG and GH for 1 week each
d. Activity GH for 2 weeks

ITEMS 59 AND 60 ARE BASED ON THE FOLLOWING INFORMATION:

The activity cost chart for a manufacturing project of Lody, Inc. is presented below:
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NORMAL CRASH
Activity Cost Time (days) Cost Time(days)
AB P 9,000 7 P 12,000 5
AD 15,000 10 15,750 9
AC 12,000 11 14,250 8
BE 18,000 14 21,000 10
DE 24,000 13 27,600 10
CE 18,000 15 20,250 13
BD 7,500 2 10,500 1
BC 6,000 1 7,500 ½

From the network diagram for this project, the critical path is Path A-C-E

59. How long is the expected duration to complete the entire project?
a. 26 days
b. 23 days
c. 22 days
d. 21 days
60. In order to keep costs at a minimum and decrease the completion time of the project by 3 days,
the company should crash an activity. Which activity should be crash and how much is the
incremental cost of crashing such activity?
a. AC, P2,250
b. CE P2,250
c. DE P3,600
d. AB P3,000 and AD P750
61. It is mathematical technique used to maximize a revenue, contribution margin or profit function,
or minimize a cost function subject to constraints, such as scars resources and production
capacity.
a. PERT
b. Queuing Theory
c. Linear Programing
d. High-Low Points Method
62. Linear programming is a mathematical technique that is used to allocate scars resources.
Mathematical expressions are used to describe a problem. In a linear programming model, the
measure of effectiveness that is to be maximized or minimized is the
a. Set of decision variables
b. Set of slack variables
c. Constraints function
d. Objective function
63. In a linear programming model, the constraints are
a. Minimize
b. The cost
c. The revenues are profits to be maximized
d. The scars resources
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64. Mocho Company wants to allocate its available paths between 2 investment alternatives: stacks
and bonds, which differ in terms of return and risk. The company will invest at most 60% in
either investment choice and desires to earn at least 20% from the investment.
To allocate its available funds between stocks and bonds, the appropriate mathematical
technique that much the company can use is
a. Queuing theory
b. Capital budgeting
c. PERT or CPM
d. Linear programming

ITEMS 65 TO 68 ARE BASED ON THE FOLLOWING INFORMATION:

Javee Corporation produces and sells 2 products, A and B. the contribution margin per unit of A is P10,
while of that B is P15. 2 types of materials, X and Y, are used to produce both products. At present, the
company is experiencing some difficulties in acquiring the said materials, so it could produce as much
quantity of A and B as it wants to produce. To properly allocate the available materials and, at the same
time, maximize its total contribution margin, the following model will be used:

Max CM = 10A + 15B

Subject to: 5A + 4B ≤ 800

3A + 6B ≤ 500

65. The mathematical functions that the company will use to allocate this scars materials and
maximize the total contribution margin are an example of a (an)
a. Linear programming model
b. Expected value model
c. FTV model
d. EQQ model
66. In the given mathematical functions, Max CM = 10A + 15B is the
a. Constraint function
b. Objective function
c. Shadow point
d. Objection function
67. The 2 inequality function are the
a. Objective function
b. Feasible solution
c. Constraints
d. Irrelevant variables
68. The point at which A = 60 and B = 40
a. Would minimize contribution margin
b. Would minimize cost
c. Is a corner point
d. Is a feasible point
69. To solve a linear programming problem, slack, surplus, and artificial variables must be employed.
Which of the following statements about a slack variable is correct?
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a. It is the benefit foregone by using a scars resources in a given way


b. It is the total amount varies which change in cost driver, but its cost per cost is constant
within the relevant range
c. It represents unused capacity and is added to inequalities of the ≤ type to convert them into
equalities
d. It refers to the benefit of moving the feasible area
70. The quantitative technique most commonly used to arrive of the optimize solution in linear
programming is
a. Regression analysis
b. Sensitivity analysis
c. Simulation
d. Simplex method analysis
71. In linear programming, shadow prices may be calculated. Which of the following statements
about shadows prices is incorrect?
a. A shadow price is the amount by which the value of the optimal solution of the objective
function in a linear programming problem will change if 1-unit change is made in a binding
constraint
b. In a linear programming solutions are ordinarily considered to be the same as opportunity
cost
c. A shadow price refers to the measurement of the value of relaxing a constraint in a problem
with dual variables
d. A shadow price, is the price charge for a product or service when such product or service is
transferred or sold by one segment of an organization to another segment of the same
organization
72. A linear programming, sensitivity analysis is use to
a. Develop coefficients for the objective function
b. Determine how the optimal solution will react to changes in parameters, such as the
objective function coefficient, the limiting value of a resources constraint, or a constraint
coefficient
c. Develop the optimal solution to the problem
d. Identify the constraints
73. A transportation model is a special case of the linear programming model. It involves
a. Physical movements of goods from sources of supply to destinations
b. Determination of how the optimal solution will react to changes in parameter
c. Determination of the amount by which the value of the optimal solution of the objective
function will change if a 1-unit change is made in a biding constraint
d. Managing large construction projects by focusing on the critical path in the network
74. Linear programming problems can be solved using either the graphic method or the simplex
method. Which of the following statements about the graphic method is not correct
a. The graphic solution defects the area of feasible combinations of activity given the
constraints
b. The graph depicts the optimal corner point
c. The graphic can be used given more than to restriction (constraints)
d. The graphic method is limited to situations having to restriction (constraint)

FOR ITEMS 75 AND 76 ARE BASED ON THE FOLLOWING INFORMATION:


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Kit Corporation produces 2 products, Tik and Tak, which uses 2 types of materials, Buk and Bok. Fixed
quantities of materials Buk and Bok are available each math. There is no constraint on the number of
unit of product Tik that can be solved, but the demand for product Tak is limited.

The productions in demand constraints are depend on the following graph:

A Material Buk Constraint

B Demand Constraint

C
Units of Product
E

D Material Bok Constraint

F G H

Units of Product Tak

75. The feasible solution region is bounded by the lines connecting points
a. A,B,C,D, and F
b. B, C, D, and F
c. B, C,D, and G
d. A, C, E , and H
76. If the profit line for Tik and Tak is moved rightward on the graph while maintaining its slope, the
mix of Tik and Tak that will resolve in the maximum profit (the optimal solution) can determined
from
a. Any point within the feasible solution region touched by the profit line
b. The last point in the feasible solution region touched by the profit line
c. The first point in the feasible solution region touched by the profit line
d. Any corner point in the feasible solution region

ITEMS 77 TO 81 ARE BASED ON THE FOLLOWING INFORMATION:

Jasper Company produces 2 products, C and D, each of which requires 2 processes, grinding and mixing,
the contribution margin is P15 for product C and P20 for product D. the numbers are required to process
the 2 products are as follows:

Product C Product D

Grinding 10 20

Mixing 10 10

The numbers of hours available during the period are 400 hours for grinding and 300 hours for mixing.
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77. The objective function is


a. Max. CM = 15C + 20D
b. Min. CM = 15C + 20D
c. 10C + 20D = 400
d. 10C + 10D = 300
78. The grinding constraint is
a. 10C + 10D ≤ 400
b. 10C + 20D ≤ 400
c. Minimize 10C + 20D
d. Maximize 15C + 20D
79. The mixing constraint is
a. 10C + 20D ≤ 400
b. 10C + 20D = 400
c. 10C + 10D ≤ 300
d. 10C + 20D = 400
80. Which of the following combination of C and D is not a corner point within the feasible solution
region?
Product C Product D
a. 0 20
b. 30 0
c. 20 10
d. 40 0
81. Which of the following combinations of product C and D will maximize the objective function
subject to the given constraint?
Product C Product D

a. 0 20

b. 30 0
c. 20 10
d. 40 0

ITEMS 82 TO 84 ARE BASED ON THE FOLLOWING INFORMATION:

Balls Inc. produces 2 products, squid balls(S) and fish balls (F), in 2 departments, the mixing
department and deep frying department. Production of the 2 products (combined)during any period
cannot exceed 23,700 kilos. Data on the 2 products follow:

Contribution Margin TIME REQUIRED (minutes)


per kilo Mixing (M) Deep Frying (D)
Squid Balls (S) P40 3.0 2.0
Fish Balls (F) 30 1.5 3.6
Total time available 48,000 72,000
(minutes)
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82. Using linear programming, the objective function to determine the optimal production of the
balls each period is
a. CM = 40M + 30D
b. CM = 40S + 30F
c. 40S + 30S ≤ CM
d. 5S + 5.10F = 70
83. Which of the following is not a constraint function for this linear programming problem?
a. 3S + 1.5F ≤ 48,000
b. 2S + 3.6F ≤ 72,000
c. S + F ≤ 23,700
d. CM = 40S + 30F
84. The optimal number of units for product D can solved by calculating
a. 2/3 (48,000 – 1.5F) + 3.6F = 72,000
b. 2S + 3.6S ≤ 72,000
c. 3S + 1.5F ≤ 48,000
d. CM = 40S + 30F

ITEMS 85-90 ARE BASED ON THE FOLLOWING INFORMATION:

Bags Company reduces travelling bags and document bags. It uses 4 cutting machine and 4 sewing
machines which it trends for 2,000 per month. Each machine’s capacity is 300 hours per month. As of
now, no additional machines can be obtained.

Productions, sales, and cost data are as follows:

Travelling Bags (T) Document Bags (D)


Selling price per unit 1,350 900
Variable price per unit 1,000 700
Hours required per unit:
Cutting machine (c) 2 1
Sewing machine (S) 4 1
Market Limit None 1,000 units

85. If a linear programming model is used to determine the optimal product mix that will maximize
contribution margin (CM), the objective function is
a. Max. CM = 350T + 200D
b. Min. VC = 1,000T + 700D
c. Max. S = 1,350T + 900D
d. Max. Cm =550TD
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86. How should the constraint function for the cutting machine be expressed?
a. C + S ≤ 1,200
b. 2C + 4S ≤ 1,200
c. 2T + D ≤ 1,200
d. 4T + D ≤ 1,200
87. How should the constraint function for the sewing machine be expressed?
a. 4T + D ≤ 1,200
b. 4T + D ≤ 4
c. 4T + D ≤ 300
d. 4T + D ≤ 1,200
88. Aside from the cutting machine and sewing machine constraint, another constraint in this linear
programming model for Bags Company is
a. 350T + 200D = CM
b. T + D = 1,000
c. T ≤ 1,000
d. D ≤ 1,000
89. If the graphical approach is used in this linear programming model, the graph will look like
a. C.

Document Bags

Travelling Bags

b. d.

90. Which of the following product combinations per points is not a corner point in the feasible
solution region of the linear programming graph for this LP model?

Travelling Bags Document Bags

a. 0 1,000
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b. 50 1,000
c. 100 1,000
d. 300 0
91. If the following product combinations represent the corner points of the feasible solution region,
what is the optimal mix?

Travelling Bags Document Bags

a. 0 0
b. 0 1,000
c. 50 1,000
d. 300 0
92. The maximum amount that the company would be willing to spent on advertising to increase the
demand for document bags to 1,200 units is
a. P0
b. P40,000
c. P180,000
d. P22,500
93. Cheen Corporation makes 2 products that are processed in 2 machines. The objective function
and the constraints are as follows:
Max. P = 16A + 8B
8A + 12B ≤ 72
8A + 4B ≤ 40
A≥O:B≥
Where A is the number of units of the first product:
B is the number of units of the second product

What is the maximum possible profit?

a. P48
b. P80
c. P160
d. P128

ITEMS 94 TO 96 ARE BASED ON THE FOLLOWING INFORMATION:

Chooch Company reduces 2 types of its product, regular and special. Pertinent data about the 2 product
are as follows:

Mixing Packing Contribution Margin


Regular (R) 4 hours 2 hours P20
Special (S) 8 hours 6 hours P28
Total available time per 200 hours 180 hours
period

94. How should the objective function (maximization of contribution margin) be expressed?
a. 20M + 28P
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b. 46 ( R + S)
c. 20R + 28S
d. 20R +28S ≤ 380
95. How should the restriction (constraints) for the 2 processes ( missing and packing) be expressed?
Mixing Packing
a. 4R + 2R ≤ 20 8S + 6S ≤ 28
b. 4M + 8M ≤ 200 2P + 6P ≤ 180
c. 4R + 8S ≤ 200 2R + 6S ≤ 180
d. 6R + 14S ≤ 200 6R + 14S ≤ 180
96. If the simplex method is use to solve this linear programming problem, how many slacks
variables are needed for the simplex tableau?
a. 3
b. 2
c. 1
d. None
97. A toothbrush manufacturer asks your advised on how to maximize his profit by achieving the
best product mix given certain scars resources. You decide that a linear programming technique
should be of help. The following information has been gathered:

HOURS PER BATCH Cont. Margin


Molding Finishing Per batch
Children’s toothbrush 2.5 4 P30
Adult’s toothbrush 2.0 1 15
Hours available 1,500 1,400

Which of the following correctly formulates this linear programming problem?


a. Max. 30X + 15Y
Subject to:
2.5X + 4Y ≤ 1500
2X + Y ≤ 1,400
X, Y ≥ 0
b. Max. 30X + 15Y
Subject to:
2.5X + 2Y ≤ 1500
2X + Y ≤ 1,400
X, Y ≥ 0
c. Max. 1,500X + 1,400Y
Subject to:
2.5X + 4Y ≥ 30
2X + Y ≥ 15
X, Y ≥ 0
d. Max. 30X + 15Y
Subject to:
2.5X + 2Y ≥ 1,500
4X + Y ≥ 1,400
X, Y ≥ 0
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ITEMS 98 TO 102 ARE BASED ON THE FOLLOWING INFORMATION:

The following tableau was developed when a linear programming problem involving maximization of
contribution margin was solved using the simplex method:

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
0 S1 600 3 6 1 0
0 S2 800 6 4 0 1
Zj 0 0 0 0 0
Cj-Zj 15 25 0 0
98. If Cj is the contribution margin per unit in the products are X and Y, the objective function is
a. CM = 15X + 25Y
b. 15X + 25Y = 600
c. 15X + 25Y = 880
d. 15X + 25Y + S1 + S2 = CM

99. The constraint function (S) is (R)


a. 3X + 6Y ≤ 600
6X + 4Y ≤ 880
b. 3X + 6y ≥ 600
6X + 4Y ≥ 600
c. 15X + 25Y ≤ 0
d. S1 + 0S2 ≤ 600
0S1 +S2 ≤ 880

100. The tableau indicates that

a. if 600 units of X and 880 units of Y are produced , total contribution margin is equal to 0
b. no unit of X and Y will be produced, the total contribution margin is equal to 0
c. the optimal product mix is 600 units of S1 and 880 units of S2
d. 3 units of X and units of Y must be produced to maximize contribution margin

101. The tableau indicates that

a. an optimal solution has been reach


b. the product mix can no longer be improved
c. the total contribution margin from the present mix is P1,480
d. the solution can be still be improve

102. The 4 values of Zj in the variables column (all 0 in the tableau) are the amounts by which
contribution margin would be reduce 1 unit of any of the variables (X, Y, S1, and S2) were added to the
mix. In the given tableau, if one unit of X is produce, the reduction in the contribution margin is

a. P15
b. P25
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c. P40
d. P0

ITEMS 103 TO 110 ARE BASED ON THE FOLLOWING INFORMATION:

Following is the first tableau develop when a linear programming problem involving maximization of
contribution margin was solved using the simplex method:

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
0 S1 600 3 6 1 0
0 S2 880 6 4 0 1
Zj 0 0 0 0 0
Cj-Zj 15 25 0 0

Where Cj = contribution margin per unit

X and Y = the products

S1 and S2 = the slack variables

600 and 880 = the maximum number of resources available

Zj = the total contribution number

103. The values 15 and 25 in the Cj-Zj row indicate that the present product mix (0 of X and 0 of Y) is not
the optimal solution hence can still be improve. The second tableau should therefore be developed.

Using the procedures in the simplex method, the next tableau is developed by identifying the new row,
and that is

a. Row X

b. Row Y

c. Row S1

d. Row S2

104. The row to be replaced is

a. Row X

b. Row Y

c. Row S1

d. Row S2
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105. the values of the replacing row are

a. 100 ½ 1 1/6 0

b. 150 ¾ 2/3 ¼ 0

c. 3,600 18 36 6 0

d. 2,400 12 24 4 0

106. The row that will not be replaced will have new elements in the new tableau. The elements are

a. 880 6 4 0 1

b. 100 ½ 1 1/6 0

c. 600 3 6 1 0

d. 480 4 0 -2/3 1

107. The new elements of the Zj row are

a. 0 0 0 0 0

b. 2,500 15 25 0 0

c. 2,500 12.50 25 25/6 0

d. 1,500 7.50 15 15/6 0

108. If the answer to the items 103 to 107 are summarized and the Cj-Zj values are computed, the new
tableau will be

a.

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
25 Y 100 1/2 1 1/6 0
0 S2 480 4 0 -2/3 1
Zj 2,500 12.5 25 25/6 0
Cj-Zj 2.5 0 -25/6 0

b.

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
15 X 100 1/2 1 1/6 0
0 S2 480 4 0 -2/3 1
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Zj 2,500 12.5 25 25/6 0


Cj-Zj 2.5 0 -25/6 0

c.

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
25 X 100 1/2 1 1/6 0
0 S1 480 4 0 -2/3 1
Zj 2,500 12.5 25 25/6 0
Cj-Zj 2.5 0 -25/6 0

d.

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
25 Y 100 1/2 1 1/6 0
0 S1 480 4 0 -2/3 1
Zj 2,500 12.5 25 25/6 0
Cj-Zj 2.5 0 -25/6 0

109. The answer in item no. 108 (2nd tableau) indicates that the product mix is

Product X Product Y

a. 100 480

b. 100 0

c. 0 100

d. 480 100

110. from the product mix in the 2 nd tableau (item no. 108), the total contribution margin is

a. P2,541.67

b. P1,500

c. P0

d. P2,500
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ITEMS 111 TO 113 ARE BASED ON THE FOLLOWING INFORMATION:

Shown below is a tableau when a linear programming problem involving maximization of contribution
margin was solve using the simplex method:

Cj 15 25 0 0
Product Mix Quantity X Y S1 S2
25 Y 40 0 1 0.25 0
15 X 120 1 0 -1/6 4
Zj 2,800 15 25 3.75 0
Cj-Zj 0 0 -3.75 0

111. the tableau indicates that

a. the optimal solution has been attained

b. the product mix can still be improved

c. the total contribution margin from the present product mix is P2,843.75

d. the solution can still be improved

112. based on the given tableau, the optimal product mix is

a. 40 units of X and 120 units of Y

b. 40 units of Y and 120 units of X

c. 2,800 units of Zj

d. ¼ units of S1 and none of S2

113. From the table, the total contribution margin to be earned optimal product mix is

a. P160

b. P2,843.75

c. P2,800

d. 40 units of Y and 120 units of X

ITEMS 114 TO 115 ARE BASED ON THE FOLLOWING INFORMATION:

The following information were taken from the solution to a linear programming problem involving
maximization of contribution margin:

Objective function : maximize CM = 15X + 2Y


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Subject to:

Material A Constraint: 3X + 6Y ≤ 600

Material B Constraint: 6X + 4Y ≤ 880

Non-negativity constraints: X ≥ O : Y ≥ O

Optimal Solution: 120 units of X and 40 units of Y

Total CM at Optimal Mix: CM = 120 (15) + 40 (25) = P2,800

114. What is the shadow price if one unit is added to the material constraint

a. P6.75

b. P0.625

c. P62.50

P 40

115. Should the company acquire additional unit of material B if the cost per unit is P0.20?

a. yes, because the acquisition cost is less than the shadow price of material B

b. yes, because the acquisition cost is greater than the shadow price of material B

c. yes, because the contribution margin will increase by P0.20 per unit

d. no, because the company’s capacity is limited to 880 units of material B

116. A university has a centralized printing office where the different colleges have their hand outs and
other instructional materials reproduce for distribution to their students. Recently, there have been lonn
delays in printing the materials, because of the increase the number of the job requests from the
different colleges. The university administration is considering decentralizing printing offices to reduce
the backlogs and print the instructional materials on time.

An appropriate technique for minimizing the waiting time for a printing job, as well as the cost of
providing printing services is

a. linear programming

b. regression analysis

c. queuing theory

d. PERT or CPM
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117. Queuing theory minimize the sum of the waiting costs and of the

a. no. of customers waiting in line

b. average waiting time in queue

c. cost of providing the service

d. cost of idle resources waiting in line

118. Movi-World operates 10 cinemas in a mall. At present, each cinema has a ticket booth where
customers fall in line to buy ticket. The company is planning to change its present system into a 1-line,
multi-server system. The booths will be installed in just 1 ticketing center and the customer fall in just 1
line. When a book teller is free, the person at the head of the line goes to the teller. In the new system is
implemented, it is expected to

a. decrease the time customer spent in the line

b. increase the work load of the teller

c. decrease the company’s expenses on the tellers’ salaries

d. decrease the number of tickets sold per day

119. Clients arrive at an ATM booth at an average of 10 clients per hour. The ATM ca serve (process
requests: balance inquiry, fund transfer, withdrawals, bills payment, etc.) at an average rate of 12 clients
per hour

What is the average number of clients waiting in line at any time?

a.5

b.10

c.12

d.2

120. What is the average number of clients waiting in line, not being serviced?

a. 5 clients

b. 4 clients

c. 10 clients

d. 12 clients

121. The average waiting time is


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a. 60 minutes

b. 14.38 minutes

C. 25 minutes

d. 50 minutes

122. It is the mathematical model that shows a constant percentage reduction in the average direct
labor input time required per unit as the accumulate output doubles

a. PERT

b. CPM

C. Queuing theory

d. Learning curve

ITEMS 123 TO 125 ARE BASED ON THE FOLLOWING INFORMATION:

A particular manufacturing job is subject to an estimated 60% learning curve. The first unit required 20
labor hours to complete.

123. A doubling of production will reduce the cumulative average unit completion by

a. 40%

b. 20%

c. 60%

d. 30%

124. What is the cumulative time per unit after four hours are completed?

a. 60 hours

b. 20 hours

c. 7.20 hours

d. 28.80 hours

125. what is the cumulative (total) time required to produce 4 units?

a. go hours

b. 39.20 hours
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c. 28.80 hours

d. 7.20 hours

ITEMS 126 TO 128 ARE BASED ON THE FOLLOWING INFORMATION:

The first unit of a manufacturing job required 59 labor hours to complete. When production was
doubled, the cumulative average time per unit to complete the two units was 40 hours.

126. The manufacturing job’s learning curve is

a. 40%

b.50%

c.20%

d.80

127. Assuming the learning curve continues, the cumulative (total) time required to produce 8 hours
units is

a. 25.60 hours

b. 320 hours

c. 204.80 hours

d. 40 hours

128. What is the time required to produce the second unit if the first unit required 50 hours to
complete?

a. 40 hours

b. 50 hours

c. 30 hours

d. 80 hours

129. A learning curve of 70% assumes that direct labor costs are reduced by 30% for each doubling of
output. What is the cost of the 8th unit produced as an appropriate percentage of the first unit
produced?

a.34.30%

b.70%
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c.30%

d.0.343%

ITEMS 130 TO 131 ARE BASED ON THE FOLLOWING INFORMATION:

The cumulative average labor cost per unit for the first batch (of 100 units) produced using a new
process is P200. The cumulative average labor cost after the second batch is P140.

130. The new process ha s learning curve percentage of

a.30%

b.70%

c.140%

d.200%

131. Assuming that the learning curve obtained in Item #130 continues, the cumulative (total) labor cost
of four batches is

a. P80,000

b. P56,000

c.P39,200

d.P98

132. It is the study of how the outcome of a decision process changes as one or more of the assumptions
used in the process change. Different scenarios are presented, showing the outcome in each scenario as
the assumptions change

a. Sensitivity analysis

b. Learning curve

c. Queuing theory

d. PERT

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