C723 QUANTITATIVE ANALYSIS FOR BUSINESS (PA) -
COMPLETE ANSWER KEY WITH RATIONALES
Question 1
A car stereo company is planning to introduce a new product into the market. It
faces stiff competition from two other organizations with similar products. The
company's marketing manager has asked the production manager to perform a
break-even analysis using three different price points. The marketing manager will
use the results to set a price for the new product. Which type of method is a break-
even analysis?
Correct Answer: Quantitative
Rationale: Break-even analysis uses numerical data including price points, costs,
and units to calculate the point where revenue equals costs. Since it involves
mathematical calculations with numbers (price points, costs, quantities), it is a
quantitative method. Quantitative = Quantity = Numbers.
---
Question 2
Over the last three months, a small rural hospital has seen a sudden increase in the
number of patients coming to the emergency room for non-emergency treatment.
The hospital administrator wants to know why there is a sudden increase in demand
and is considering three options to find out. Classify each method available to the
administrator as qualitative or quantitative.
Correct Answers:
- Including an open-ended question on the intake form → Qualitative
,- Pulling the hospital's records for the last 10 years and sorting by medical codes
→ Qualitative
- Counting the number of non-emergencies visits each day and comparing to the
previous month → Quantitative
Rationale:
- Open-ended questions collect opinions and explanations, which cannot be counted
numerically → Qualitative (Quality = Opinion)
- Sorting by medical codes involves categorizing information, not numerical counting
→ Qualitative
- Counting visits and comparing numbers involves numerical data and calculations
→ Quantitative (Quantity = Number)
---
Question 3
A local music store that hosts live music has been a very popular hangout for years.
However, the owner is concerned that the increasing popularity of new methods of
music delivery will soon make the business obsolete. The owner is considering
building a small recording studio in the basement of the store. The nearest
professional studio is 50 miles away, so a new studio may appeal to local musicians
and increase foot traffic. The owner has all the costs of building the studio and has
also estimated how much revenue might increase due to the new studio (from studio
rental fees, increased food and drink sales if more people come to the live music
shows, etc.). The owner will use this information to determine the net present value
for the studio. Which method of analysis should this owner use to make a
determination?
Correct Answer: Quantitative
, Rationale: The owner is using numerical data including building costs, studio rental
fees, food and drink sales, and revenue estimates to calculate net present value. All
these involve counting numbers and performing calculations → Quantitative
(Quantity = Number).
---
Question 4
How should quantitative analysis improve subsequent decision making for a firm
that wants to determine whether its revenue has been increasing or decreasing for
the past 10 years?
Correct Answer: It will let the company determine the average revenue it made.
Rationale: Quantitative analysis involves calculating numerical measures. Since the
question asks about determining whether revenue has been increasing or
decreasing over time, calculating the average revenue would provide numerical
evidence to support this analysis. The other options (seeing why it's profitable, which
customers bought items, or competitors' revenue) would require different types of
analysis beyond simple revenue calculation.
---
Question 5
An employee working for the Highway Safety Department in Albany, New York
has the job to predict the automobile accidents in Albany for the next year. The
employee currently has monthly data on the following variables for the city of
Albany: the number of automobiles registered, the sales of alcoholic beverages,
and the rainfall in inches. How can this employee realistically predict the accidents
in Albany for next year?
, Correct Answer: Use a multiple regression equation using accident as the
dependent variable and others as independent variables
Rationale: The employee wants to predict automobile accidents (the dependent
variable) using multiple independent variables (automobiles registered, alcoholic
beverage sales, and rainfall). Multiple regression analysis is appropriate when you
want to predict one outcome (dependent variable) using multiple predictors
(independent variables). The accident count is what we're trying to predict, making
it the dependent variable.
---
Question 6
A marketing manager for a corporation that markets a broad range of food
brands needs to plan a monthly marketing, advertising, and sales promotion budget
for next year and is looking at monthly sales. One brand shows dramatic
fluctuations in sales over the past three years. How should this manager use
quantitative analysis to make budgeting decisions for this brand?
Correct Answer: Compute seasonality indices for each month to forecast next year's
monthly sales
Rationale: Seasonality indices help identify patterns in sales fluctuations that occur
at specific times each year (e.g., holiday spikes, summer slowdowns). By computing
these indices, the manager can forecast future monthly sales more accurately and
make informed budgeting decisions that account for these predictable fluctuations.
---
Question 7
Y-hat = a + b₁X₁ + b₂X₂
COMPLETE ANSWER KEY WITH RATIONALES
Question 1
A car stereo company is planning to introduce a new product into the market. It
faces stiff competition from two other organizations with similar products. The
company's marketing manager has asked the production manager to perform a
break-even analysis using three different price points. The marketing manager will
use the results to set a price for the new product. Which type of method is a break-
even analysis?
Correct Answer: Quantitative
Rationale: Break-even analysis uses numerical data including price points, costs,
and units to calculate the point where revenue equals costs. Since it involves
mathematical calculations with numbers (price points, costs, quantities), it is a
quantitative method. Quantitative = Quantity = Numbers.
---
Question 2
Over the last three months, a small rural hospital has seen a sudden increase in the
number of patients coming to the emergency room for non-emergency treatment.
The hospital administrator wants to know why there is a sudden increase in demand
and is considering three options to find out. Classify each method available to the
administrator as qualitative or quantitative.
Correct Answers:
- Including an open-ended question on the intake form → Qualitative
,- Pulling the hospital's records for the last 10 years and sorting by medical codes
→ Qualitative
- Counting the number of non-emergencies visits each day and comparing to the
previous month → Quantitative
Rationale:
- Open-ended questions collect opinions and explanations, which cannot be counted
numerically → Qualitative (Quality = Opinion)
- Sorting by medical codes involves categorizing information, not numerical counting
→ Qualitative
- Counting visits and comparing numbers involves numerical data and calculations
→ Quantitative (Quantity = Number)
---
Question 3
A local music store that hosts live music has been a very popular hangout for years.
However, the owner is concerned that the increasing popularity of new methods of
music delivery will soon make the business obsolete. The owner is considering
building a small recording studio in the basement of the store. The nearest
professional studio is 50 miles away, so a new studio may appeal to local musicians
and increase foot traffic. The owner has all the costs of building the studio and has
also estimated how much revenue might increase due to the new studio (from studio
rental fees, increased food and drink sales if more people come to the live music
shows, etc.). The owner will use this information to determine the net present value
for the studio. Which method of analysis should this owner use to make a
determination?
Correct Answer: Quantitative
, Rationale: The owner is using numerical data including building costs, studio rental
fees, food and drink sales, and revenue estimates to calculate net present value. All
these involve counting numbers and performing calculations → Quantitative
(Quantity = Number).
---
Question 4
How should quantitative analysis improve subsequent decision making for a firm
that wants to determine whether its revenue has been increasing or decreasing for
the past 10 years?
Correct Answer: It will let the company determine the average revenue it made.
Rationale: Quantitative analysis involves calculating numerical measures. Since the
question asks about determining whether revenue has been increasing or
decreasing over time, calculating the average revenue would provide numerical
evidence to support this analysis. The other options (seeing why it's profitable, which
customers bought items, or competitors' revenue) would require different types of
analysis beyond simple revenue calculation.
---
Question 5
An employee working for the Highway Safety Department in Albany, New York
has the job to predict the automobile accidents in Albany for the next year. The
employee currently has monthly data on the following variables for the city of
Albany: the number of automobiles registered, the sales of alcoholic beverages,
and the rainfall in inches. How can this employee realistically predict the accidents
in Albany for next year?
, Correct Answer: Use a multiple regression equation using accident as the
dependent variable and others as independent variables
Rationale: The employee wants to predict automobile accidents (the dependent
variable) using multiple independent variables (automobiles registered, alcoholic
beverage sales, and rainfall). Multiple regression analysis is appropriate when you
want to predict one outcome (dependent variable) using multiple predictors
(independent variables). The accident count is what we're trying to predict, making
it the dependent variable.
---
Question 6
A marketing manager for a corporation that markets a broad range of food
brands needs to plan a monthly marketing, advertising, and sales promotion budget
for next year and is looking at monthly sales. One brand shows dramatic
fluctuations in sales over the past three years. How should this manager use
quantitative analysis to make budgeting decisions for this brand?
Correct Answer: Compute seasonality indices for each month to forecast next year's
monthly sales
Rationale: Seasonality indices help identify patterns in sales fluctuations that occur
at specific times each year (e.g., holiday spikes, summer slowdowns). By computing
these indices, the manager can forecast future monthly sales more accurately and
make informed budgeting decisions that account for these predictable fluctuations.
---
Question 7
Y-hat = a + b₁X₁ + b₂X₂
