Introduction to Management Science A Modeling 6e TB

Intro to Management Science: Modeling and Case Studies, 6e (Hillier) Chapter 1 Introduction 1) Managers need to know the mathematical theory behind the techniques of management science so that they can lead management science teams. 2) Management scientists use mathematical techniques to make decisions, which are then implemented by managers. 3) Spreadsheets allow many managers to conduct their own analyses in management science studies. 4) Managers must rely on management science experts to create and understand managerial problems. 5) Management science is a discipline that attempts to aid managerial decision making by applying a scientific approach to managerial problems that involve quantitative factors. 6) The discovery of the simplex method in 1947 was the beginning of management science as a discipline. 7) The rapid growth of computing capability and power has led to a corresponding rapid growth of the management science discipline. 8) Managers make decisions based solely on the quantitative factors involved in the problem. 9) A management science team will try to conduct a systematic investigation of a problem that includes careful data gathering, developing and testing hypotheses, and then applying sound logic in the analysis. 10) The mathematical model of a business problem is the system of equations and related mathematical expressions that describes the essence of the problem. 11) A mathematical model of a business problem allows a manager to evaluate both quantitative and qualitative aspects of the problem. 12) Once management makes its decisions, the management science team typically is finished with its involvement in the problem. 13) A cost that varies with the production volume would be a fixed cost. 14) A cost that varies with the production volume would be a variable cost. 15) A cost that does not vary with the production volume would be a fixed cost. 16) A cost that does not vary with the production volume would be a variable cost. 2 Copyright © 2019 McGraw-Hill 17) At the break-even point, management is indifferent between producing a product and not producing it. 18) The best way to solve a break-even problem with a spreadsheet model is to try different production quantities until the quantity that leads to profits of zero is found. 19) A constraint is an algebraic variable that represents a quantifiable decision to be made. 20) A decision variable is an algebraic variable that represents a quantifiable decision to be made. 21) A parameter in a model is a variable that represents a decision to be made. 22) The objective function for a model is a mathematical expression of the measure of performance for the problem in terms of the decision variables. 23) Sensitivity analysis is used to check the effect of changes in the model. 24) Investigating the potential outcomes when estimates turn out to be incorrect is known as "what-if analysis." 25) "What-if analysis" is a process used to generate estimates for use in mathematical models. 26) Enlightened future managers should know which of the following? A) The power and relevance of management science. B) When management science can and cannot be applied. C) How to apply the major techniques of management science. D) How to interpret the results of a management science study. E) All of the answer choices are correct. 27) The rapid development of the management science discipline can be credited in part to: A) World War I. B) George Dantzig. C) the computer revolution. D) George Dantzig and the computer revolution. E) World War I, George Dantzig, and the computer revolution. 28) Managers may base their decisions on which of the following? A) Quantitative factors. B) Their best judgment. C) Opinions from other managers. D) Past experience. E) All of the answer choices are correct. 3 Copyright © 2019 McGraw-Hill 29) Management science is based strongly on which of the following fields? A) Mathematics. B) Computer science. C) Business administration. D) Mathematics and computer science only. E) All of the answer choices are correct. 30) Which of the following are components of a mathematical model for decision making? A) Decision variables. B) An objective function. C) Constraints. D) Parameters. E) All of the answer choices are correct. 31) Which of the following are steps in a typical management science study? A) Define the problem and gather data. B) Formulate a model to represent the problem. C) Test the model and refine it as needed. D) Help to implement the recommendations. E) All of the answer choices are correct. 32) Which of the following is a mathematical expression that gives the measure of performance for the problem? A) Decision variable. B) Parameter. C) Objective function. D) Constraint. E) None of the answer choices are correct. 33) Which of the following is a constant in a mathematical model? A) Decision variable. B) Parameter. C) Objective function. D) Constraint. E) None of the answer choices are correct. 34) Which of the following is an inequality or equation that expresses a restriction in a mathematical model? A) Decision variable. B) Parameter. C) Objective function. D) Constraint. E) None of the answer choices are correct. 4 Copyright © 2019 McGraw-Hill 35) A manager has determined that a potential new product can be sold at a price of $10.00 each. The cost to produce the product is $5.00, but the equipment necessary for production must be leased for $25,000 per year. What is the break-even point? A) 2,500 units. B) 5,000 units. C) 7,500 units. D) 10,000 units. E) 25,000 units. 36) In order to produce a new product, a firm must lease equipment at a cost of $10,000 per year. The managers feel that they can sell 5,000 units per year at a price of $7.50. What is the highest variable cost that will allow the firm to at least break even on this project? A) $2.50. B) $3.50. C) $4.50. D) $5.50. E) $6.50. 37) A manager has determined that a potential new product can be sold at a price of $20.00 each. The cost to produce the product is $10.00, but the equipment necessary for production must be leased for $75,000 per year. What is the break-even point? A) 2,500 units. B) 5,000 units. C) 7,500 units. D) 10,000 units. E) 25,000 units. 38) Production has indicated that they can produce widgets at a cost of $4.00 each if they lease new equipment at a cost of $10,000. Marketing has estimated the number of units they can sell at a number of prices (shown below). Which price/volume option will allow the firm to avoid losing money on this project? A) 4,000 units at $5.00 each. B) 3,000 units at $7.50 each. C) 1,500 units at $10.00 each. D) 1,000 units at $15.00 each E) 25,000 units. 39) A manager has determined that a potential new product can be sold at a price of $50.00 each. The cost to produce the product is $35.00, but the equipment necessary for production must be leased for $100,000 per year. What is the break-even point? A) 3,333 units. B) 5,000 units. C) 6,667 units. D) 7,500 units. E) 8,167 units. 5 Copyright © 2019 McGraw-Hill 40) In order to produce a new product, a firm must lease equipment at a cost of $25,000 per year. The managers feel that they can sell 10,000 units per year at a price of $15.00. What is the highest variable cost that will allow the firm to at least break even on this project? A) $12.50. B) $13.50. C) $14.50. D) $15.50. E) $16.50. 41) A manager has determined that a potential new product can be sold at a price of $100.00 each. The cost to produce the product is $75.00, but the equipment necessary for production must be leased for $175,000 per year. What is the break-even point? A) 3,000 units. B) 5,000 units. C) 7,000 units. D) 10,000 units. E) 25,000 units. 42) Production has indicated that they can produce widgets at a cost of $3.00 each if they lease new equipment at a cost of $10,000. Marketing has estimated the number of units they can sell at a number of prices (shown below). Which price/volume option will allow the firm to avoid losing money on this project? A) 7,500 units at $17.50 each. B) 4,000 units at $20.00 each. C) 3,000 units at $22.50 each. D) 2,500 units at $25.00 each E) 1,500 units at $27.50 each. 43) When evaluating a project to determine the break-even quantity, the advantage of a spreadsheet model is? A) Users can't see the formulas used. B) Calculations are always rounded to the nearest integer. C) The analyst can use Excel's "BREAKEVEN" function to perform the calculation D) A number of different estimates can be quickly evaluated once the model is constructed. E) There are no advantages to spreadsheet modeling of break-even analysis. 44) Which of the following is TRUE about the break-even point? A) When sales are equal to the break-even point, profit will be zero. B) When sales exceed the break-even point, profits will be negative. C) When sales are below the break-even point, profits will be positive. D) Once sales exceed the break-even point, profits no longer change if sales increase further. E) The total revenue and total cost are equal at the point where profits are maximized. 6 Copyright © 2019 McGraw-Hill 45) Which of the following statements about the break-even quantity is FALSE? A) When sales are equal to the break-even point, profit will be zero. B) When sales exceed the break-even point, profits will be positive. C) When sales are below the break-even point, profits will be negative. D) Once sales exceed the break-even point, profits continue to increase as sales increase. E) The total revenue and total cost are equal at the point where profits are maximized. 46) Business analytics is a field which. A) is the same as operations research. B) aids managerial decision making through the use of data. C) uses descriptive analytics to predict the future. D) uses prescriptive analytics to analyze trends. E) uses predictive analytics to determine the best course of action. 47) Descriptive analytics is the process of using data to. A) analyze trends. B) predict what will happen in the future. C) determine the break-even point. D) solve linear programming problems. E) determine the best course of action for the future. 48) Predictive analytics is the process of using data to. A) analyze trends. B) predict what will happen in the future. C) determine the break-even point. D) solve linear programming problems. E) determine the best course of action for the future. 49) Prescriptive analytics is the process of using data to. A) analyze trends. B) predict what will happen in the future. C) determine the break-even point. D) solve linear programming problems. E) determine the best course of action for the future. 50) In order to produce a new product, a firm must lease new equipment. The managers feel that they can sell 10,000 units per year at a price of $7.50. If the variable cost of production is $5.00 per unit, what is the most the firm can spend to lease the new equipment without losing money? A) $10,000. B) $15,000. C) $20,000. D) $25,000. E) $30,000. 7 Copyright © 2019 McGraw-Hill 51) A group is planning a conference. The cost to rent the space is $1,000. Each attendee will be charged $50.00 to attend, but the group provides a lunch (the group will pay $10.00 for each lunch). What is the break-even point? A) 20 attendees. B) 25 attendees. C) 30 attendees. D) 35 attendees. E) 40 attendees. 52) A training firm is planning to offer a one-day class at a local facility. The class is projected to have 50 students, each of whom will pay $25.00 to attend. The firm provides materials to each student (materials cost the firm $10.00 per student). What is the most the firm can afford to pay to rent the facility for one day? A) $250. B) $500. C) $750. D) $1,000. E) $1,250. 53) A tour company is planning a bus trip to a local museum. The company will lease a bus from a local bus owner for $400 and estimates that it will spend $15.00 per person for admission and lunch. Which of the following volume/price alternatives will allow the firm to avoid losing money on the trip? A) 20 customers at $30.00 each. B) 30 customers at $27.50 each. C) 40 customers at $25.00 each. D) 50 customers at $22.50 each E) 60 customers at $20.00 each. 54) You have decided to start a vending machine business. A local store has space available for your machine but wants to charge you an annual fee to use the space. You estimate that you can sell 5,000 cans of soda each year. You sell a can of soda for $1.25, which allows you a profit of $0.50 per can. What is the most you would spend to lease the space for one year? A) $1,000. B) $2,500. C) $5,000. D) $7,500. E) $10,000. 1 Copyright © 2019 McGraw-Hill Intro to Management Science: Modeling and Case Studies, 6e (Hillier) Chapter 1 Introduction 1) Managers need to know the mathematical theory behind the techniques of management science so that they can lead management science teams. Answer: FALSE Difficulty: 2 Medium Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Understand AACSB: Knowledge Application 2) Management scientists use mathematical techniques to make decisions, which are then implemented by managers. Answer: FALSE Difficulty: 2 Medium Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Understand AACSB: Knowledge Application 3) Spreadsheets allow many managers to conduct their own analyses in management science studies. Answer: TRUE Difficulty: 2 Medium Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Understand AACSB: Knowledge Application 4) Managers must rely on management science experts to create and understand managerial problems. Answer: FALSE Difficulty: 2 Medium Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Understand AACSB: Knowledge Application 2 Copyright © 2019 McGraw-Hill 5) Management science is a discipline that attempts to aid managerial decision making by applying a scientific approach to managerial problems that involve quantitative factors. Answer: TRUE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 6) The discovery of the simplex method in 1947 was the beginning of management science as a discipline. Answer: FALSE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 7) The rapid growth of computing capability and power has led to a corresponding rapid growth of the management science discipline. Answer: TRUE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 8) Managers make decisions based solely on the quantitative factors involved in the problem. Answer: FALSE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 3 Copyright © 2019 McGraw-Hill 9) A management science team will try to conduct a systematic investigation of a problem that includes careful data gathering, developing and testing hypotheses, and then applying sound logic in the analysis. Answer: TRUE Difficulty: 3 Hard Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Apply AACSB: Reflective Thinking 10) The mathematical model of a business problem is the system of equations and related mathematical expressions that describes the essence of the problem. Answer: TRUE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 11) A mathematical model of a business problem allows a manager to evaluate both quantitative and qualitative aspects of the problem. Answer: FALSE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 12) Once management makes its decisions, the management science team typically is finished with its involvement in the problem. Answer: FALSE Difficulty: 2 Medium Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Understand AACSB: Knowledge Application 4 Copyright © 2019 McGraw-Hill 13) A cost that varies with the production volume would be a fixed cost. Answer: FALSE Difficulty: 2 Medium Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Understand AACSB: Knowledge Application 14) A cost that varies with the production volume would be a variable cost. Answer: TRUE Difficulty: 2 Medium Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Understand AACSB: Knowledge Application 15) A cost that does not vary with the production volume would be a fixed cost. Answer: TRUE Difficulty: 2 Medium Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Understand AACSB: Knowledge Application 16) A cost that does not vary with the production volume would be a variable cost. Answer: FALSE Difficulty: 2 Medium Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Understand AACSB: Knowledge Application 17) At the break-even point, management is indifferent between producing a product and not producing it. Answer: TRUE Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Remember AACSB: Knowledge Application 5 Copyright © 2019 McGraw-Hill 18) The best way to solve a break-even problem with a spreadsheet model is to try different production quantities until the quantity that leads to profits of zero is found. Answer: FALSE Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a spreadsheet model to perform a break-even analysis Bloom's: Remember AACSB: Knowledge Application 19) A constraint is an algebraic variable that represents a quantifiable decision to be made. Answer: FALSE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 20) A decision variable is an algebraic variable that represents a quantifiable decision to be made. Answer: TRUE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 21) A parameter in a model is a variable that represents a decision to be made. Answer: FALSE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 22) The objective function for a model is a mathematical expression of the measure of performance for the problem in terms of the decision variables. Answer: TRUE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 6 Copyright © 2019 McGraw-Hill 23) Sensitivity analysis is used to check the effect of changes in the model. Answer: TRUE Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 24) Investigating the potential outcomes when estimates turn out to be incorrect is known as "what-if analysis." Answer: TRUE Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Remember AACSB: Knowledge Application 25) "What-if analysis" is a process used to generate estimates for use in mathematical models. Answer: FALSE Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Remember AACSB: Knowledge Application 26) Enlightened future managers should know which of the following? A) The power and relevance of management science. B) When management science can and cannot be applied. C) How to apply the major techniques of management science. D) How to interpret the results of a management science study. E) All of the answer choices are correct. Answer: E Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 7 Copyright © 2019 McGraw-Hill 27) The rapid development of the management science discipline can be credited in part to: A) World War I. B) George Dantzig. C) the computer revolution. D) George Dantzig and the computer revolution. E) World War I, George Dantzig, and the computer revolution. Answer: D Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Define the term management science Bloom's: Remember AACSB: Knowledge Application 28) Managers may base their decisions on which of the following? A) Quantitative factors. B) Their best judgment. C) Opinions from other managers. D) Past experience. E) All of the answer choices are correct. Answer: E Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 29) Management science is based strongly on which of the following fields? A) Mathematics. B) Computer science. C) Business administration. D) Mathematics and computer science only. E) All of the answer choices are correct. Answer: D Difficulty: 1 Easy Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Remember AACSB: Knowledge Application 8 Copyright © 2019 McGraw-Hill 30) Which of the following are components of a mathematical model for decision making? A) Decision variables. B) An objective function. C) Constraints. D) Parameters. E) All of the answer choices are correct. Answer: E Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 31) Which of the following are steps in a typical management science study? A) Define the problem and gather data. B) Formulate a model to represent the problem. C) Test the model and refine it as needed. D) Help to implement the recommendations. E) All of the answer choices are correct. Answer: E Difficulty: 2 Medium Topic: The Nature of Management Science Learning Objective: Describe the nature of management science Bloom's: Understand AACSB: Knowledge Application 32) Which of the following is a mathematical expression that gives the measure of performance for the problem? A) Decision variable. B) Parameter. C) Objective function. D) Constraint. E) None of the answer choices are correct. Answer: C Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 9 Copyright © 2019 McGraw-Hill 33) Which of the following is a constant in a mathematical model? A) Decision variable. B) Parameter. C) Objective function. D) Constraint. E) None of the answer choices are correct. Answer: B Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 34) Which of the following is an inequality or equation that expresses a restriction in a mathematical model? A) Decision variable. B) Parameter. C) Objective function. D) Constraint. E) None of the answer choices are correct. Answer: D Difficulty: 1 Easy Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Explain what a mathematical model is Bloom's: Remember AACSB: Knowledge Application 35) A manager has determined that a potential new product can be sold at a price of $10.00 each. The cost to produce the product is $5.00, but the equipment necessary for production must be leased for $25,000 per year. What is the break-even point? A) 2,500 units. B) 5,000 units. C) 7,500 units. D) 10,000 units. E) 25,000 units. Answer: B Explanation: Difficulty: 2 Medium Topic: An Illustration of the Management Science Approach: Break-Even Analysis Learning Objective: Use a mathematical model to perform a break-even analysis Bloom's: Apply AACSB: Knowledge Application