MSIS 3223 FINAL EXAM QUESTIONS
AND ANSWERS
Variable Cost of Production - Correct Answers -•Logic suggests that variable cost is the
unit variable cost times the quantity of item produced. Thus, a descriptive model would
be:
•Variable Cost = Unit Variable Cost * Quantity Produced
•Total Cost = Fixed Cost + Variable Cost * Quantity Produced
•Also written as C=F+VQ
Demand - Correct Answers -•Demand has an influence on profit by predicting how
many units of a product will be sold. Quantity produced is a decision option typically
based on demand.
•The spreadsheet model for profit is revenue minus variable cost minus fixed cost:
•Profit = Revenue - Variable Cost - Fixed Cost
Data Tables - Correct Answers -•Multiple outputs may be evaluated using one way data
tables. For example, profit and revenue.
•Two-way data tables can evaluate only one output variable. To evaluate multiple output
variables, you must construct multiple two-way tables.
Net Income - Correct Answers -gross profit - operating expenses
Gross Profit - Correct Answers -Sales - Cost of Goods Sold (COGS)
Operating Expenses - Correct Answers -Sum of Administrative expenses, selling
expenses, and depreciation expenses
Net Operating Income - Correct Answers -gross profit - operating expenses
Earnings before Taxes - Correct Answers -Net Operating Income- Interest Expense
Net Income Value - Correct Answers -Earnings before tax- Taxes
Predictive Decision Models - Correct Answers -•Predictive models focus on
understanding the future.
•Practical business models focus on predicting financial performance, customer
retention, and product sales.
•Sales levels are often used to plan inventory levels.
•Predictive models usually involve multiple time periods.
•Predictive models incorporate the uncertainty element.
, Optimization - Correct Answers -•Optimization models have been used extensively in
operations and supply chains, finance, marketing, and other disciplines.
•Optimization is the process of selecting values of decision variables that minimize or
maximize some quantity of interest.
•Objective function is the quantity that is to be minimized or maximized.
•Optimization is the most important tool in prescriptive analytics.
Constraints in an Optimization Model - Correct Answers -•Constraints are limitations,
requirements, or other restrictions that are imposed on any solution, either from
practical or technological considerations or by management policy.
•Constraints generally fall into one of the following categories:
•Simple Bounds constrain the value of a single variable.
•Limitations usually involve the allocation of scarce resources.
•Requirements involve the specification of minimum levels of performance.
•Proportional Relationships are often found in problems involving mixtures or blends of
materials or strategies.
•Balance Constraints essentially state that input = output and ensure that the flow of
material or money is accounted for at locations or between time periods.
Cash budget - Correct Answers -•Cash budgeting is the process of projecting and
summarizing a company's cash inflows and outflows expected during a planning
horizon, usually 6 to 12 months.
•The cash budget also shows the monthly cash balances and any short-term borrowing
used to cover cash shortfalls.
Solver - Correct Answers -•The Solver Answer Report provides basic information about
the solution, including the values of the original and optimal objective function and
decision variables.
•A feasible solution is a set of values for the decision variables that satisfy all of the
constraints. Linear programs generally have an infinite number of feasible solutions.
•The set of feasible solutions is often called the feasible region. The feasible region is
the set of points that satisfy all constraints simultaneously.
•When a problem is infeasible, Solver will report "Solver could not find a feasible
solution."
Linear Optimization models - Correct Answers -•In an integer linear optimization model
some or all of the variables are restricted to being whole numbers.
•Many optimization models require binary variables, which are variables that are
restricted to being either 0 or 1.
•Decision variables that are forced to be integers are called general integer variables.
Solver - Correct Answers -•Solver is an add-in package with Excel that was developed
by Frontline Systems Inc. and can be used to solve many different types of optimization
problems.
AND ANSWERS
Variable Cost of Production - Correct Answers -•Logic suggests that variable cost is the
unit variable cost times the quantity of item produced. Thus, a descriptive model would
be:
•Variable Cost = Unit Variable Cost * Quantity Produced
•Total Cost = Fixed Cost + Variable Cost * Quantity Produced
•Also written as C=F+VQ
Demand - Correct Answers -•Demand has an influence on profit by predicting how
many units of a product will be sold. Quantity produced is a decision option typically
based on demand.
•The spreadsheet model for profit is revenue minus variable cost minus fixed cost:
•Profit = Revenue - Variable Cost - Fixed Cost
Data Tables - Correct Answers -•Multiple outputs may be evaluated using one way data
tables. For example, profit and revenue.
•Two-way data tables can evaluate only one output variable. To evaluate multiple output
variables, you must construct multiple two-way tables.
Net Income - Correct Answers -gross profit - operating expenses
Gross Profit - Correct Answers -Sales - Cost of Goods Sold (COGS)
Operating Expenses - Correct Answers -Sum of Administrative expenses, selling
expenses, and depreciation expenses
Net Operating Income - Correct Answers -gross profit - operating expenses
Earnings before Taxes - Correct Answers -Net Operating Income- Interest Expense
Net Income Value - Correct Answers -Earnings before tax- Taxes
Predictive Decision Models - Correct Answers -•Predictive models focus on
understanding the future.
•Practical business models focus on predicting financial performance, customer
retention, and product sales.
•Sales levels are often used to plan inventory levels.
•Predictive models usually involve multiple time periods.
•Predictive models incorporate the uncertainty element.
, Optimization - Correct Answers -•Optimization models have been used extensively in
operations and supply chains, finance, marketing, and other disciplines.
•Optimization is the process of selecting values of decision variables that minimize or
maximize some quantity of interest.
•Objective function is the quantity that is to be minimized or maximized.
•Optimization is the most important tool in prescriptive analytics.
Constraints in an Optimization Model - Correct Answers -•Constraints are limitations,
requirements, or other restrictions that are imposed on any solution, either from
practical or technological considerations or by management policy.
•Constraints generally fall into one of the following categories:
•Simple Bounds constrain the value of a single variable.
•Limitations usually involve the allocation of scarce resources.
•Requirements involve the specification of minimum levels of performance.
•Proportional Relationships are often found in problems involving mixtures or blends of
materials or strategies.
•Balance Constraints essentially state that input = output and ensure that the flow of
material or money is accounted for at locations or between time periods.
Cash budget - Correct Answers -•Cash budgeting is the process of projecting and
summarizing a company's cash inflows and outflows expected during a planning
horizon, usually 6 to 12 months.
•The cash budget also shows the monthly cash balances and any short-term borrowing
used to cover cash shortfalls.
Solver - Correct Answers -•The Solver Answer Report provides basic information about
the solution, including the values of the original and optimal objective function and
decision variables.
•A feasible solution is a set of values for the decision variables that satisfy all of the
constraints. Linear programs generally have an infinite number of feasible solutions.
•The set of feasible solutions is often called the feasible region. The feasible region is
the set of points that satisfy all constraints simultaneously.
•When a problem is infeasible, Solver will report "Solver could not find a feasible
solution."
Linear Optimization models - Correct Answers -•In an integer linear optimization model
some or all of the variables are restricted to being whole numbers.
•Many optimization models require binary variables, which are variables that are
restricted to being either 0 or 1.
•Decision variables that are forced to be integers are called general integer variables.
Solver - Correct Answers -•Solver is an add-in package with Excel that was developed
by Frontline Systems Inc. and can be used to solve many different types of optimization
problems.
