Deck 1: Introduction to Management Science, Modeling, and Excel Spreadsheets

Question 1

Quantitative approach to problem solving will be appropriate when the problem

A) is simple
B) is complex
C) involves substantial costs
D) A and C
E) B and C

Answer 1

B and C

Question 2

Mathematical models usually contain

A) variables
B) constants
C) assumptions
D) all of the above
E) none of the above

Answer 2

all of the above

Question 3

Benefits of model building include

A) focusing on small number of important details
B) omitting non-quantitative information
C) need to quantify information
D) $\mathrm{A}$ and $\mathrm{C}$
E) A, B, and C

Answer 3

$\mathrm{A}$ and $\mathrm{C}$

Question 4

Risks of model building include

A) focusing on small number of important details
B) omitting non-quantitative information
C) need to quantify information
D) $\mathrm{A}$ and $\mathrm{C}$
E) A, B, and C

Question 5

Risks of model building include

A) fitting the problem to the model, if necessary by force
B) omitting non-quantitative information
C) need to quantify information
D) A and B
E) A and C

Question 6

A deterministic model would be appropriate to use if the

A) data for the problem is known with high level of confidence
B) data follows a range, but the average is known with high level of confidence
C) data distribution is known with high level of confidence
D) any one of $\mathrm{A}, \mathrm{B}$ , or $\mathrm{C}$
E) none of the above

Question 7

Probabilistic model would be appropriate to use if the

A) data for the problem is known with high level of confidence
B) data follows a range, but the average is known with high level of confidence
C) data distribution is known with high level of confidence
D) B or C
E) none of the above

Question 8

Two of the steps in the management science approach to problem solving are

A) model construction, model interpretation
B) model construction and interpret & analyze the solution
C) finding a solution and testing the model
D) interpret & analyze the model and construct solution
E) implement the model and follow up the model

Question 9

Two of the steps in the management science approach to problem solving are

A) model construction, implement the model
B) model construction and interpret & analyze the model
C) determine a solution and test the solution
D) interpret & analyze the model and construct solution
E) implement the model and follow up the model

Question 10

Decision support system is $a / n$

A) tool for implementing management science models
B) a collection of technologies to support decision making
C) marriage between operations research (OR/MS) with information technology (IT/IS)
D) B and C
E) A, B, and C

Question 11

A one-machine shop producing bolts has a fixed cost of $\$ 2,000.00$ and a variable cost of $\$ 2.00$ per bolt. The selling price is $\$ 6.00$ per unit. The breakeven volume of production is

A) 1000
B) 500
C) 333.33
D) 250
E) none of the above

Question 12

A one-machine shop producing bolts has a fixed cost of $\$ 2,000.00$ and a variable cost of $\$ 2.00$ per bolt. The selling price is $\$ 6.00$ per unit. The total revenue corresponding to the breakeven volume of production is

A) 6000
B) 2000
C) 3000
D) 1500
E) none of the above

Question 13

A one-machine shop producing bolts has a fixed cost of $\$ 2,000.00$ and a variable cost of $\$ 2.00$ per bolt. The selling price is $\$ 6.00$ per unit. Net profit corresponding to the breakeven volume of production is

A) 1000
B) 4000
C) -500
D) 0
E) none of the above

Question 14

All other things remaining the same, if the variable cost per unit increases by $10 \%$ then the breakeven volume of production will

A) go up by $10 \%$
B) go down by $10 \%$
C) cannot tell
D) can stay the same, though usually will change
E) price has to be increased by $10 \%$

Question 15

A one-person automobile oil change in rural Mississippi has a fixed overhead of $\$ 900.00$ per month. The variable cost per oil change is $\$ 10.00$ . The charge is $\$ 30.00$ for one oil change. The breakeven number of oil changes per month is

A) 30
B) 45
C) 90
D) 22.5
E) none of the above

Question 16

A one-person automobile oil change in rural Mississippi has a fixed overhead of $\$ 900.00$ per month. The variable cost per oil change $\$ 10.00$ . The charge is $\$ 30.00$ for one oil change. If the owner/worker Joe Smith desires to have a contribution per month of $\$ 2,100.00$ , the number of oil changes he should do per month is

A) 100
B) 300
C) 150
D) 75
E) none of the above

Question 17

A one-person automobile oil change in rural Mississippi has a fixed overhead of $\$ 900.00$ per month. The variable cost per oil change $\$ 10.00$ . The charge is $\$ 30.00$ for one oil change. If the owner/worker Joe Smith performed 200 oil changes in October 2005, the total contribution in October 2005 is

A) $\$ 6,000.00$
B) $\$ 2,000.00$
C) $\$ 4,000.00$
D) $\$ 3,100.00$
E) none of the above

Question 18

A one person automobile oil change in rural Mississippi has a fixed overhead of $\$ 900.00$ per month. The variable cost per oil change $\$ 10.00$ . The charge is $\$ 30.00$ for one oil change. If the owner/worker Joe Smith performed 300 oil changes in November 2005; total sales revenue for November 2005 is

A) $\$ 9,000.00$
B) $\$ 6,000.00$
C) $\$ 3,000.00$
D) $\$ 8,100.00$
E) $\$ 5,100.00$

Question 19

Kathy Smith works for a cell phone company. She is paid $\$ 3.00$ per hour (note that commission sales personnel may be paid less than the minimum wage) plus a commission of $\$ 20.00$ per phone sold. Kathy works for 40 hours a week. The company sells the phones for $\$ 100$ a phone and buys it for $\$ 40.00$ per phone. The company hopes to sell anywhere from 10 to 60 phones per week. From the company's point of view, considering Kathy's wages and phone costs as the only expenses related to cell phone sales, the fixed cost per week is

A) $\$ 100.00$
B) $\$ 120.00$
C) $\$ 140.00$
D) $\$ 420.00$
E) $\$ 620.00$

Question 20

Kathy Smith works for a cell phone company. She is paid $\$ 3.00$ per hour (note that commission sales personnel may be paid less than the minimum wage) plus a commission of $\$ 20.00$ per phone sold. Kathy works for 40 hours a week. The company sells the phones for $\$ 100$ a phone and buys it for $\$ 40.00$ per phone. The company hopes to sell anywhere from 10 to 60 phones per week. From the company's point of view, considering Kathy's wages and phone costs as the only expenses related to cell phone sales, the breakeven sales volume is

A) 2
B) 5
C) 10
D) 60
E) 3

Question 21

Kathy Smith works for a cell phone company. She is paid $\$ 3.00$ per hour (note that commission sales personnel may be paid less than the minimum wage) plus a commission of $\$ 20.00$ per phone sold. Kathy works for 40 hours a week. The company sells the phones for $\$ 100$ a phone and buys it for $\$ 40.00$ per phone. The company hopes to sell anywhere from 10 to 60 phones per week. From the company's point of view, considering Kathy's wages and phone costs as the only expenses related to cell phone, net contribution for a sales level of 50 phones is

A) $\$ 5,000.00$
B) $\$ 2,000.00$
C) $\$ 1,880.00$
D) $\$ 4,880.00$
E) $\$ 2,880.00$

Question 22

Kathy Smith works for a cell phone company. She is paid $\$ 3.00$ per hour (note that commission sales personnel may be paid less than the minimum wage) plus a commission of $\$ 20.00$ per phone sold. Kathy works for 40 hours a week. The company sells the phones for $\$ 100$ a phone and buys it for $\$ 40.00$ per phone. The company hopes to sell anywhere from 10 to 60 phones per week. From the company's point of view, considering Kathy's wages and phone costs as the only expenses related to cell phone, the total costs for a sales level of 50 phones is

A) $\$ 3,120.00$
B) $\$ 3,000.00$
C) $\$ 1,120.00$
D) $\$ 2,880.00$
E) none of the above

Question 23

You are trying to lease a gasoline-powered car or a hybrid car based on cost considerations during the next 5 years that you plan to keep it. You plan to drive 12,000 miles per year. Ignore the effect of interest rates and time value of money. Leasing cost is $\$ 250$ per month for the gas-powered car and $\$ 350$ per month for the hybrid. Down payment is $\$ 0$ for both cars. 12,000 leasing miles are allowed per year for each car. Per mile charge for gas-powered cars is $\$ 0.15$ and $\$ 0.05$ for hybrids. Which would be a better buy, from a cost minimization point of view?

A) Gas-powered
B) Hybrid
C) Either would be the same
D) None

Question 24

You are trying to lease a gasoline-powered car or a hybrid car based on cost considerations during the next 5 years that you plan to keep it. You plan to drive 12,000 miles per year. Ignore the effect of interest rates and time value of money. Leasing cost is $\$ 250$ per month for the gas-powered car and $\$ 325$ per month for the hybrid. Down payment is $\$ 0$ for both cars. 12,000 leasing miles are allowed per year for each car. Per mile charge for gas powered cars is $\$ 0.15$ and $\$ 0.05$ for hybrids. Which would be a better buy, from a cost minimization point of view?

A) Gas-powered
B) Hybrid
C) Either would be the same
D) None

Question 25

You are trying to lease a gasoline-powered car or a hybrid car based on cost considerations during the next 5 years that you plan to keep it. You plan to drive 12,000 miles per year. Ignore the effect of interest rates and time value of money. Leasing cost is $\$ 250$ per month for the gas-powered car and \$375 per month for the hybrid. Down payment is $\$ 0$ for both cars. 12,000 leasing miles are allowed per year for each car. Per mile charge for gas-powered cars is $\$ 0.15$ and $\$ 0.05$ for hybrids. Which would be a better buy, from a cost minimization point of view?

A) Gas-powered
B) Hybrid
C) Either would be the same
D) None

Question 26

Demand for a product follows normal distribution (one of many statistical distributions you learned earlier). Models using this data are best done using

A) deterministic model
B) probabilistic models
C) neither
D) both

Question 27

Demand for a product is 10,000 per month for sure and the variable and fixed costs are also known with a high level of certainty. Models incorporating this data are best done using

A) deterministic model
B) probabilistic models
C) neither
D) both

Question 28

All other things remaining the same, if the variable cost goes up by $\$ 0.10$ per unit, and fixed cost is $\$ 1000.00$ , the breakeven volume will

A) generally increase
B) generally increase by 10,000 units
C) generally increase as long as net contribution per unit is positive
D) generally increase by 10,000 units as long as net contribution per unit is positive
E) none of the above

Question 29

A company sets up elderly clients for general purpose household software, such as Quicken, for a flat fee through its agents. Agents are paid a retention fee of $\$ 600.00$ per week and a flat fee of $\$ 100$ per setup. The software itself costs $\$ 100.00$ per unit; the total charge per installation is $\$ 350$ .
(A) What sales volume per week will make the firm break even?
(B) How many installations per week should be targeted if the target profit is $\$ 3900.00$ per week?
(C) If Joe Jackson, a Detroit-based salesman, installs the software for 500 clients during the first week of March 2006, what will be his commission for that week?
(D) If Joe Jackson, a Detroit-based salesman installs the software for 500 clients during the first week of March 2006, what will the firm earn (net contribution) through its association with Joe Jackson?

Question 30

A plant producing hydrogen has a fixed overhead of $\$ 10,000,000$ per year and incurs a variable cost of $\$ 40.00$ per ton. The average selling price is $\$ 90.00$ per ton.
(A) What is the breakeven volume for this plant?
(B) What is the total sales revenue that will produce a net contribution of $\$ 2,000,000$ ?
(C) What is the number of units produced by the plant in 2004, if its net contribution during 2004 is $\$ 3,000,000$ ?
(D) If production is 250,000 tons in 2003 and 150,000 tons in 2003, what is the net contribution during 2002 and 2003 combined?

Question 31

There are two machines available in the market for making frozen pancakes. Machine A incurs a fixed cost of $\$ 10,000$ per year and a variable cost of $\$ 0.03$ per pancake. Machine B incurs a fixed cost of $\$ 30,000$ per year and a variable cost of $\$ 0.01$ per pancake. The selling price is $\$ 0.05$ per pancake.
(A) If the expected sales volume per year is 600,000 , which machine will give higher net contribution?
(B) If the expected sales volume per year is 1,000,000, which machine will give higher net contribution?
(C) What is the breakeven volume of Machine A?

Question 32

An insurance salesperson is paid $\$ 6.00$ an hour and a commission of $\$ 1.50$ per $\$ 1,000$ of insurance sold. The firm sells each $\$ 1,000$ of insurance for $\$ 20.00$ .
(A) If each salesman works for exactly 40 hours per week, and if the total compensation received by the 10 salesmen working for this firm during a typical week is $\$ 18,900$ , what is the total value of insurance sold during a typical week?
(B) If the firm changes the compensation package to $\$ 20.00$ per hour and a commission of $\$ 0.25$ per $\$ 1000$ of insurance sold, what will be the total compensation for a typical week?
(C) For a single salesman, what will be the volume of sales needed to make a wage of $\$ 2,010$ per week?

Question 33

A gas refinery is offered new add-on equipment for cleaning the smoke stack. The leasing cost of the equipment is $\$ 200,000$ per year. The addition reduces the variable cost by $\$ 0.02$ per gallon of gas. The selling price of gas is $\$ 2.00$ per gallon; other variable costs are $\$ 1.10$ per gallon.
(A) What is the minimum volume of production per year that will justify the lease of the equipment? (B) If the expected volumes for the next 3 years are: 8,000,000, 14,000,000 and 20,000,000, will it be worth leasing the equipment for three years? (Assuming that it has to be leased for all three years or not leased at all)