Which of the methods for decision making best protects the decision maker from undesirable results?

____ 1. Identification and definition of a problem A. cannot be done until alternatives are proposed. B. is the first step of decision making.

C. is the final step of decision making.

D. requires consideration of multiple criteria.

____ 2. The quantitative analysis approach requires A. the manager’s prior experience with a similar problem.

B. a relatively uncomplicated problem.

C. mathematical expressions for the relationships.

D. each of the above is true.

____ 3. A decision tree A. presents all decision alternatives first and follows them with all states of nature.

B. presents all states of nature first and follows them with all decision alternatives. C. alternates the decision alternatives and states of nature. D. arranges decision alternatives and states of nature in their natural chronological order.

____ 4. Which of the methods for decision making without probabilities best protects the decision maker from

undesirable results? A. the optimistic approach

B. the conservative approach C. minimum regret D. minimax regret ____ 5. Decision variables A. tell how much or how many of something to produce, invest, purchase, hire, etc.

B. represent the values of the constraints. C. measure the objective function.

D. must exist for each constraint.

BSC400 MIDTERM EXAM

Page 2 SECTION II: MATCHING (10 possible points) Please match the numbered terms with their definitions by placing the letter that identifies the best definition in the blank space next to the term. The value of each correct answer is 1 point. ____ 1. Breakeven Point ____ 2. Constraints ____ 3. Decision Strategy ____ 4. Linear Program ____ 5. Moving Averages ____ 6. Objective Function ____ 7. Regression Analysis ____ 8. Risk Analysis

____ 9. Time Series

____ 10. Trend

A. A mathematical model with a linear objective function, a set of constraints, and nonnegative variables. B. The mathematical expression that defines the quantity to be maximized or minimized.

C. A set of observations measured at successive points in time or over successive periods of time.

D. The gradual shift or movement of the time series to relatively higher or lower values over a long period of time.

E. A statistical technique used to develop a mathematical equation showing how variables are related.

F. Restrictions or limitations imposed on a problem.

G. The study of the possible payoffs and probabilities associated with a decision alternative or a decision strategy.

H. A smoothing method that uses the average of the most recent n data values in the time series as the forecast for

the next period. I. The volume at which total revenue equals total cost. J. A strategy involving a sequence of decisions and chance outcomes to provide the optimal solution to a decision

problem.

BSC400 MIDTERM EXAM

Page 3

SECTION III. ESSAY/SHORT ANSWER QUESTIONS (35 possible points)

Please answer each of the following questions.

1. INTRODUCTION (10 Possible Points)

Explain the difference between quantitative and qualitative analysis from the manager’s point of view.

2. DECISION ANALYSIS (10 possible points)

Give an example from your own work experience, or make up an example, of how Decision Analysis could be used to

determine an optimal strategy. Briefly describe several decision alternatives you, as the decision maker, would be faced with

and possible uncertain or risk-filled future events you would need to consider.

3. FORECASTING (15 possible points)

A. What is the difference between Quantitative forecasting methods and Qualitative forecasting methods?

B. Under what circumstances would it be more appropriate to use quantitative rather than qualitative forecasting

methods?

BSC400 MIDTERM EXAM

Page 4

3. FORECASTING (Cont.)

C. Give an example of a situation when using quantitative forecasting would be appropriate.

SECTION IV: PROBLEMS (45 possible points)

PROBLEM 1: LINEAR PROGRAMMING MODEL DEVELOPMENT (20 possible points)

A manufacturer makes two products, doors and windows. Each must be processed through two work areas. Work area #1 has 60 hours of available production time. Work area #2 has 48 hours of available production time. Manufacturing of a door requires 4 hours in work area #1 and 2 hours in work area #2. Manufacturing of a window requires 2 hours in work area #1 and 4 hours in work area #2. Profit is $8 per door and $6 per window. As you respond to the following questions, please note that you are only setting the problem up. A solution to determine the number of doors and windows to be manufactured and the resulting profit is NOT necessary.

1. Define the decision variables that will tell how many units to build (doors and windows).

2. Develop an objective function that will maximize profits.

3. Develop production constraints for work areas #1 and #2.

BSC400 MIDTERM EXAM

Page 5

PROBLEM 2: DECISION ANALYSIS (25 possible points)

Lakewood Fashion must decide how many lots of assorted ski wear to order for its three stores. Information on prices, sales, and inventory costs has led to the following payoff table, in thousands:

_________Demand_________ Order Size____Low_____Medium_____High 1 Lot 12 15 15 2 Lots 9 25 35

3 Lots 6 35 60

REQUIRED:

1. What decision should be made by an optimist?

2. What decision should be made by a conservative?

3. What decision should be made by using minimax regret?

4. Unrelated to this problem, which approach do you personally prefer – optimistic, conservative, or minimax

regret? Explain.

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