Test Bank for Principles Of Operations Management: Sustainability And Supply Chain Management, 11th Edition

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1Operations Management, 13e(Heizer/Render/Munson)Module A Decision-Making ToolsSection 1The Decision Process in Operations1)Analytic decision making is based on logic and considers all available data and possiblealternatives.Answer: TRUEDiff:12) The first step in the analytic decision process is to clearly define the problem and the factorsthat influence it.Answer: TRUEDiff: 13) The last step in the analytic decision process is to select the best alternative.Answer: FALSEDiff: 14) The most critical step in the analytic decision process is to minimize the total cost.Answer: FALSEDiff: 15) Which of the following is NOT considered a step in the decision-making process?A) Clearly define the problem and the factors that influenceit.B) Select the best alternative.C) Develop specific and measurable objectives.D) Evaluate each alternative solution based on itsmerits and drawbacks.E) Minimize costs whenever possible.Answer: EDiff: 26) The first step, and a key element, in the decision-making process is to:A) consult a specialist.B) clearly define the problem.C) develop objectives.D)monitor the results.E) select the best alternative.Answer: BDiff: 1

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27) The last step of the decision-making process is to:A) developa model.B) evaluate each alternative.C) select the best alternative.D) implement the decision.E) check the decision with senior management.Answer: DDiff: 28) Identify, in order, the six steps of analytical decision making.Answer: 1. Clearly define the problem and factors that influence it.2. Develop specific and measurable objectives.3. Develop a model—thatis, a relationship between objectives and variables (which aremeasurable quantities).4. Evaluate each alternative solution based on its merits and drawbacks.5. Select the best alternative.6. Implement the decision and set a timetable for completion.Diff: 3Section 2Fundamentals of Decision Making1)A state of nature is an occurrence or a situation over which the decision maker haslittle or nocontrol.Answer: TRUEDiff: 1Objective: LO A.1 Create a simple decision tree2) In a decision tree, a round symbol represents a state of nature node.Answer: TRUEDiff: 2Objective: LO A.1 Create a simple decision tree3) A square nodeon a decision tree infers that:A) the node splits into various states of nature, of which only one will occur.B) there are several alternatives available.C) the managermust choose an alternative.D) Both B and CE) A, B, and CAnswer: DDiff: 2Objective: LO A.1 Create a simple decision treeAACSB: Reflective thinking

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34) The following decision tree has how many state-of-nature nodes?A) 0B) 1C) 2D) 3E) 4Answer: DDiff: 2Objective: LO A.1 Create a simple decision tree5)In terms of decision theory, an occurrence or situation over which the decision maker has nocontrol is called a(n):A) decision under uncertainty.B) decision tree.C) state of nature.D) alternative.E) EMV.Answer: CDiff: 2Objective: LO A.1 Create asimple decisiontree6) A(n) ________ is an occurrence or situation over which the decision maker has little or nocontrol.Answer: state of natureDiff: 1Objective: LO A.1 Create a simple decision tree7) The square symbol used in drawing a decisiontree representsa(n) ________ node.Answer: decisionDiff: 1Objective: LO A.1 Create a simple decision tree

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48) In the context of decision making, define a state of nature.Answer: A state of nature is an occurrence or situation over which the decision maker has littleor no control.Diff: 2Objective: LO A.1 Create a simple decision tree9) In the context of decision-making, define an alternative.Answer:An alternative is a course of action or strategy that may be chosen by a decision maker.Diff: 2Objective:LO A.1 Create a simple decision tree10) Explain the symbols used in decision tree analysis.Answer: A decision node from which one or several alternatives may be selected is representedby a square; a state of nature node out of which states of nature will occur is represented by acircle.Diff: 2Objective: LO A.1 Create a simple decision treeSection 3Decision Tables1) An example of a conditional value would be the payoff from selecting a particular alternativewhen a particular state of natureoccurs.Answer: TRUEDiff: 2Objective: LO A.2 Build a decision table2) What is a tabular presentation that shows the outcome for each decisionalternative under thevarious possible states of nature called?A) payoff treeB) payback period matrixC) decision tableD) feasible regionE) decision treeAnswer: CDiff: 1Objective: LO A.2 Build a decision table3) What is the outcome of an alternative/state of nature combination called?A) priceB) conditional valueC) expected valueD) conditional probabilityE) conditional expectationAnswer: BDiff: 2Objective: LO A.2 Build a decision table

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54)Doing nothing would yield how much profit if favorable market conditions prevail accordingto the following profit decision table?AlternativeFavorable marketUnfavorable MarketDo Nothing$20,000-$10,000A) $5,000B) $20,000C)-$10,000D) $0E)$10,000Answer: BDiff: 1Objective: LO A.2 Build a decision table5) A retailer is deciding how many units of a certain product to stock. The historical probabilitydistribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and3 units, 0.1. Theproduct costs $11 per unit and sells for $25 per unit. What is the conditional value for thedecision alternative "Stock 3" and state of nature "Sell 1"?A) 1.4 unitsB) $1 profitC) $25 profitD) $-8 profitE) $23.80 profitAnswer: DDiff: 2Objective: LO A.2 Build a decision tableAACSB: Analytical thinking6)A retailer is deciding how many units of a certain product to stock. The historical probabilitydistribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. Theproduct costs $8 per unit and sells for $33 per unit. What is the largest conditional value (profit)in the entire payoff table for this scenario?A) $-24 profitB) $42 profitC) $9 profitD) $51 profitE) $75 profitAnswer: EDiff: 2Objective: LO A.2 Build a decision tableAACSB: Analytical thinking

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67) Aretailer is deciding how many units of a certain product to stock. The historical probabilitydistribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. Theproduct costs $10 per unit and sells for $33 per unit. What is the smallest conditional value(profit) in the entire payoff table forthis scenario?A) $-30 profitB) $3 profitC) $36 profitD) $66 profitE) $75 profitAnswer: ADiff: 2Objective: LO A.2 Build a decision tableAACSB: Analytical thinking8)A(n) ________ is a tabular means of analyzing decision alternatives and statesof nature.Answer: decision tableDiff: 1Objective: LO A.2 Build a decision table9) What are decision tables?Answer:Decision tables are a tabular means of analyzing decision alternatives and states ofnature.Diff: 2Objective: LO A.2 Build a decision table10) What is a conditional value?Answer: It is an outcome of a particular alternative/state of nature combination.Diff: 2Objective: LO A.2 Build a decision tableSection 4Types of Decision-Making Environments1) If a decision maker can assign probabilities of occurrences to the states of nature, then thedecision-making environment is Decision Making underUncertainty.Answer: FALSEDiff: 2Objective: LO A.3 Explain when to use each of the three types of decision-makingenvironments2) The maximax criterion of decision making requires that all decision alternatives have an equalprobability of occurrence.Answer: FALSEDiff: 2Objective: LO A.3 Explain when to use each of the three types of decision-makingenvironments

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73) The maximin criterion is optimistic, while the maximax criterion is pessimistic.Answer: FALSEDiff: 14) If a decision maker knowsfor sure which state of nature will occur, he/she is making adecision under certainty.Answer: TRUEDiff: 2Objective: LO A.3Explain when to use each of the three types of decision-makingenvironments5)The expected value with perfect information assumes that all states of nature are equallylikely.Answer: FALSEDiff: 1Objective: LO A.3 Explain when to use each of the three types of decision-makingenvironments6)An example of expected monetary value would be the payoff from selecting a particularalternative when a particular state of nature occurs.Answer: FALSEDiff: 2Objective: LO A.4 Calculate an expected monetaryvalue (EMV)7) The expected monetary valueof a decision alternative is the sum of all possible payoffs fromthe alternative, each weighted by the probability of that payoff occurring.Answer: TRUEDiff: 1Objective: LO A.4 Calculate an expected monetary value (EMV)8) If a decision maker has to make a particular decision only once, expected monetary value is agood indication of the payoff associated with the decision.Answer: FALSEDiff: 3Objective: LO A.4 Calculate an expected monetary value (EMV)AACSB: Reflective thinking9) The expected value of perfect information is the same as the expected value with perfectinformation.Answer: FALSEDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)

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810) What decision criterion would be used by a pessimistic decision maker solving a problemunder conditions of uncertainty?A) expected monetary valueB) equally likelyC) maximaxD) maximinE) miniminAnswer: DDiff: 211)A decision maker who uses the maximax criterionwhen solving a problem under conditionsof uncertainty is:A) an optimist.B) a pessimist.C) an economist.D) an optometrist.E) making a serious mistake; maximax is not appropriate for conditions of uncertainty.Answer: ADiff: 212) Expected monetaryvalue is most appropriate for problem solving that takes place:A) when conditions are average.B) when all states of nature are equally likely.C) when all alternatives are equally likely.D) under conditions of uncertainty.E) under conditions of risk.Answer: EDiff: 2Objective: LO A.3 Explain when to use each of the three types of decision-makingenvironments13) There are three equally likely states of nature (High, Medium, and Low demand). If the largefactory will post profits of $60,000, $25,000, and-$10,000 under these states of nature,respectively, what is the EMV of the factory?A) $50,000B) $25,000C) $28,333.33D) $21,666.67E) $65,000Answer: BDiff: 2Objective:LO A.4 Calculate an expected monetary value (EMV)AACSB: Analytical thinking

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914) A plant manager wants to know how much she should be willing to pay for perfect marketresearch. Currently there are two states of nature facing her decision to expand or donothing.Under favorable market conditions the manager would make $100,000 for the large plant and$5,000 for the small plant. Under unfavorable market conditions the large plant would lose$80,000 and the small plant would make $0. If the two states of nature are equally likely, howmuch should she pay for perfect information?A) $0B) $25,000C) $40,000D) $100,000E) $145,000Answer: CDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)AACSB: Analytical thinking15) The expected value with perfect information:A) equals EVPI-Maximum EMV.B) requires that each decision alternative have a known probability of occurrence.C) is an input into the calculation of the expected value of perfect information.D) is the averageof the maximax and the maximin.E) none of theseAnswer: CDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)16)What is the difference between the expected payoff under perfect information and themaximum expected payoff under risk?A) expected monetary valueB) economic order quantityC)expected value of perfect informationD) PERTE) expected monetary payoffAnswer: CDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)

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1017) The likelihood that a decision maker will ever receive a payoff precisely equal to the EMVwhen making any one decision is:A) low (near 0%).B) high (near 100%).C) dependent upon the number of alternatives.D) dependent upon the number of states of nature.E) none of theseAnswer: ADiff: 2Objective: LO A.4 Calculate an expected monetary value (EMV)AACSB: Reflective thinking18) The expected value of perfect information (EVPI) is the:A) payoff for a decision made under perfect information.B) payoff under minimum risk.C) average expected payoff.D) difference between the payoff under perfect information and the payoff under risk.E) greater of EVwPI andMaximum EMV.Answer: DDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)19)A decision maker using the maximax criterion on the problem below would chooseAlternative ________ because the maximum of the row maximums is ________.States of Nature123Alternative A505560Alternative B305080Alternative C708070Alternative D-100-10140A) A; 60B) B; 80C) C; 70D) D;-100E) D; 140Answer: EDiff: 2AACSB: Analytical thinking

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1120)A decision maker using the maximin criterion on the problem below would chooseAlternative ________ because the maximum of the row minimums is ________.States of Nature123AlternativeA505560Alternative B809080Alternative C7080170Alternative D-100-10140A) A; 55B) B; 80C) C; 70D) D; 140E) D; 10Answer: BDiff: 2AACSB: Analytical thinking21) For the following decision table, the highest value for the equallylikely criterion is________; this occurs with alternative ________.States of NatureAlternativesS1S2Option 1$10,000$30,000Option 2$5,000$55,000Option 3-$4,000$60,000A) $20,000; Option 1B)$30,000; Option 2C) $28,000; Option 3D) $32,000; Option 3E) $60,000; Option 2Answer: BDiff: 2AACSB: Analytical thinking

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1222) What is the EMV for Option 1 in the following decision table?States of NatureAlternativesS1S2p.7.3Option 115,00020,000Option 210,00030,000A) 15,000B) 16,500C) 17,500D) 18,500E) 20,000Answer: BDiff: 2Objective: LO A.4 Calculate an expected monetary value (EMV)AACSB: Analytical thinking23)The expected value with perfect information is:A) the maximum EMV for a set of alternatives.B) the same as the expected value of perfect information.C)the difference between the payoff under perfect information and the payoff under risk.D) the expected return obtained when the decision maker knows which state of nature is going tooccur before thedecision is made.E) obtained using conditional probabilities.Answer: DDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)24) What is the EMV for Option 2 in the following decision table?States of NatureAlternativesS1S2p.3.7Option 115,00020,000Option 210,00030,000A) 10,000B) 16,000C) 20,000D) 24,000E) 30,000Answer: DDiff: 2Objective: LO A.4 Calculate an expected monetary value (EMV)AACSB: Analytical thinking

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1325)What is the EMV for Option 1 in the following decision table?States of NatureAlternativesS1S2p.6.4Option 110,00030,000Option 25,00045,000Option 3-4,00060,000A) 10,000B) 18,000C) 20,000D) 22,000E) 30,000Answer: BDiff: 2Objective: LO A.4 Calculatean expected monetary value (EMV)AACSB: Analytical thinking26) What is the EMV for Option 3 in the following decision table?States of NatureAlternativesS1S2p.4.6Option 110,00030,000Option 25,00045,000Option 3-4,00060,000A) 5,000B) 21,000C) 25,000D) 29,000E) 34,400Answer: EDiff: 2Objective: LO A.4 Calculate an expected monetary value (EMV)AACSB: Analytical thinking

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1427)What is the expected value with perfect information of the following decision table?States of NatureAlternativesS1S2p.6.4Option 110,00030,000Option 25,00045,000Option 3-4,00060,000A) 5,000B) 30,000C) 40,000D) 60,000E)8,400Answer: BDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)AACSB:Analytical thinking28) What is the EMV for Option 1 in the following decision table?States of NatureAlternativesS1S2p.2.8Option 1200300Option 250350A) 220B) 240C) 250D) 280E) 300Answer: DDiff: 2Objective: LO A.4 Calculatean expected monetary value (EMV)AACSB: Analytical thinking

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1529)What is the EMV for Option 2 in the following decision table?States of NatureAlternativesS1S2p.6.4Option 1200300Option 250350A) 50B) 100C) 170D) 200E) 350Answer:CDiff: 2Objective:LO A.4 Calculate an expected monetary value (EMV)AACSB: Analytical thinking30) What is the expected value with perfect information in the following decision table?States of NatureAlternativesS1S2p.6.4Option 1200300Option 250550A) 90B) 250C) 260D) 300E) 340Answer: EDiff: 2Objective: LO A.5 Compute the expected value of perfect information (EVPI)AACSB: Analytical thinking

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