1

Introduction
MULTIPLE CHOICE
1. The field of management science
a. concentrates on the use of quantitative methods to assist in decision making.
b. approaches decision making rationally, with techniques based on the scientific method.
c. is another name for decision science and for operations research.
d. each of the above is true.
ANS!"# d
T$%&'# &ntroduction
(. &dentification and definition of a problem
a. cannot be done until alternatives are proposed.
b. is the first step of decision making.
c. is the final step of problem solving.
d. requires consideration of multiple criteria.
ANS!"# b
T$%&'# %roblem solving and decision making
). *ecision alternatives
a. should be identified before decision criteria are established.
b. are limited to quantitative solutions
c. are evaluated as a part of the problem definition stage.
d. are best generated by brain+storming.
ANS!"# a
T$%&'# %roblem solving and decision making
,. *ecision crit eri a
a. are the choices faced by the decision maker.
b. are the probl ems faced by the decision maker.
c. are the ways to eval uat e the choices faced by the decision maker.
d. must be unique for a probl em.
ANS!"# c
T$%&'# %robl em solving and deci sion maki ng
-. &n a multicriteria decision problem
a. it is impossible to select a single decision alternative.
b. the decision maker must evaluate each alternative with respect to each criterion.
c. successive decisions must be made over time.
d. each of the above is true.
ANS!"# b
T$%&'# %roblem solving and decision making
.. The quantitative analysis approach requires
a. the manager/s prior e0perience with a similar problem.
1
2 Chapter 1 Introduction
b. a relatively uncomplicated problem.
c. mathematical e0pressions for the relationships.
d. each of the above is true.
ANS!"# c
T$%&'# 1uantitative analysis and decision making
2. A physical model that does not have the same physical appearance as the ob3ect being modeled is
a. an analog model.
b. an iconic model.
c. a mathematical model.
d. a qualitative model.
ANS!"# a
T$%&'# 4odel development
5. &nputs to a quantitative model
a. are a trivial part of the problem solving process.
b. are uncertain for a stochastic model.
c. are uncontrollable for the decision variables.
d. must all be deterministic if the problem is to have a solution.
ANS!"# b
T$%&'# 4odel development
6. hen the value of the output cannot be determined even if the value of the controllable input is known,
the model is
a. analog.
b. digital.
c. stochastic.
d. deterministic.
ANS!"# c
T$%&'# 4odel development
17. The volume that results in total revenue being equal to total cost is the
a. break+even point.
b. marginal volume.
c. marginal cost.
d. profit mi0.
ANS!"# a
T$%&'# 8reak+even analysis
11. 4anagement science and operations research both involve
a. qualitative managerial skills.
b. quantitative approaches to decision making.
c. operational management skills.
d. scientific research as opposed to applications.
ANS!"# b
T$%&'# &ntroduction
1(. 9eorge *ant:ig is important in the history of management science because he developed
a. the scientific management revolution.
b. orld ar && operations research teams.
c. the simple0 method for linear programming.
d. powerful digital computers.
ANS!"# c
T$%&'# &ntroduction
1). The first step in problem solving is
a. determination of the correct analytical solution procedure.
b. definition of decision variables.
Chapter 1 Introduction 3
c. the identification of a difference between the actual and desired state of affairs.
d. implementation.
ANS!"# c
T$%&'# %roblem solving and decision making
1,. %roblem definition
a. includes specific ob3ectives and operating constraints.
b. must occur prior to the quantitative analysis process.
c. must involve the analyst and the user of the results.
d. each of the above is true.
ANS!"# d
T$%&'# 1uantitative analysis
1-. A model that uses a system of symbols to represent a problem is called
a. mathematical.
b. iconic.
c. analog.
d. constrained.
ANS!"# a
T$%&'# 4odel development
TRUE/FALSE
1. The process of decision making is more limited than that of problem solving.
ANS!"# True
T$%&'# %roblem solving and decision making
(. The terms ;stochastic/ and ;deterministic/ have the same meaning in quantitative analysis.
ANS!"# <alse
T$%&'# 4odel development
). The volume that results in marginal revenue equaling marginal cost is called the break+even point.
ANS!"# <alse
T$%&'# %roblem solving and decision making
,. %roblem solving encompasses both the identification of a problem and the action to resolve it.
ANS!"# True
T$%&'# %roblem solving and decision making
-. The decision making process includes implementation and evaluation of the decision.
ANS!"# <alse
T$%&'# %roblem solving and decision making
.. The most successful quantitative analysis will separate the analyst from the managerial team until after
the problem is fully structured.
ANS!"# <alse
T$%&'# 1uantitative analysis
2. The value of any model is that it enables the user to make inferences about the real situation.
ANS!"# True
T$%&'# 4odel development
5. =ncontrollable inputs are the decision variables for a model.
4 Chapter 1 Introduction
ANS!"# <alse
T$%&'# 4odel development
6. The feasible solution is the best solution possible for a mathematical model.
ANS!"# <alse
T$%&'# 4odel solution
17. A company seeks to ma0imi:e profit sub3ect to limited availability of man+hours. 4an+hours is a
controllable input.
ANS!"# <alse
T$%&'# 4odel development
11. <rederick Taylor is credited with forming the first 4S>$" interdisciplinary teams in the 16,7/s.
ANS!"# <alse
T$%&'# &ntroduction
1(. To find the choice that provides the highest profit and the fewest employees, apply a single+criterion
decision process.
ANS!"# <alse
T$%&'# %roblem solving and decision making
1). The most critical component in determining the success or failure of any quantitative approach to decision
making is problem definition.
ANS!"# True
T$%&'# 1uantitative analysis
1,. The first step in the decision making process is to identify the problem.
ANS!"# True
T$%&'# &ntroduction
1-. All uncontrollable inputs or data must be specified before we can analy:e the model and recommend a
decision or solution for the problem.
ANS!"# True
T$%&'# 1uantitative analysis
SHORT ANSWER
1. Should the problem solving process be applied to all problems?
T$%&'# %roblem solving and decision making
(. !0plain the difference between quantitative and qualitative analysis from the manager@s point of view.
T$%&'# 1uantitative analysis and decision making
). !0plain the relationship among model development, model accuracy, and the ability to obtain a solution
from a model.
T$%&'# 4odel solution
,. hat are three of the management science techniques that practitioners use most frequently? Aow can
the effectiveness of these applications be increased?
T$%&'# 4ethods used most frequently
-. hat steps of the problem solving process are involved in decision making?
T$%&'# &ntroduction
.. 9ive three benefits of model development and an e0ample of each.
T$%&'# 4odel development
Chapter 1 Introduction 5
2. !0plain the relationship between information systems specialists and quantitative analysts in the solution
of large mathematical problems.
T$%&'# *ata preparation
PROLEMS
1. A snack food manufacturer buys corn for tortilla chips from two cooperatives, one in &owa and one in
&llinois. The price per unit of the &owa corn is B..77 and the price per unit of the &llinois corn is B-.-7.
a. *efine variables that would tell how many units to purchase from each source.
b. *evelop an ob3ective function that would minimi:e the total cost.
c. The manufacturer needs at least 1(777 units of corn. The &owa cooperative can supply up to
5777 units, and the &llinois cooperative can supply at least .777 units. *evelop constraints for
these conditions.
T$%&'# 4odel development
(. The relationship d C -777 + (-p describes what happens to demand DdE as price DpE varies. Aere, price can
vary between B17 and B-7.
a. Aow many units can be sold at the B17 price? Aow many can be sold at the B-7 price?
b. 4odel the e0pression for total revenue.
c. 'onsider prices of B(7, B)7, and B,7. hich price alternative will ma0imi:e total revenue?
hat are the values for demand and revenue at this price?
T$%&'# 4odel development
). There is a fi0ed cost of B-7,777 to start a production process. $nce the process has begun, the variable
cost per unit is B(-. The revenue per unit is pro3ected to be B,-.
a. rite an e0pression for total cost.
b. rite an e0pression for total revenue.
c. rite an e0pression for total profit.
d. <ind the break+even point.
T$%&'# 8reak+even analysis
,. An author has received an advance against royalties of B17,777. The royalty rate is B1.77 for every book
sold in the =nited States, and B1.)- for every book sold outside the =nited States. *efine variables for
this problem and write an e0pression that could be used to calculate the number of books to be sold to
cover the advance.
T$%&'# 8reak+even analysis
-. A university schedules summer school courses based on anticipated enrollment. The cost for faculty
compensation, laboratories, student services, and allocated overhead for a computer class is B5-77. &f
students pay B,(7 to enroll in the course, how large would enrollment have to be for the university to
break even?
T$%&'# 8reak+even analysis
.. As part of their application for a loan to buy Fakeside <arm, a property they hope to develop as a bed+and+
breakfast operation, the prospective owners have pro3ected#
4onthly fi0ed cost Dloan payment, ta0es, insurance, maintenanceE B.777
Gariable cost per occupied room per night B (7
"evenue per occupied room per night B 2-
a. rite the e0pression for total cost per month. Assume )7 days per month.
b. rite the e0pression for total revenue per month.
c. &f there are 1( guest rooms available, can they break even? hat percentage of rooms would
need to be occupied, on average, to break even?
T$%&'# 8reak+even analysis
6 Chapter 1 Introduction
2. $rgani:ers of an &nternet training session will charge participants B1-7 to attend. &t costs B)777 to
reserve the room, hire the instructor, bring in the equipment, and advertise. Assume it costs B(- per
student for the organi:ers to provide the course materials.
a. Aow many students would have to attend for the company to break even?
b. &f the trainers think, realistically, that (7 people will attend, then what price should be charged
per person for the organi:ation to break even?
T$%&'# 8reak+even analysis
5. &n this portion of an !0cel spreadsheet, the user has given values for selling price, the costs, and a sample
volume. 9ive the cell formula for
a. cell !1(, break+even volume.
b. cell !1., total revenue.
c. cell !12, total cost.
d. cell !16, profit>loss.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
A B C D E
Break-even calculation
Selling price per unit 10
Costs
Fixed cost 8400
Variable cost per unit 4.5
Break-even volue
Saple calculation
Volue !000
"otal revenue
"otal cost
#ro$it loss
T$%&'# Spreadsheets for management science
6. A furniture store has set aside 577 square feet to display its sofas and chairs. !ach sofa utili:es -7 sq. ft.
and each chair utili:es )7 sq. ft. At least five sofas and at least five chairs are to be displayed.
a. rite a mathematical model representing the store@s constraints.
b. Suppose the profit on sofas is B(77 and on chairs is B177. $n a given day, the probability that a
displayed sofa will be sold is .7) and that a displayed chair will be sold is .7-. 4athematically
model each of the following ob3ectives#
1. 4a0imi:e the total pieces of furniture displayed.
(. 4a0imi:e the total e0pected number of daily sales.
). 4a0imi:e the total e0pected daily profit.
T$%&'# 4odel development
17. A manufacturer makes two products, doors and windows. !ach must be processed through two work
areas. ork area H1 has .7 hours of available production time. ork area H( has ,5 hours of available
production time. 4anufacturing of a door requires , hours in work area H1 and ( hours in work area H(.
Chapter 1 Introduction 7
4anufacturing of a window requires ( hours in work area H1 and , hours in work area H(. %rofit is B5
per door and B. per window.
a. *efine decision variables that will tell how many units to build Ddoors and windowsE.
b. *evelop an ob3ective function that will ma0imi:e profits.
c. *evelop production constraints for work area H1 and H(.
T$%&'# 4odel development
11. A small firm builds television antennas. The investment in plan and equipment is B(77,777. The
variable cost per television antenna is B-77. The price of the television antenna is B1777. Aow many
television antennas would be needed for the firm to break even?
T$%&'# 8reak+even analysis
1(. As computer service center has the capacity to do ,77 3obs per day. The e0pected level of 3obs demanded
per day is (-7 per day. The fi0ed cost of renting the computer process is B(77 per day. Space rents for
B177 per day. The cost of material is B1- per unit of work and B.)- cents of labor per unit. hat is the
break+even level of work?
T$%&'# 8reak+even analysis
1). To establish a driver education school, organi:ers must decide how many cars, instructors, and students to
have. 'osts are estimated as follows. Annual fi0ed costs to operate the school are B)7,777. The annual
cost per car is B)777. The cost per instructor is B11,777 and one instructor is needed for each car.
Tuition for each student is B)-7. Fet 0 be the number of cars and y be the number of students.
a. rite an e0pression for total cost.
b. rite an e0pression for total revenue.
c. rite an e0pression for total profit.
d. The school offers the course eight times each year. !ach time the course is offered, there are two
sessions. &f they decide to operate five cars, and if four students can be assigned to each car, will
they break even?
T$%&'# 8reak+even analysis
SOLUTIONS TO PROLEMS
1. a. Fet 01 C the number of units from &owa
Fet 0( C the number of units from &llinois
b. 4in .01 I -.-0(
c. 01 I 0( J 1(777
01 J 5777
01 J .777
(. a. <or p C 17, d C ,2-7
<or p C -7, d C )2-7
b. T" C pD-777+(-pE
c. <or p C (7, T" C B67,777
<or p C )7, T" C B1(2,-77
<or p C ,7, T" C B1.7,777
8est price is p C ,7. *emand C ,777
). a. 'D0E C -7777 I (-0
b. "D0E C ,-0
c. %D0E C ,-0 + D-7777 I (-0E
d. 0 C (-77
8 Chapter 1 Introduction
,. Fet 01 C the number of books sold in the =.S.
Fet 0( C the number of books sold outside the =.S.
17777 C 101 I 1.)-0(
-. !nrollment would need to be (1 students.
.. a. 'D0E C .777 I (7D)7E0 DmonthlyE
b. "D0E C 2-D)7E0 DmonthlyE
c. 8reak+even occupancy C ).., or , occupied rooms per night, so they have enough rooms to break
even. This would be a ))K occupancy rate.
2. a. 'D0E C )777 I (-0
"D0E C 1-70
8reak+even students C (,
b. 'ost C )777 I (-D(7E
"evenue C (7p
8reak+even price C 12-
5. a. C!6>D!.+!17E
b. C!1-L!.
c. C!6I!17L!1-
d. C!1.+!12
6. a. -7s I )7c M 577
s J -
c J -
b. D1E 4a0 s I c
D(E 4a0 .7)s I .7-c
D)E 4a0 .s I -c
17. a. Fet * C the number of doors to build
Fet N C the number of windows to build
b. %rofit C 5* I .
c. ,* I ( .7
(* I , ,5
11. ,77 television antennae
1(. (77 service units
1). a. 'D0E C )7777 I 1,7770
b. "DyE C )-7y
c. %D0,yE C )-7y + D)7777 I 1,7770E
d. !ach car>instructor can serve up to D, students>sessionED( sessions>courseED5 courses>yearE C .,
students annually. <ive cars can serve )(7 students. &f the classes are filled, then profit for five
cars is
)-7D)(7E + D)7777 I 1,777D-EE C 1(777
so the school can reach the break+even point.