CHAPTER 6—QUANTITATIVE TECHNIQUES FOR PLANNING AND DECISION
MAKING
MULTIPLE CHOICE
1. Juanita is a data-driven manager, so she
a.
minimizes interaction with people when working.
b.
bases her decisions on facts.
c.
finely tunes her intuition.
d.
emphasizes politics in her decision making.
2. Richard is a data-driven manager, so he tells subordinates,
a.
“Don’t politic, use data.”
b.
“Politic, don’t use data.”
c.
“Pay for your own lunch while on a business trip.”
d.
“Donate 10 percent of your gross income to charity.”
3. A judgmental forecast is
a.
based on a collection of subjective opinions..
b.
a qualitative forecasting method.
c.
both a & b
d.
a quantitative forecasting method.
4. A major reason that forecasting is so important in business is that
a.
customers often demand forecasts before they purchase equipment.
b.
forecasts accurately describe a company’s history.
c.
forecasts are good for spotting errors in current operations.
d.
spotting trends can give you an edge over the competition.
5. The results of a time-series analysis are best represented by a(n)
a.
equation with two variables.
b.
chart or graph showing past trends and predicted future trends.
c.
verbal summary of expert opinions.
d.
pie chart of the various components of the analysis.
6. CEO Maria is so convinced that company sales will triple, that she commits the company to lavish
new expenses without making contingency plans if the sales growth does not take place. Maria might
be falling into the
a.
prudence trap.
b.
overconfidence trap.
c.
recallability trap.
d.
subjective thinking trap.
7. The World Future Society predicts that 100 million people with telecommute by the year 2015,
illustrating a(n) ____ forecast.
a.
economic
b.
sales
c.
technological
d.
doomsday
8. The two major variables considered by Gantt charts and milestone charts are
a.
planned and actual work.
b.
past and present.
c.
time and motion.
d.
price and cost.
9. The numbers in a PERT network refer to the
a.
amount of time consumed by events.
b.
completion date for projects.
c.
time required to complete activities between events.
d.
average of the optimistic and pessimistic times.
10. The critical path is the path through the PERT network with the
a.
shortest completion time.
b.
longest completion time.
c.
most probable time.
d.
pessimistic time.
11. With a more refined application of PERT, the optimistic, pessimistic, and most probable times should
be based on
a.
Bureau of Labor Statistics estimates.
b.
the intuition of someone new to the task.
c.
the intuition of a well-experienced worker.
d.
a frequency distribution of estimates.
12. In addition to estimating the time required for activities, advanced applications of PERT estimate the
a.
job satisfaction associated with the task.
b.
amount of resources to needed to accomplish the job.
c.
productivity bonuses paid to workers who finish on schedule.
d.
starting day of the project.
13. The break-even point occurs when
a.
fixed costs and fixed revenues are equal.
b.
variable costs and variable revenues are equal.
c.
the units produced equal the units sold.
d.
total costs and total revenues are equal.
14. Break-even analysis indicates the ____ that will be necessary to justify a new expense.
a.
increase in sales.
b.
increase in costs.
c.
amount of profit.
d.
volume of activity.
15. Fixed cost in break-even analysis refers to the cost that
a.
remains constant no matter how many units are produced.
b.
covers the initial capital expenditures.
c.
covers everything but employee compensation.
d.
declines after the break-even point has been reached.
16. A decision tree graphically depicts
a.
the alternative solutions available to solve a problem.
b.
cause and effect relationships.
c.
how much inventory to keep on hand.
d.
the states of nature.
17. An expected value for a decision tree is the value you would expect if
a.
you calculated how much revenue is needed to break even.
b.
your business were sold within 30 days.
c.
a particular decision is made a large number of times.
d.
you took a poll of what people want.
18. A decision tree is considered particularly useful in
a.
evaluating costs over the life of a project.
b.
making a sequence of decisions.
c.
estimating the length of time required to achieve given return on investment.
d.
determining when to drop a product line.
19. The economic-order quantity (EOQ) suggests the
a.
right size orders to take.
b.
break-even point for storing inventory.
c.
break-even point for sales orders.
d.
right amount of inventory to store.
20. Under a just-in–time inventory system, inventory is moved into a plant as soon as
a.
the supplier can deliver.
b.
the manufacturer has shelf space.
c.
it can be bought at the right price.
d.
it is needed.
21. Just-in-time inventorys often referred to
a.
supply-chain management
b.
as lean manufacturing because waste of “fat” is minimized.
c.
operations management.
d.
as custom manufacturing.
22. The just in time system of inventory control relies on
a.
cards, to communicate production requirements from the final point of assembly to the
manufacturing operations that precede it.
b.
kanbans
c.
both a & b
d.
shipping directly from suppliers.
23. Under the inventory system, FIFO, you sell
a.
by shipping directly from one of your suppliers.
b.
the first goods you obtained last
c.
the last goods you obtained first.
d.
the first goods you obtained first.
24. Sell the most recently received items first is called
a.
FIFO
b.
JIT
c.
LIFO
d.
wholesaling
25. A Pareto diagram is
a.
an inventory method
b.
a bar graph that ranks types of output variations by frequency of occurrence.
c.
a forecasting tool.
d.
a scenario for the future
TRUE/FALSE
1. The data-driven decision maker relies mostly on intuition when making decisions.
2. Brett is a data-driven manager so he relies more on facts than human impressions when making
decisions.
3. Data-driven management is more of an attitude and approach than a specific technique,
4. A technological forecast predicts what types of technological changes will take
place.
5. Time-series analysis is an historical approach to making forecasts.
6. If a manager recalls success stories from global expansion to Singapore, he might overestimate
the chances of succeeding in that country. This is an example of the recallability trap.
7. The overconfidence trap in making forecasts leads a person to overestimate the accuracy of his or her
forecasts.
8. The prudence trap in making forecasts leads a person to make overly optimistic forecast so as not to
appear too conservative.
9. Forecasts that are updated regularly with fresh data are referred to as rolling forecasts.
10. The information compiled in a Gantt chart is well suited as a control device.
11. Janet is supervising the construction of an animal hospital. An example of a milestone in her project
would the installation of the operating room.
12. Much of the accuracy of a PERT chart depends upon estimates of the time necessary to complete each
activity.
13. To speed up the completion of a project, the manager should attempt to give top priority to all
activities not on the critical path.
14. In an advanced application of PERT, expected times are based on frequency distributions of how long
certain events took place in the past.
15. With scenario planning, you prepare for what the future might look like.
16. Break-even analysis assumes that unit costs vary in relation to sales volume.
17. Maintaining the right level of inventory is a major factor influencing the financial health of an
organization.
18. The inventory management system called LIFO, refers to selling your oldest inventory first.
19. A decision tree is a graphic illustration of the alternative solutions available to solve a problem.
20. The economic-order quantity (EOQ) is the inventory level that minimizes ordering and carrying costs.
21. Under just-in–time inventory control, an ample safety stock is accumulated to deal with emergencies
such as supplier problems and labor strikes.
22. The just-in-time system emphasizes that customer demand is the most important factor in determining
how much product to manufacture.
23. Just in time is applicable only to highly repetitive manufacturing operations such as car or residential
furnace manufacturing.
24. The 80/20 (Pareto) Principle is a general guide as to what percent activities are likely to cause most of
the results in a given situation.
25. The Delphi Technique is a form of group decision making designed to provide group members with
one another’s ideas and feedback while avoiding some of the problems associated with interacting
groups
ESSAY
1. Describe how a person might use a Gantt chart to plan an office party for 2,000 people. Use a diagram
of a Gantt chart in your answer.
2. Describe scenario planning.
3. Explain the basics of a just-in–time (JIT) inventory system.
4. Suppose a small-business owner wants to repaint the walls inside the office. The office manager
suggests buying a premium brand of paint because such paint stays fresher looking
longer and does not chip as readily. What would a data-driven manager say?