In Problem 3-37, you helped the medical professionals analyze their decision using expected monetary value as the decision criterion. This group has also assessed its utility for money: U(-$45,000) = 0, U(-$40,000) = 0.1, U(-$5,000) = 0.7, U($0)= 0.9, U($95,000) = 0.99, and U($100,000) = 1. Use expected utility as the decision criterion, and determine the best decision for the medical professionals. Are the medical professionals risk seekers or risk avoiders? Problem 3-37: The physicians in Problem 3-36 have been approached by a market research firm that offers to perform a study of the market at a fee of $5,000. The market researchers claim their experience enables them to use Bayes’ Theorem to make the following statements of probability: Probability of a favorable market given a favorable study = 0.82 Probability of an unfavorable market given a favorable study = 0.18 Probability of a favorable market given an unfavorable study = 0.11 Probability of an unfavorable market given an unfavorable study = 0.89 Probability of a favorable research study = 0.55 Probability of an unfavorable research study = 0.45 Problem 3-36: A group of medical professionals is considering the construction of a private clinic. If the medical demand is high (i.e., there is a favorable market for the clinic), the physicians could realize a net profit of $100,000. If the market is not favorable, they could lose $40,000. Of course, they don’t have to proceed at all, in which case there is no cost. In the absence of any market data, the physicians’ best guess is that there is a 50–50 chance the clinic will be successful. Construct a decision tree to help analyze this problem. What should the medical professionals do?
> John Smith has developed the following forecasting model: Ŷ = 36 + 4.3X1 where Ŷ = demand for K10 air conditioners X1 = the outside temperature (℉) (a) Forecast the demand for K10 when the temperature is 70℉. (b) What is the demand for a temperature of 8
> Jim Overstreet, inventory control manager for Itex, receives wheel bearings from Wheel-Rite, a small producer of metal parts. Unfortunately, Wheel-Rite can produce only 500 wheel bearings per day. Itex sreceives 10,000 wheel bearings from Wheel-Rite each
> Annual rainfall plays an important role in corn agriculture. The drought of 2011 literally affected corn prices for years. Given the following data, build a model and predict the harvest for 2016 given that the total rainfall was 6.45 inches. Critique yo
> Trowbridge Manufacturing produces cases for personal computers and other electronic equipment. The quality control inspector for this company believes that a particular process is out of control. Normally, only 5% of all cases are deemed defective due to
> If 10% of all disk drives produced on an assembly line are defective, what is the probability that there will be exactly one defect in a random sample of 5 of these? What is the probability that there will be no defects in a random sample of 5?
> Gary Schwartz is the top salesman for his company. Records indicate that he makes a sale on 70% of his sales calls. If he calls on four potential clients, what is the probability that he makes exactly 3 sales? What is the probability that he makes exactl
> It takes approximately eight working days for an order of number 6 screws to arrive once the order has been placed. (Refer to Problem 6-20.) The demand for number 6 screws is fairly constant, and on average, Lila has observed that her brother’s hardware
> Use a 3-year moving average forecasting model to forecast the sales of Cool-Man air conditioners (see Problem 5-22). Problem 5-22: Sales of Cool-Man air conditioners have grown steadily during the past 5 years: The sales manager had predicted, before
> Sales of Cool-Man air conditioners have grown steadily during the past 5 years: The sales manager had predicted, before the business started, that year 1’s sales would be 410 air conditioners. Using exponential smoothing with a weight
> Develop a trend line for the demand for fertilizer in Problem 5-17, using any computer software. Problem 5-17: Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in the following table. Develop a 3-ye
> Use the data in Problem 4-22 and develop a regression model to predict selling price based on the square footage, number of bedrooms, and age. Use this to predict the selling price of a 10-year-old, 2,000-square-foot house with three bedrooms. Problem 4
> Refer to the Trowbridge Manufacturing example in Problem 2-35. The quality control inspection procedure is to select 6 items, and if there are 0 or 1 defective cases in the group of 6, the process is said to be in control. If the number of defects is mor
> Use the data in Problem 4-26 to develop a multiple linear regression model. How does this compare with each of the models in Problem 4-26? Problem 4-26: A sample of 20 automobiles was taken, and the miles per gallon (MPG), horsepower, and total weight w
> A sample of 20 automobiles was taken, and the miles per gallon (MPG), horsepower, and total weight were recorded. Develop a linear regression model to predict MPG, using horsepower as the only independent variable. Develop another model with weight as th
> Using computer software, find the least-squares regression line for the data in Problem 4-13. Based on the F test, is there a statistically significant relationship between the first test grade and the final average in the course? Problem 4-13: Students
> A couple of entrepreneurial business students at State University decided to put their education into practice by developing a tutoring company for business students. While private tutoring was offered, it was determined that group tutoring before tests
> Golden Age Retirement Planners specializes in providing financial advice for people planning for a comfortable retirement. The company offers seminars on the important topic of retirement planning. For a typical seminar, the room rental at a hotel is $1,
> Mysti Farris (see Problem 1-20) believes that there is a high probability that 120 pool cues can be sold if the selling price is appropriately set. What selling price would cause the break-even point to be 120? Problem 1-20: Farris Billiard Supply sell
> Mysti Farris (see Problem 1-20) is considering raising the selling price of each cue to $50 instead of $40. If this is done while the costs remain the same, what would the new break-even point be? What would the total revenue be at this break-even point?
> Farris Billiard Supply sells all types of billiard equipment and is considering manufacturing its own brand of pool cues. Mysti Farris, the production manager, is currently investigating the production of a standard house pool cue that should be very pop
> Katherine D’Ann, from Problem 1-18, has become concerned that sales may fall, as the team is on a terrible losing streak and attendance has fallen off. In fact, Katherine believes that she will sell only 500 programs for the next game. If it was possible
> Katherine D’Ann is planning to finance her college education by selling programs at the football games for State University. There is a fixed cost of $400 for printing these programs, and the variable cost is $3. There is also a $1,000 fee that is paid t
> Solve the following LP problem using the corner point graphical method. At the optimal solution, calculate the slack for each constraint: Maximize profit = 4X + 4Y subject to 3X + 5Y ≤ 150 X - 2Y ≤ 10 5X + 3Y ≤ 150 X,
> Use exponential smoothing with a smoothing constant of 0.3 to forecast the demand for fertilizer given in Problem 5-17. Assume that last period’s forecast for year 1 is 5,000 bags to begin the procedure. Would you prefer to use the expo
> In Problems 5-17 and 5-18, three different forecasts were developed for the demand for fertilizer. These three forecasts are a 3-year moving average, a weighted moving average, and a trend line. Which one would you use? Explain your answer. Problem 5-17
> Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in the following table. Develop a 3-year moving average to forecast sales. Then estimate demand again with a weighted moving average in which sales in
> Using MAD, determine whether the forecast in Problem 5-15 or the forecast in the section concerning Wallace Garden Supply is more accurate. Problem 5-15: Develop a 4-month moving average forecast for Wallace Garden Supply, and compute the MAD. A 3-month
> Develop a 4-month moving average forecast for Wallace Garden Supply, and compute the MAD. A 3-month moving average forecast was developed in the section on moving averages in Table 5.2. Table 5.2: ΜΟΝΤΗ ACTUAL SHED SALES 3-MONTH MOVING AVERAGE Janu
> The closing stock price for each of two stocks was recorded over a 12-month period. The closing price for the Dow Jones Industrial Average (DJIA) was also recorded over this same time period. These values are shown in the following table: (a) Develop a
> The number of victories (W), earned run average (ERA), runs scored (R), batting average (AVG), and on-base percentage (OBP) for each team in the American League in the 2012 season are provided in the following table. The ERA is one measure of the effecti
> In 2012, the total payroll for the New York Yankees was almost $200 million, while the total payroll for the Oakland Athletics (a team known for using baseball analytics or saber metrics) was about $55 million, less than one-third of the Yankeesâ&#
> A sample of nine public universities and nine private universities was taken. The total cost for the year (including room and board) and the median SAT score (maximum total is 2400) at each school were recorded. It was felt that schools with higher media
> Use the data in Problem 4-26 to find the best quadratic regression model. (There is more than one to consider.) How does this compare to the models in Problems 4-26 and 4-27? Problem 4-26: A sample of 20 automobiles was taken, and the miles per gallon (
> Martin-Pullin Bicycle Corp. (MPBC), located in Dallas, is a wholesale distributor of bicycles and bicycle parts. Formed in 1981 by cousins Ray Martin and Jim Pullin, the firm’s primary retail outlets are located within a 400-mile radius
> The total expenses of a hospital are related to many factors. Two of these factors are the number of beds in the hospital and the number of admissions. Data were collected on 14 hospitals, as shown in the following table: Find the best regression model
> Use the data in Problem 4-22 and develop a regression model to predict selling price based on the square footage and number of bedrooms. Use this to predict the selling price of a 2,000-square-foot house with three bedrooms. Compare this model with the m
> The following data give the selling price, square footage, number of bedrooms, and age of houses that have sold in a neighborhood in the past 6 months. Develop three regression models to predict the selling price based upon each of the other factors indi
> The following data give the starting salary for students who recently graduated from a local university and accepted jobs soon after graduation. The starting salary, grade-point average (GPA), and major (business or other) are provided. (a) Using a com
> Use computer software to develop a regression model for the data in Problem 4-19. Explain what this output indicates about the usefulness of this model. Problem 4-19: Bus and subway ridership in Washington, D.C., during the summer months is believed to
> Bus and subway ridership in Washington, D.C., during the summer months is believed to be heavily tied to the number of tourists visiting the city. During the past 12 years, the following data have been obtained: (a) Plot these data and determine whethe
> Thirteen students entered the undergraduate business program at Rollins College 2 years ago. The following table indicates what their grade-point averages (GPAs) were after being in the program for 2 years and what each student scored on the SAT exam (ma
> Accountants at the firm Walker and Walker believed that several traveling executives submit unusually high travel vouchers when they return from business trips. The accountants took a sample of 200 vouchers submitted from the past year; they then develop
> Steve Caples, a real estate appraiser in Lake Charles, Louisiana, has developed a regression model to help appraise residential housing in the Lake Charles area. The model was developed using recently sold homes in a particular neighborhood. The price (Y
> Using the data in Problem 4-13, test to see if there is a statistically significant relationship between the grade on the first test and the final average at the 0.05 level of significance. Use the formulas in this chapter and Appendix D. Problem 4-13:
> For years The Glass Slipper restaurant has operated in a resort community near a popular ski area of New Mexico. The restaurant is busiest during the first 3 months of the year, when the ski slopes are crowded and tourists flock to the area. When James a
> Sue Reynolds has to decide if she should get information (at a cost of $20,000) to help her decide whether to invest in a retail store. If she gets the information, there is a 0.6 probability that the information will be favorable and a 0.4 probability t
> Mary is considering opening a new grocery store in town. She is evaluating three sites: downtown, the mall, and out at the busy traffic circle. Mary calculated the value of successful stores at these locations as follows: downtown, $250,000; the mall, $3
> In the past few years, the traffic problems in Lynn McKell’s hometown have gotten worse. Now, Broad Street is congested about half the time. The normal travel time to work for Lynn is only 15 minutes when Broad Street is used and there is no congestion.
> In this chapter, a decision tree was developed for John Thompson (see Figure 3.5 for the complete decision tree analysis). After completing the analysis, John was not completely sure that he is indifferent to risk. After going through a number of standar
> The Long Island Life Insurance Company sells a term life insurance policy. If the policy holder dies during the term of the policy, the company pays $100,000. If the person does not die, the company pays out nothing, and there is no further value to the
> Two states of nature exist for a particular situation: a good economy and a poor economy. An economic study may be performed to obtain more information about which of these will actually occur in the coming year. The study may forecast either a good econ
> A financial advisor has recommended two possible mutual funds for investment: Fund A and Fund B. The return that will be achieved by each of these depends on whether the economy is good, fair, or poor. A payoff table has been constructed to illustrate th
> Mark Martinko has been a class A racquetball player for the past 5 years, and one of his biggest goals is to own and operate a racquetball facility. Unfortunately, Mark thinks that the chance of a successful racquetball facility is only 30%. Mark’s lawye
> Peter Martin is going to help his brother who wants to open a food store. Peter initially believes that there is a 50–50 chance that his brother’s food store would be a success. Peter is considering doing a market research study. Based on historical data
> Southwestern University (SWU), a large state college in Stephenville, Texas, 30 miles southwest of the Dallas/Fort Worth metroplex, enrolls close to 20,000 students. In a typical town– gown relationship, the school is a dominant force i
> Bill Holliday is not sure what he should do. He can build a quadplex (i.e., a building with four apartments), build a duplex, gather additional information, or simply do nothing. If he gathers additional information, the results could be either favorable
> Jerry Smith (see Problem 3-38) has done some analysis about the profitability of the bicycle shop. If Jerry builds the large bicycle shop, he will earn $60,000 if the market is favorable, but he will lose $40,000 if the market is unfavorable. The small s
> The physicians in Problem 3-36 have been approached by a market research firm that offers to perform a study of the market at a fee of $5,000. The market researchers claim their experience enables them to use Bayes’ Theorem to make the following statemen
> Refer to the leasing decision facing Beverly Mills in Problem 3-31. Develop the opportunity loss table for this situation. Which option would be chosen based on the minimax regret criterion? Which alternative would result in the lowest expected opportuni
> What is the meaning of mutually exclusive events? What is meant by collectively exhaustive? Give an example of each.
> Describe the use of sensitivity analysis and post optimality analysis in analyzing the results.
> What are the two basic laws of probability?
> List some sources of input data.
> What is Bayes’ Theorem, and when can it be used?
> Briefly trace the history of quantitative analysis. What happened to the development of quantitative analysis during World War II?
> In January 2012, Northern Airlines merged with Southeast Airlines to create the fourth largest U.S. carrier. The new North– South Airline inherited both an aging fleet of Boeing 727-300 aircraft and Stephen Ruth. Stephen was a tough for
> What is the quantitative analysis process? Give several examples of this process.
> What are the three categories of business analytics?
> Define quantitative analysis. What are some of the organizations that support the use of the scientific approach?
> What is the difference between quantitative and qualitative analysis? Give several examples.
> Discuss the role of sensitivity analysis in LP. Under what circumstances is it needed, and under what conditions do you think it is not necessary?
> The mathematical relationships that follow were formulated by an operations research analyst at the Smith–Lawton Chemical Company. Which ones are invalid for use in an LP problem, and why? Maximize profit = 4X1 + 3X1X2 + 8X2 + 5X3 subject to 2X1 + X2 +
> The production manager of a large Cincinnati manufacturing firm once made the statement, “I would like to use LP, but it’s a technique that operates under conditions of certainty. My plant doesn’t have that certainty; it’s a world of uncertainty. So LP c
> You have just formulated a maximization LP problem and are preparing to solve it graphically. What criteria should you consider in deciding whether it would be easier to solve the problem by the corner point method or the isoprofit line approach?
> It has been said that each LP problem that has a feasible region has an infinite number of solutions. Explain.
> It is important to understand the assumptions underlying the use of any quantitative analysis model. What are the assumptions and requirements for an LP model to be formulated and used?
> The Toledo Leather Company has been producing leather goods for more than 30 years. It purchases prepared hides from tanners and produces leather clothing accessories such as wallets, belts, and handbags. The firm has just developed a new leather product
> Explain how a change in a technological coefficient can affect a problem’s optimal solution. How can a change in resource availability affect a solution?
> Develop your own original LP problem with two constraints and two real variables. (a) Explain the meaning of the numbers on the right hand side of each of your constraints. (b) Explain the significance of the technological coefficients. (c) Solve you
> A linear program has a maximum profit of $600. One constraint in this problem is 4X + 2Y ≤ 80. Using a computer, we find the dual price for this constraint is 3, and there is a lower bound of 75 and an upper bound of 100. Explain what this means.
> A linear program has the objective of maximizing profit = 12X + 8Y. The maximum profit is $8,000. Using a computer, we find the upper bound for profit on X is 20 and the lower bound is 9. Discuss the changes to the optimal solution (the values of the var
> Discuss the similarities and differences between minimization and maximization problems using the graphical solution approaches of LP.
> If the ROP is greater than the order quantity, explain how the ROP is implemented. Can the ROP be more than twice the order quantity, and, if so, how is such a situation handled?
> What is the ROP? How is it determined?
> What are some of the assumptions made in using the EOQ?
> Why wouldn’t a company always store large quantities of inventory to eliminate shortages and stockouts?
> Under what circumstances can inventory be used as a hedge against inflation?
> After watching a movie about a young woman who quit a successful corporate career to start her own baby food company, Julia Day decided that she wanted to do the same. In the movie, the baby food company was very successful. Julia knew, however, that it
> Briefly describe what is meant by ABC analysis. What is the purpose of this inventory technique?
> Briefly explain the marginal analysis approach to the single-period inventory problem.
> When using safety stock, how is the standard deviation of demand during the lead time calculated if daily demand is normally distributed but lead time is constant? How is it calculated if daily demand is constant but lead time is normally distributed? Ho
> Briefly describe what is involved in solving a quantity discount model.
> What assumptions are made in the production run model?
> What is the purpose of sensitivity analysis?
> Why is inventory an important consideration for managers?
> Explain how the number of seasons is determined when forecasting with a seasonal component.
> Explain what would happen if the smoothing constant in an exponential smoothing model was equal to zero. Explain what would happen if the smoothing constant was equal to one.
> Describe briefly the steps used to develop a forecasting system.
> In 1979, Steve Blake founded Blake Electronics in Long Beach, California, to manufacture resistors, capacitors, inductors, and other electronic components. During the Vietnam War, Steve was a radio operator, and it was during this time that he became pro
> Explain what information is provided by the F test.
