41. A company that uses zero-based budgeting has

a.

An expense budget of zero.

b.

Zero as the starting point of budgeting the coming year's expenses.

c.

A zero variance between budgeted and actual performance.

d.

An assumed sales level of zero.

42. A decision maker is operating in an environment wherein all the facts surrounding a decision are known exactly, & each alternative is associated only with one possible outcome. The environment is known as:

a.

Certainty

c.

Uncertainty

b.

Risk

d.

Conflict

Items 43 and 44 are based on the following information

A store sells four computer models designated as P100, A200, R300, and T400. The store manager has made random number assignments to represent customer choices based on past sales data. The assignments are:

Model

Random Numbers

P100

0-1

A200

2-6

R300

7-8

T400

9

43. What is the probability that a customer will select model P100?

a.

10%

c.

50%

b.

20%

d.

Cannot be determined from given information

44. In running a simulation of the computer demand, the following numbers are drawn in sequence: 2, 8 and 6. The simulation indicates that the third customer will purchase

a.

Model P100

c.

Model R300

b.

Model A200

d.

Model T400

45. A quantitative technique useful in projecting a firm's sales and profits is the

a.

Probability distribution theory

c.

Learning curves

b.

Gantt chart

d.

Queuing theory

46. Expected value in decision analysis is

a.

A standard deviation using the probabilities as weights.

b.

An arithmetic mean using the probabilities as weights.

c.

A standard deviation divided by the coefficient of variation.

d.

A measure of the difference between best possible outcome and outcome of the original decision

47. The term 'expected value' refers to the

a.

Value which would be assigned to a variable if problem were to be treated in a deterministic manner

b.

Most likely single outcome selected from among a number of possible alternatives

c.

Tails of a normal probability distribution

d.

Mean value of a variable

Items 48 to 50 are based on the following information

A group of kids sells sweet candies at a basketball game. The candies are sold for P 1.00 each, and the cost per candy is P 0.30. Any unsold candies are discarded because they will be stale before the next basketball game. The frequency distribution of the demand for candies per basketball game is:

Unit sales volume

Probability

2,000 candies

0.10

3,000 candies

0.15

4,000 candies

0.20

5,000 candies

0.35

6,000 candies

0.20

48. What is the estimated demand for candies at the next game using an expected value approach?

a.

4,000 candies

c.

5,000 candies

b.

4,400 candies

d.

6,000 candies

49. What is the estimated demand for candies at the next game using a deterministic approach (highest probability)?

a.

4,000 candies

c.

5,000 candies

b.

4,400 candies

d.

6,000 candies

50. The conditional profit per game of having 4,000 candies available but only selling 3,000 candies is

a.

P 1,800

c.

P 2,800

b.

P 2,100

d.

P 4,000

51. Raspberry Enterprises, distributor of compact disks (CDs), is developing its budgeted cost of goods sold for 2021. Raspberry has developed the following range of sales estimates and associated probabilities:

Sales estimate

Probability

P 60,000

25%

85,000

40%

100,000

35%

The cost of goods sold averages 80% of sales. What is 2021's expected value of cost of goods sold?

a.

P 67,200

c.

P 84,000

b.

P 68,000

d.

P 85,000

51. The Pineapple Company produces its product in batches of 100 units. The units each batch are then tested. The results from testing the most recent 200 batches are shown below:

Units Failed per Batch

Number of Batches

0

50

1

40

2

40

3

30

4

40

Total

200

What is the expected value of the number of failed units per batch?

a.

0

c.

2.00

b.

1.85

d.

13.33

52. Cherry Distributors has decided to increase its daily muffin purchases of 100 boxes. A box of muffins costs P 2.00 and sells for P 3.00 through regular stores. Any boxes not sold through regular store are sold through thrift store for P 1.00. Cherry assigns the following probabilities to selling additional boxes:

Additional sales

Probability

60

60%

100

40%

What is the expected value of Cherry's decision to buy 100 additional boxes of muffins?

a.

P 28

c.

P 52

b.

P 40

d.

P 68

Items 53 and 54 are based on the following information

The probabilities shown in the table represent the estimate of sales for a new product:

Sales (unit)

Probability

0 - 200

15%

201 - 400

45%

401 - 600

25%

601 - 800

15%

53. What is the probability of selling between 201 and 600 units of the product?

a.

0%

c.

25%

b.

11.25%

d.

70%

54. What is the best estimate of the expected sales of the new product? (Hint: compute average of range)

a.

380

c.

480

b.

400

d.

800

55. Mango Company uses two major inputs in its production. To prepare its manufacturing operations budget, the company has to project the cost changes of these material inputs. The cost changes are independent of one another. The purchasing department provides the following probabilities associated with projected cost changes:

Cost Change

Material 1

Material 2

3% increase

30%

50%

5% increase

50%

40%

10% increase

20%

10%

What is the probability of a 3% increase in the cost of both Material 1 and Material 2?

a.

15%

c.

80%

b.

40%

d.

20%

56. It is used for situations involving a sequence of events with several possible outcomes associated with each event.

a.

Network analysis

c.

Queuing theory

b.

Decision tree analysis

d.

Linear programming

57. A contractor has been invited to submit a bid on a large and complicated construction project. The preparation of the bid proposal will cost about P 20,000. Management feels that if the company bids low, enough to result in a net profit of P 50,000, there would be a 60% chance of getting the job. If the company bids high, enough to result in a P 100,000 net profit, the chance of getting the contract would be only 20%. What should the company do?

a.

Bid low, enough to allow for P 50,000 profit since the expected value of payoff is P 22,000

b.

Bid high, enough to allow for a P 100,000 profit since the expected value of payoff is P 4,000

c.

Bid high, enough to allow for a P 100,000 profit since the expected value of payoff is P 20,000

d.

Make no bid.

Items 58 to 60 are based on the following information

A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is hot, it will make P 2,500; if the weather is cold, the profit will be P 1,000. If the stand sells coffee and the weather is hot, it will make P 1,900; if the weather is cold, the profit will be P 2,000. The probability of cold weather on a given day at this time is 60%.

58. What is the expected payoff for selling coffee?

a.

P 1,360

c.

P 2,200

b.

P 1,960

d.

P 3,900

59. What is the expected payoff if the vendor has perfect information?

a.

P 1,360

c.

P 2,200

b.

P 1,960

d.

P 3,900

60. Considering only the information given, if the probability of hot weather given a hot weather forecast is 50%, then how much would the vendor be willing to pay for the forecast?

a.

P 300

c.

P 600

b.

P 500

d.

P 1,000