MULTIPLE CHOICE:

1. Using the balanced scorecard approach, an organization evaluates managerial performance based on:

a. A single ultimate measure of operating results, such as residual income.

b. Multiple financial and non-financial measures.

c. Multiple non-financial measures only.

d. Multiple financial measures only.

2. A strategy map in the balanced scorecard framework is

a. A statement of what the strategy must achieve and what is critical to its success.

b. Key action programs required to achieve strategic objectives.

c. Diagrams of the cause-and-effect relationships between strategic objectives.

d. The level of performance or rate of improvement needed in the performance measure.

3. What is the most important purpose of a balanced scorecard?

a. Develop strategy.

b. Measure performance.

c. Develop cause-and-effect linkages.

d. Set priorities.

4. Which of the following is not one of the four perspectives of the balanced scorecard?

a. Investment in resources perspective.

b. Customer perspective.

c. Learning and growth perspective.

d. Financial perspective.

5. The balanced scorecard generally uses performance measures with four different perspectives. Which of the following performance measures would be part of those used for the internal business processes perspective?

a. Cycle time.

b. Employee satisfaction.

c. Hours of training per employee.

d. Customer retention.

6. Probability of the simultaneous occurrence of two mutually exclusive events is

a. The probability that two or more events will occur.

b. The probability that once will occur given that the other has occurred.

c. The probability that two independent events will occur.

d. Zero.

7. A firm must decide whether to introduce a new product A or B. There is no time to obtain experimental information; a decision has to be made now. Expected sales can be classified as weak, moderate, or strong. How many different payoffs are possible in a decision tree under these circumstances?

a. 2

b. 3

c. 5

d. 6

8. The constraints in a linear programming model are

a. Included in the objective function.

b. Cost.

c. Scarce resources.

d. Depended variables.

9. The two inequality functions are

a. Contributions.

b. Shadow points.

c. Objectives.

d. Constraints.

10. A bank is designing an on-the-job training program for its branch managers. The bank would like to design the program so that participants can complete it as quickly as possible. The training program requires that certain activities be completed before others. For example, a participant cannot make credit loan decisions without first having obtained experience in the loan department. An appropriate scheduling technique for this training program is

a. PERT/CPM.

b. Linear programming.

c. Queuing theory.

d. Sensitivity analysis.

11. PERT and the critical path method (CPM) are used for

a. Determining the optimal product mix.

b. Project planning and control.

c. Determining product costs.

d. Determining the number of servers needed in a fast food restaurant.

12. To assist in an investment decision, Greedy Co., selected the most likely sales volume from several possible outcomes. Which of the following attributes would that selected sales volume reflect?

a. The midpoint of the range

b. The median

c. The greatest probability

d. The expected value

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

a. Probability distribution theory.

b. Linear programming.

c. Gantt charting.

d. Learning curves.

14. Corrupt Company is preparing its 2020 budget and, taking into consideration the recent pace of economic recovery, has developed several sales forecast and the estimated probability associated with each sales forecast. To determine the sales forecast to be used for 2020, budgeting purposes, which of the following purposes should Corrupt Company use?

a. Expected value analysis

b. Continuous probability simulation

c. Monte Carlo simulation

d. Sensitivity analysis

15. The Booster Club at Blair College sells hotdogs at home basketball games. The group has a frequency distribution of the demand for hotdogs per game and plans to apply the expected value decision rule to determine the number of hotdogs to stock. The Booster Club should select the demand level that*

a. Is closest to the expected demand.

b. Has the greatest probability of occurring.

c. Has the greatest expected opportunity cost.

d. Has the greatest expected monetary value.

16. Management of a company has asked the internal auditing department to assist in determining whether a new automated system should be implemented and whether the supporting software should be developed in-house, purchased, or leased. This will require evaluating a sequence of alternatives, each of which will result in different outcomes. The most effective tool the company can use to evaluate these choices would be

a. PERT/CPM

b. Payoff tables

c. Queuing theory

d. Decision tree

17. Which one of the following statements does not apply to decision tree analysis?

a. The sum of the probabilities of the events is less than one.

b. All of the events are mutually exclusive.

c. All of the events are included in the decision.

d. The branches emanate from a node from left to right.

18. Linear programming is an operations research technique that allocates resources. Mathematical expressions are used to describe the problem. The measure of effectiveness that is to be maximized or minimized is the

a. Constraints.

b. Set of decision variables.

c. Objective function.

d. derivative of function.

19. In the Program Evaluation Review Technique (PERT), slack is the

a. Uncertainty associated with time estimates.

b. Path that has the largest amount of time associated with it.

c. Excess time available in the completion of the project after chasing the critical path.

d. Number of days an activity can be delayed without forcing a delay for the entire project.

20. A company has developed a learning (improvement) curve for one of its newer processes from its accounting and production records. Management asked internal audit to review the curve. Which of the following events tend to mitigate the effects of the learning curve?

a. Labor costs incurred for overtime hours were charged to an overhead account.

b. The number of pre-assembled purchased parts used exceeded the plan.

c. Newly developed processing equipment with improved operating characteristics was used.

d. All of the answers are correct.

21. Given demand in excess of capacity, no spoilage or waste, and full use of a constant number of assembly hours, the number of components needed for an assembly operation with an 80% learning curve should I. Increase for successive periods. II. Decrease per unit of output.

a. I only.

b. II only.

c. Both I and II.

d. Neither I or II.

22. Angelo Inc. is preparing a bid to produce engines. The company has experienced the following costs: Cumulative Units Produced 10 - 20 -40 Total Cumulative Costs- Materials P60,000 - P120,000 - P120,000 Total Cumulative Costs - Labor P192,000 -P 240,000 - P 307,200. At Angelo Inc., variable overhead is applied on the basis of P1.00 per direct labor peso. Based on historical costs, Angelo knows that the production of 40 engines will incur P100,000 of fixed overhead costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to charge a maximum of 25% above full cost for each order. What is the maximum bid price that Angelo, Inc. can submit for the 40 units?

a. 760,800

b. 608,640

c. 885,800

d. 708,640

23. Angelo Inc. is preparing a bid to produce engines. The company has experienced the following costs: Cumulative Units Produced 10 - 20 -40 Total Cumulative Costs- Materials P60,000 - P120,000 - P120,000 Total Cumulative Costs - Labor P192,000 -P 240,000 - P 307,200. At Angelo Inc., variable overhead is applied on the basis of P1.00 per direct labor peso. Based on historical costs, Angelo knows that the production of 40 engines will incur P100,000 of fixed overhead costs. The bid request is for an additional 40 units; all companies submitting bids are allowed to charge a maximum of 25% above full cost for each order. To ensure that the company will not lose money on the project, Angelo, Inc.'s minimum bid for the 40 units will be

a. 760,800

b. 608,640

c. 885,800

d. 708,640

24. Wolk Corporation is a highly automated manufacturing firm. The vice-president of finance has decided that traditional standards are inappropriate for performance measures in an automated environment. Labor is insignificant in terms of the total cost of production and tends to be fixed, material quality is considered more important than minimizing material cost, and customer satisfaction is the number one priority. As a result, delivery performance measures have been chosen to evaluate performance. The following information is considered typical of the time involved to complete orders. Wait time: from order being placed to start of production - 10 days. Wait time: from start of production to completion - 5 days. Inspection time - 1.5 days. Process time - 3 days. Move time - 2.5 days. What is the manufacturing cycle efficiency (MCE) for this order?

a. 25%

b. 13.6%

c. 37.5%

d. 33.3%

25. Wolk Corporation is a highly automated manufacturing firm. The vice-president of finance has decided that traditional standards are inappropriate for performance measures in an automated environment. Labor is insignificant in terms of the total cost of production and tends to be fixed, material quality is considered more important than minimizing material cost, and customer satisfaction is the number one priority. As a result, delivery performance measures have been chosen to evaluate performance. The following information is considered typical of the time involved to complete orders. Wait time: from order being placed to start of production - 10 days. Wait time: from start of production to completion - 5 days. Inspection time - 1.5 days. Process time - 3 days. Move time - 2.5 days. What is the delivery cycle time for this order?

a. 7 days

b. 12 days

c. 15 days

d. 22 days

26. A firm must decide the mix of production Product X and Product Y. There are only two resources used in the two products, resources A and B. Data related to the two products are given in the following table: Products X Y Resource A 3 -for Product X 7 - for Product Y: Resource B 2 - for Product X 1 - for Product Y: Unit profit P 8 - for Product X P 6 - for Product Y . What is the appropriate objective function to maximize profit?

a. 3x + 7y

b. 2x + y

c. 8x + 6y

d. 5x + 8y

27. Patsy, Inc. manufactures two products, X and Y. Each product must be processed in each of the three departments: machining, assembling, and finishing. The hours needed to produce one unit of product per department and the maximum possible hours per department are the following: Production Hours per Unit Maximum Capacity Department X Y in hours Machining 2 2 420 Assembling 2 2 500 Finishing 2 3 600 Other restrictions follow: X 50 Y 50 The objective function is to maximize profits if profit equals P4X + P2Y. Given the objective function and constraints, how many constraints exist in Patsy's Linear Programming problem?

a. None

b. Two

c. Three

d. Five

28. Merlin Company has excess capacity on two machines, 24 hours on Machine 105 and 16 hours on Machine 107. To use this excess capacity, the company has two products, known as Product D and Product F, that must use both machines in manufacturing. Both have excess product demand, and the company can sell as many units as it can manufacture. The company's objective is to maximize profits. Product D has an incremental profit of P6 per unit, and each unit utilizes 2 hours of time on machine 105 and then 2 hours of time on Machine 107, Product F has an incremental profit of P7 per unit, and each unit utilizes 3 hours of time on Machine 105 and then one hour of time in on Machine 107. Let D be the number of units for Product D, F be the number of units for Product F, and P be the company's profit. The optimal number of units for Product D can be solved by calculating

a. 2D + 3F 24

b. 2D + F 16

c. 2D +(16 - 2D) 24

d. 2(16 - F) + 3F 24

29. California Building Corporation uses the critical path method to monitor construction jobs. The company is currently 2 weeks behind schedule on Job #181, which is subject to a P10, 500-per-week completion penalty. Path A-B-C-F-G-H-I has a normal completion weeks. The following activities can be crashed. Activities Cost to crash Cost to crash 1 week 2 weeks BC P 8, 000 P 150, 000 DE 10, 000 19, 000 EF 8, 800 19, 500California Building desires to reduce the normal completion time of Job#181 and, at the same time, report the highest possible income for the year. California Building should crash

a. Activity BC 1 week and activity EF 1 week.

b. Activity DE 1 week and activity BC 1 week.

c. Activity EF 2 weeks.

d. Activity DE 1 week and activity EF 1 week.

30. Philip Enterprises, distributor of compact disks (CDs), is developing its budgeted cost of goods sold for 2006. Philip has developed the following range of sales estimated and associated probabilities for the year. Sales estimate Probability 60,000 25%85,000 40100,000 35 Philip cost of goods sold averages 80% of sales. What is the expected value of Philip's 2006 budgeted cost of goods sold?

a. P85,000

b. P84,000

c. P68,000

d. P67,200

31. The Start UP Company sells hot pretzels at the home football games. The pretzels are sold for P1.00 each, and the cost per pretzel is P.30. Any unsold pretzels are discarded because they will be stale before the next home game. The frequency distribution of the demand for pretzels per game is presented below. Unit sales volume Probability 2,000 pretzels .10 3,000 pretzels .15 4,000 pretzels .20 5,000 pretzels .35 6,000 pretzels .20 The estimated demand for pretzels at the next home football game using an expected value approach is\

a. 4,000 pretzels

b. 4,400 pretzels

c. 5,000 pretzels

d. some amount other than those given

32. A company is considering three alternative machines to produce a new product. The cost structures (unit variable cost plus avoidable fixed cost) for the three machines are shown below. The selling price is unaffected by the machine used. Single Purpose Machine .60x + P20, 000 Semi-automatic Machine .40x + P50, 000 Automatic Machine .20x + P120,000 The demand for units of the new product is described by the following probability distribution. Unit sales volume Probability200,000 .40 300,000 .30 400,000 .20 500,000 .10 Ignoring the time value of money, the expected costs of using the automatic machine are

a. P180, 000

b. P130,000

c. P210, 000

d. P250,000

33. Dale Pastry has decided to increase its daily muffin purchases by 100 boxes. A box of muffins costs P2 and sells for P3 through regular stores. Any boxes not sold through regular stores are sold through thrift store for PI. Dale assigns the following probabilities to selling additional boxes: Additional sales60100 Probability0.60.4What is the expected value of Dale's decision to buy 100 additional boxes of muffins?

a. 28

b. 40

c. 52

d. 68

34. 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 P2,500; if the weather is cold, the profit will be P1,000. If the stand sells coffee and the weather is hot, it will make P1,900; if the weather is cold, the profit will be P2,000. The probability of cold weather on a given day at this time is 60%. The expected payoff for selling coffee is

a. P1,360

b. P2,200

c. P 3,900

d. P1,960

35. 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 P2,500; if the weather is cold, the profit will be P1,000. If the stand sells coffee and the weather is hot, it will make P1,900; if the weather is cold, the profit will be P2,000. The probability of cold weather on a given day at this time is 60%. The expected payoff if the vendor has perfect information is

a. P3,900

b. P2,200

c. P1,960

d. P1,950

36. A wine maker must decide whether to harvest grapes now or in four weeks. Harvesting now will yield 100,000 bottles of wine netting P2 per bottle. If the wine maker waits and the weather turns cold (probability 20%), the yield will be cut in half but net P3 per bottle. If the weather does not turn cold, the yield will depend on rain. With rain (probability 50%), a full yield netting P4 per bottle will result. Without rain (probability 50%), there will still be a full 100,000 bottle yield, but the net will be only P3 per bottle. What is the optimal expected value?

a. P200,000

b. P310,000

c. P350,000

d. P400,000

37. JPIA Company is considering the sale of banners in an exhibit fair. JPIA could purchase these banners for P7.50 each. Unsold banners would be unreturnable and worthless after the exhibit. JPIA would have to rent a booth at the Little Theatre for P4,000. JPIA estimates sales of 2,000 banners at P20.00 each. If JPIA's prediction proves to be incorrect and only 1,500 banners were sold, what would be the cost of this prediction error?

a. 6,250

b. 10,000

c. 4,750

d. 3,750

38. A firm will produce either product A or B. The total costs (TC) for both products can be estimated by the equations Product A: TC=P300, 000 + (P23 x Sales volume) Product B: TC=P100, 000 + (P29 x Sales volume) The firm believes there is a 20% chance for the sales volume of each product to equal 10, 000 units and an 80% chance they will both equal 20, 000 units. The selling price of product A is P42, and the selling price of product B is P40. The expected profit from producing product B equals

a. P120,000

b. P680, 000

c. P96, 000

d. P390, 000