MULTIPLE CHOICE

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