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Strategic Cost Management Reviewerquestions with answers.
1. A decision maker is operating in an environment in which all the facts surrounding a decision are
known exactly, and each alternative is associated with only one possible
outcome. The environment is known as
a. certainty.
b. risk.
c. uncertainty.
d. conflict. ANS -a. certainty.
A quantitative technique useful in projecting a firm's sales and profits is
a. probability distribution theory.
b. gantt charting
c. learning curves.
d. queuing theory ANS -a. probability distribution theory.
Sweet Company is preparing its budget and, taking into consideration the recent pace of economic
recovery, has developed several sales forecasts and the estimated
probability associated with each sales forecast. To determine the sales forecast to be
used for budgeting purposes, which one of the following techniques should Sweet use?
a. Expected value analysis.
B. Continuous probability simulation.
c. Exponential distribution analysis.
d. Sensitivity analysis. ANS -a. Expected value analysis.
,The modeling technique to be used for situations involving a sequence of events with several possible
outcomes associated with each event is
a. queuing theory.
b. dynamic programming
c. the critical path method.
d. decision tree analysis. ANS -d. decision tree analysis.
20. Which 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. ANS -a. The sum of the probabilities of the
events is less than one.
. The modeling technique to be employed in a situation involving a sequence of events
with several possible outcomes associated with each event is
a. network analysis. c. Monte Carlo simulation.
b. decision tree analysis. d. linear programming. ANS -b. decision tree analysis.
25. The expected value of perfect information is the
a. same as the expected profit under certainty.
b. sum of the conditional profit (loss) for the best event of each act times the probability of each event
occurring.
c. difference between the expected profit under certainty and the expected opportunity loss.
, d. difference between the expected profit under certainty and the expected monetary value of the best
act under certainty. ANS -d. difference between the expected profit under certainty and the expected
monetary value of the best act under certainty.
One limitation of the linear programming technique is that it is effective only for
a. two-product situations.
b. manufacturing resource constraint situations.
c. straight-line relationship situations.
d. income maximization situations. ANS -c. straight-line relationship situations.
In order to solve a linear programming problem, slack, surplus, and artificial variables must be
employed. A slack variable represents
a. Opportunity costs.
b. unused capacity.
c.variables with high cost.
d. the variable with the most negative value. ANS -b. unused capacity.
The procedure employed to solve linear programming problem is
A.Differential calculus.
B.Integral calculus.
C. Simulation
D. Matrix algebra. ANS -D. Matrix algebra.
Mandarin Manufacturing Corporation uses the following model to determine its product
mix for metal (M) and scrap metal (S).
Maxz = P30M + P70S
If: 3M + 2S ≤ 15
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