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Diet Problem

Earliest applications of LP, originally used by hospitals to determine the most economical diet for patients

Safety Stock

Helps in avoiding stockouts, It is extra stock kept on hand. Uncertainties with Demand and Leadtime Extra stock on hand to avoid stockouts.

Production run model

The ____________________ is useful when a firm purchases inventory that is delivered over a period of time.

The adjusted r2 may decrease when more variables are added to the model.

The adjusted r2 may decrease when more variables are added to the model.

Production Run Model

Eliminates the instantaneous receipt assumption.

A

In order for a linear programming problem to have multiple solutions, the solution must exist A) on a non-redundant constraint parallel to the objective function. B) at the intersection of three or more constraints. C) at the intersection of the non-negativity constraints. D) at the intersection of the objective function and a constraint. E) None of the above

True

Linear programming can be used to select effective media mixes, and maximize audience exposure T/F

Sum of Squares Error (SSE)

The total sum of the squared difference between each observations and the predicted value.

Sum of Squares Total (SST)

The total sum of the squared differences between each observations and the mean.

Sum of Squares Regression (SSR)

The total sum of the squared differences between each predicted value and the mean.

The value of r2 can never decrease when more variables are added to the model

The value of r2 can never decrease when more variables are added to the model

False

There are no limitations on the number of constraints or variables that can be graphed to solve an LP problem. T/F

Labor planning

Useful when managers have some flexibility in assigning workers to jobs that require overlapping or interchangeable talents

E

When applying LP to diet problems, the objective function is usually designed to A. Maximize profit B. maximize ingredients blends C. Minimize production losses D. Maximize the number of products to be produced. E. Minimize the costs of nutrient blends

A

When appropriate, the optimal solution to a maximization linear programming problem can be found by graphing the feasible region and A) finding the profit at every corner point of the feasible region to see which one gives the highest value. B) moving the isoprofit lines towards the origin in a parallel fashion until the last point in the feasible region is encountered. C) locating the point that is highest on the graph. D) None of the above E) All of the above

D/Q x Co

Annual orders per year

Q/2

Average inventory per year.

1. How much to order 2. When to order Overall goal is to minimize total inventory cost.

Inventory Decisions? Overall Goal?

C.

16) If the addition of a constraint to a linear programming problem does not change the solution, the constraint is said to be A) bounded. B) infeasible. C) redundant. D) non-negative. E) unbounded.

A

A JIT system will usually result in: A. a low annual holding cost. B. very few orders per year. C. frequent shutdowns in an assembly line D. high levels of safety stock

stockout

A _________ is a situation that occurs when there is no inventory on hand.

Enterprise Resource Planning (ERP)

A computerized information system that integrates and coordinates the operations of a firm.

Decision Making under Risk

A decision making environment in which several outcomes or states of nature may occur as a result of a decision or alternative. The probabilities of the outcomes or states of nature are known.

Decision Making under Uncertainty

A decision making environment in which several outcomes or states of nature may occur. The probabilities of these outcomes, however are not known.

Decision Making under Certainty

A decision making environment in which the future outcomes or states of nature are known

A.

A decision tree is preferable to a decision table when a. a number of sequential decisions are to be made. b. probabilities are available c. the maximax criterion is used. d. the objective is to maximize regret.

B

A feasible solution to a linear programming problem A) must be a corner point of the feasible region. B) must satisfy all of the problem's constraints simultaneously. C) need not satisfy all of the constraints, only the non-negativity constraints. D) must give the maximum possible profit. E) must give the minimum possible cost.

Production Mix

A fertile field for the use of LP is in planning for the optimal mix of products to manufacture.

Adjusted r2

A measure of the explanatory power of a regression model that takes into consideration the number of independent variables in the model.

Coefficient of Correlation r

A measure of the strength of the relationship between two variables.

Multiple Regression Model

A regression model that has more than one independent variable.

True

A stockout is a situation that occurs when there is no inventory on hand. T/F

A variable should not be added to the model if it causes the adjusted r2 to decrease.

A variable should not be added to the model if it causes the adjusted r2 to decrease.

Dummy variable

A variable used to represent a qualitative factor or condition. Have values of 0 or 1. This is also called binary variable or an indicator variable.

False It seeks to maximize or minimize an objective

An LP formulation typically requires finding the maximum value of an objective while simultaneously maximizing usage of the resource constraints T/F

ABC Analysis

An analysis that divides inventory into three groups. Groups A is more important than Group B, which is more important than group C.

Just in Time (JIT)

An approach whereby inventory arrives just in time to be used in the manufacturing process.

Material Requirements Planning (MRP)

An inventory model that can handle dependent demand.

False Required in both

An objective function is necessary in a maximization problem but is not required in a minimization problem. T/F

False Graphical solution method only works when there are two decision variables.

Any linear programming problem can be solved using the graphical solution procedure. T/F

A

If the EOQ assumptions are met and a company orders more than the economic order quantity then, A. total annual holding cost will be greater than the total annual ordering cost. B. total annual holding cost will be less than the total annual ordering cost. C. total annual holding cost will be equal to the total annual ordering cost. D. total annual holding cost will be equal to the total annual purchase cost.

D

If the EOQ assumptions are met then: A. annual stockout cost will be zero B. total annual holding cost will equal total annual ordering cost. C. average inventory will be one half the order quantity D. all of the above are true.

C

If the addition of a constraint to a linear programming problem does not change the solution, the constraint is said to be A) bounded. B) infeasible. C) redundant. D) non-negative. E) unbounded.

C.

If the probabilities are available to the decision making criterion that is used for decision making under risk? a. certainty b. uncertainty c. risk d. none of the above

False Mathematical relationship are linear

In a linear program, the constraints must be linear, but the objective function may be nonlinear T/F

B

In a maximization problem, when one or more of the solution variables and the profit can be made infinitely large without violating any constraints, then the linear program has (a) an infeasible solution. (b) an unbounded solution. (c) a redundant constraint. (d) alternate optimal solutions. (e) none of the above

B.

In decision theory terminology, a course of action or strategy that may be chosen by a decision maker is called. a. a payoff b. an alternative c. a state of nature d. non of the above.

C.

In decision theory, probabilities are associated with a. a payoff b. an alternative c. a state of nature d. non of the above

A

In order for a linear programming problem to have a unique solution, the solution must exist A) at the intersection of two or more constraints. B) at the intersection of a non-negativity constraint and a resource constraint. C) at the intersection of the non-negativity constraints. D) at the intersection of the objective function and a constraint. E) None of the above

C

In the production run model, the maximum inventory level will be A. greater than the production quantity B. equal to the production quantity C. less than the production quantity D. equal to the daily production rate plus the daily demand.

False Refers to modeling and solving a problem mathematically.

In the term linear programming, the word programming comes from the phrase "computer programming." T/F

B.

In using the criterion of realism (Hurwicz criterion), the coefficient of realism. a. is the probability of a good state of nature. b. describes the degree of optimism of the decision maker. c. describes the degree of pessimism of the decision maker. d. is usually less than zero.

E

Infeasibility in a linear programming problem occurs when (a) there is an infinite solution. (b) a constraint is redundant. (c) more than one solution is optimal. (d) the feasible region is unbounded. (e) there is no solution that satisfies all the constraints given.

1. Cost of the items 2. Cost of ordering 3. Cost of carrying, or holding inventory 4. Cost of safety stock and stockouts...

Inventory Cost 1. 2. 3. 4.

Expensive, Important

Inventory can be the most _________ and the most ________ asset for an organization

A

Manufacturer use MRP when A. the demand for one product is dependent on the demand for other products. B. the demand for each product is independent of the demand for other products. C. demand is totally unpredictable D. purchase cost is extremely high.

Portfolio Selection

Maximizing return on investment subject to a set of risk constraints is a popular financial application of LP

B.

On a decision tree, at each state of nature node, a. the alternative wish the greatest EMV is selected. b. an EMV is calculated c. all probabilities are added together. d. the branch with the highest probability is selected

C

One assumption necessary for the EOQ model is instantaneous replenishment. This means: A. the lead time is zero. B. the production time is assumed to be zero. C. the entire order is delivered at one time. D. replenishment cannot occur until the on hand inventory is zero.

Media Selection

Problems can be approached with LP from two perspectives. The objective can be to maximize audience exposure or to minimize advertising costs.

Production scheduling

Resembles the product mix model for each period in the future. To maximize profit or to minimize the total cost of carrying out the task Well suited to solution by LP because it is a problem that must be solved on a regular basis.

True

Resource restrictions are called constraints. T/F

True

Sensitivity analysis enables us to look at the effects of changing the coefficients in the objective function, one at a time. T/F

D.

Sensitivity analysis may also be called A) postoptimality analysis. B) optimality analysis. C) parametric programming. D) All of the above E) None of the above

Opportunity loss

The amount you would lose by not picking the best alternative. For any state of nature, this is the difference between the consequences of any alternative and the best possible alternative

Expected value of perfect information

The average or expected value of information if it were completely accurate. The increase in EMV that results from having perfect information.

Expected monetary value

The average value of a decision if it can be repeated many times. This is determined by multiplying the monetary values by their respective probabilities. The results are then added to arrive at the EMV.

A

The difference between the left-hand side and right-hand side of a less-than-or-equal-to constraint is referred to as A) slack. B) surplus. C) constraint. D) shadow price. E) None of the above

Expected value with perfect information

The expected or average return, in the long run, if we have perfect information before a decision has to be made. To calculate this value, we choose the best alternative for each state of nature and multiply its payoff times the probability of occurrence of that state of nature. The average or expected value of a decision if perfect knowledge of the future is available.

C.

The mathematical theory behind linear programming states that an optimal solution to any problem will lie at a(n) ________ of the feasible region. A) interior point or center B) maximum point or minimum point C) corner point or extreme point D) interior point or extreme point E) None of the above

C.

The minimum EOL criterion will always result in the same decision as. a. the maximax criterion b. the minimax regret criterion. c. the maximum EMV criterion d. the equally likely criterion.

C.

The minimum expected opportunity loss is a. equal to the highest expected payoff b. greater than the expected value with perfect information c. equal to the expected value of perfect information. d. computed when finding the minimax regret decision.

A.

The most that a person should pay for perfect information is. a. the EVPI b. the maximum EMV minus the minimum EMV. c. the maximum EOL. d. the maximum EMV

D/Q

The numbers of orders per year.

Quantity Discount Model

The overall objective is to minimize total inventory costs which is now include actual material costs.

Coefficient of Determination r2

The percent of the variability in the dependent variable that is explained by the regression equation.

True

The production run model is useful when a firm purchases inventory that is delivered over a period of time. T/F

C.

The selection of specific investments from among a wide variety of alternatives is the type of LP problem known as A. The product mix problem B. the investment banker problem C. the portfolio selection problem. D. The Wall street problem E. None of the above.

True

The set of solution points that satisfies all of a linear programming problem's constraints simultaneously is defined as the feasible region in graphical linear programming. T/F

True

The solution to a linear programming problem must always lie on a constraint. T/F

D

Which of the following does not represent a factor manager might consider when employing LP for production scheduling. A. labor capacity B. space limitations C. Product demand D. Risk assessment E. Inventory costs

A.

Which of the following is a decision making criterion that is used for decision making under risk? a. expected monetary value criterion b. Hurwicz criterion c. optimistic criterion d. equally likely criterion

D

Which of the following is not a part of every linear programming problem formulation? A) an objective function B) a set of constraints C) non-negativity constraints D) a redundant constraint E) maximization or minimization of a linear function

C

Which of the following is not a property of all linear programming problems? A) the presence of restrictions B) optimization of some objective C) a computer program D) alternate courses of action to choose from E) usage of only linear equations and inequalities

B

Which of the following is not a property of linear programs? A) one objective function B) at least two separate feasible regions C) alternative courses of action D) one or more constraints E) objective function and constraints are linear

A

Which of the following is not acceptable as a constraint in a linear programming problem (maximization)? Constraint 1 X + XY + Y ≥ 12 Constraint 2 X - 2Y ≤ 20 Constraint 3 X + 3Y = 48 Constraint 4 X + Y + Z ≤ 150 A) Constraint 1 B) Constraint 2 C) Constraint 3 D) Constraint 4 E) None of the above

B

Why is the annual purchase (material) cost not considered to be relevant inventory cost if the EOQ assumption are met. A. This cost will be zero B. This cost is constant and not affected by the order quantity C. This cost is insignificant compared with the other inventory costs. D. This cost is never considered to be an inventory cost.

Inventory

________is any stored resource that is used to satisfy a current or future need.