Operations Management Exam 1 Rutgers ELY

Sensitivity analysis is a way to deal with uncertainty in linear programming models. True False

True

LP

a model that consists of linear relationships representing a firm's decision(s), given an objective function and resource constraints;

Sensitivity analysis measures

uncertainty

Properties of LP Problems

-proportionality -additivity -divisibility -certainty

Inputs

Are resources used in the process of production

___________________ refers to the ability of an organization to sell products in a market. Please choose the option that best fits the empty space above. A. Total Quality Management B. Productivity C. Optimal profitability D. Business competitiveness E. None of the above

Business Competitiveness

shadow price

Defined as the marginal value of one additional unit of resource: how much an organization is willing to pay for it Z / q

If the objective function slope is exactly the same as one of the constraints and this specific constraint is redundant, we have a case of multiple optimal solutions. True False

False

Sensitivity ranges can be computed only for the coefficients of the objective function. True False

False

Slack variables are only associated with maximization problems. True False

False

The break-even point is the volume that the profit is positive (greater than zero) True False

False

the correct way to implement a sensitivity analysis for the second coefficient of the objective function is to vary not only the second coefficient but also the first one (at the same time). True False

False

If by processing the same amount of inputs used in the past a company is now capable to produce a(n) ________ amount of outputs, it means that an improvement of productivity was achieved. A. greater B. similar C. lower D. exactly the same E. none of the above

Greater

Australian road freight company Linfox uses aerodynamic trucks and trailers to reduce fuel consumption. This is a case of generating higher A. productivity B. competitiveness C. quality D. stochastic simulation E. none of the above

Productivity

Sensitivity Analysis

Sensitivity analysis determines the effect on the optimal solution, for example, due to changes in coefficients of the objective function and/or constraints

Fixed cost includes A. raw materials and resources B. staff and management salaries C. material handling and freight D. direct labor and packaging E. none of the above

Staff and management salaries

Break-Even Point

TOTAL REVENUE (TR) = TOTAL COST (TC) TC = FC + vc * v

Unbounded

There is a feasible region, however it continues on indefinitely. There is no defined region (ex. Quadrilateral, triangle, etc.) after graphing. The objective function can continue to move towards no specific one optimal solution point.

Infeasible

There is no feasible region (no common shaded region) after graphing all the constraint lines. This can be found in both min and max problems.

If one of the coefficients of the objective function is changed to a value outside of its respective sensitivity range (greater than the upper limit or lower than the lower limit), the optimal solution will be different than the one originally obtained before the change is implemented. True False

True

The optimal solution for a company that is able to produce two different products (x1 and x2) is x1 = 0 and x2 = 6. The best strategy for this company is to produce only x2. True False

True

Multiple optimal solutions

Use the slope equation (m = -A / B) to compare the slopes of the objective function and the slopes of the constraints - IMPORTANT: THIS IS ONLY VALID WHEN THE CONSTRAINT LINE IS USED TO CREATE THE FEASIBLE REGION. Just because the slopes may be the same, if the constraint line is irrelevant to the feasible region, there is only one optimal solution! - "Redundant" = not used to define the feasible region

Principles of Management Science

a scientific approach to solve management problems

Slack and surplus both do not

affect the objective function

C1 and C2

are the variables for the OBJECTIVE FUNCTION used to find the ranges where the OPTIMAL SOLUTION REMAINS THE SAME

Q1 and Q2

are the variables for the RIGHT HAND CONSTRAINTS used to find the ranges where the SHADOW PRICE REMAINS THE SAME

Another name for shadow price is

dual variable

Productivity

is a measure of efficiency— the amount of output produced compared to the amount of input required in production.

The sensitivity range for a constraint quantity value

is also the range over which the shadow price is valid

Transformation

is the conversion of inputs (resources) into outputs (goods or services)

The sensitivity range for an objective function coefficient

is the range of values over which the current optimal solution point remains optimal

Model Constraints

linear relationship that represents a restriction on decision making;

Objective Function

linear relationship that reflects the objective of an operation

decision variables

mathematical symbols that represent levels of activity;

Parameters

numerical values that are included in the objective functions and constraints;

The sensitivity range for an objective function coefficient is the range of values over which the current __________________ remains the same. A. shadow price B. right hand side C. optimal solution D. Z E. None of the above

optimal solution

Outputs

refer to the end result of an organization's efforts— the service or product that is delivered or provided to the consumer

Business competitiveness

refers to the ability of an organisation to sell products in a market

Surplus

used with a greater than sign use a -

Slack variables

variables that eliminate inequalities in linear programming problems used with a less than sign use a +