OPIM3104 Exam 1 practice

pull system

What is a concept that results in material being produced only when requested and moved to where it is needed just as it is​ needed?

Maximax (uncertainty)

- most optimistic but risky decision -take the max of each row -take the max of the column of maxima

Equal likelihood (uncertainty)

-With no forecast or probabilities telling us what to expect -We assume that every possibility has equal likelihood - Find the alternative with the highest average outcome -middle ground, risk neutral Step 1: For each entry, multiply by 1 / (number of outcomes) Step 2: Sum the weighted values in each row Step 3: Take the Maximum of the expected values for each row

maximin (uncertainty)

-most pessimistic but safest -risk adverse design makers - take the min of each row - take the max of the column of min

If Company A in Question 14 uses a method of exponential smoothing with an alpha value of .70, to forecast for the coming May, what is the corresponding Mean Absolute Deviation? ___ (enter your response rounded to one decimal place).

1.8 EXCEL OM 1. By chapter, 4, exponential smoothing 2. check off two boxes (error) 3. Fill in four periods 4. Absolute column: MAD= 1.81

Suppose that the demand in period 1 was 9 units and the demand in period 2 was 11 units, and the demand in period 3 was 12 units. Assume that the forecast for period 1 was for 7 units. If the firm uses exponential smoothing with an alpha value of .80, what should be the forecast for period 4? (Round answers to one decimal place.)

11.7 EXCEL OM 1. By Chapter (4) 2. Exponential Smoothing 3. 3 Periods 4. Alpha 0.8 5. Fill in Demand 6. Change forecast for P.1 to 7 7. Next period = 11.704

Gibson Valves produces cast bronze valves on an assembly​ line, currently producing​ 1,600 valves in *two*​ 8-hour shifts. If the productivity increases by​ 30%, the updated productivity would then​ be __ (units/hour). Please fill in a number only

130 1600/16=100 *prod increase by 30%* 100+30 (30% of 100)=130

In the Orange-Pear Jphone competition, it is estimated that, with a 35% chance Pear will come out with a competitive product. Orange's managers are offered a chance to buy the perfect information about whether Pear will follow with a competitive product or not. What is the maximum price Orange's managers are willing to pay for the perfect information? Your answer:

14,000

The monthly sales for company A were as follows: Month Jan Feb Mar Apr Sales 21.5 22.8 25.7 27.4 If Company A uses a 3-month weighted moving average with weights of 0.1, 0.2 and 0.3, where the heaviest weights are applied to the most recent month, its forecast for the coming May is ___ (enter your response rounded to one decimal place).

26.1 (27.4*0.3)+(25.7*0.2)+(22.8*0.1) = 15.64 15.64/(1.0+0.2+0.3)= 26.1 * sum of (weight for period x demand in period) / (sum of weights)

A coffee shop manager is considering expanding floor space to meet increasing demand. He will either a small-scale expansion​ (S) or a large expansion​ (L). Demand will either increase​ slightly, or increase greatly. The following table gives the changes in​ annual profits under each combination of expansion level and demand change​ level. If it is estimated that demand will increase slightly with 35% probability and greatly with 65% probability, what is the greatest expected monetary value that expansion can bring in? Demand Change Expansion Level S L Slight increase 8000 4000 Great increase 10000 40000

27400 small expansion: (8000*0.35)+(10000*0.65)=9300 large expansion: (4000*0.35)+(40000*0.65)=27400

If Company A in Question 14 uses a method of trend projection, its forecast for the *June* is ___ (enter your response rounded to one decimal place).

31.6 EXCEL OM 1. By Chapter 2. chapter 4- trend projection 3. 5 periods 4. Leave period 5 blank 5. future period 6= 31.56

In the Orange-Pear Jphone competition, it is estimated that, with a 25% chance Pear will come out with a competitive product. What is the greatest expected monetary value that Orange's managers can get? Your answer:

57,500 (80,000*.75)-(10,000*.25)

Café manager, Gary, suspects that demand for latte coffees depends on the price being charged. Based on historical observations, Gary has gathered the following data, which show the numbers of these coffees sold over four different price values: Price $2.7 $3.6 $2.1 $4.3 Number of cups sold 650 400 880 130 Given that the new price per cup is $2.75, the forecasted sales for latte coffees will be _____ cups using Associative model (linear regression) (enter your response rounded to one decimal place).

656.1 EXCEL OM 1. OM Menu 2. Forecasting 3. Simple Linear Regression, Least squares 4. 4 data points (price as x, # of cups y) 5. change highlight red to 2.75 6. answer is to left by forecast

Smartphone market has two competitors: Orange Inc. and Pear Co. Orange is considering building a new device Jphone. Orange's managers believe that there is a chance that the Pear will come out with a competitive product. If Orange adds an assembly line for the product and Pear does not follow with a competitive product, Orange's expected profit is $45,000; if Orange adds an assembly line and Pear follows suit, Orange still expects $30,000 profit. If Orange adds a new plant addition and Pear does not produce a competitive product, Orange expects a profit of $80,000; if Pear does compete for this market, Orange expects a loss of $10,000. It is known that Orange's managers are under pressure and doing nothing is not an option for them. In the Orange-Pear Jphone competition, if Orange managers make the decision under uncertainty with the criterion of Maximax, what is the value of return under this decision? Your answer:

80,000 MAXIMAX: •The most optimistic but risky decision criteria •Believe that the best will occur (HIGHEST #)

Which of the following is False about forecasting? A. In trend projection, the trend component is the intercept of the regression equation B. One advantage of exponential smoothing is the limited amount of record keeping involved C. A​ time-series model uses a series of past data points to make the forecast D. The smaller the number of periods in the simple moving average forecasting​ method, the greater the​ method's responsiveness to changes in demand

A. In trend projection, the trend component is the intercept of the regression equation

Which of the following is NOT true about the coefficient of correlation (r) and coefficient of determination (r2​)? A. r^2=1 indicates a causal relationship between two variables B. If two variables were perfectly​ correlated, r could equal 1 or -1 C. The higher r2 is, the more independent variables can explain variation in the dependent variable D. r2 will always be a positive number between 0 and 1

A. r^2=1 indicates a causal relationship between two variables

A fundamental distinction between trend projection and associative model is that: A. The independent variable in trend projection is time while the independent variable in the associative model can be any variable with explanatory power. B. Associative models do not predict demand. C. Trend projection uses two smoothing constants, not just one. D. Trend projection uses least squares while associative model does not.

A.The independent variable in trend projection is time while the independent variable in the associative model can be any variable with explanatory power.

What is the primary difference between​ time-series and associative forecasting​ models?

Associative models incorporate variables that might influence the quantity being forecasted

Which of the following is an example of competing on the basis of differentiation? A. A firm manufactures its product with less raw material than its competitors do and hence lowers the costs. B. A firm's products are introduced into the market faster than its competitors' products are. C. A firm allows customers to customize design of their purchased products. D. A firm's distribution network routinely delivers its product on time.

C. A firm allows customers to customize design of their purchased products

Which of the following statement is correct? A. Services typically produce a tangible product B. Customer interaction is often high for manufacturing processes, but low for services. C. Most goods are common to many customers; services are often unique to the final customer. D. Tangible goods are generally produced and consumed simultaneously; services are not.

C. Most goods are common to many customers; services are often unique to the final customer.

Which of the following statements about organizational missions is FALSE? A. They provide guidance for functional area missions. B. They indicate what a company intends to contribute to society. C. They are formulated after strategies are known. D. They define a company's purpose for existence.

C. They are formulated after strategies are known

If Company A in Question 14 plans to make a forecast for October, which of the following method will you recommend to Company A? A. Exponential smoothing. B. 3-quarter weighted moving average. C. Trend projection. D. Naïve method.

C. Trend Projection

Smartphone market has two competitors: Orange Inc. and Pear Co. Orange is considering building a new device Jphone. Orange's managers believe that there is a chance that the Pear will come out with a competitive product. If Orange adds an assembly line for the product and Pear does not follow with a competitive product, Orange's expected profit is $30,000; if Orange adds an assembly line and Pear follows suit, Orange still expects $20,000 profit. If Orange adds a new plant addition and Pear does not produce a competitive product, Orange expects a profit of $50,000; if Pear does compete for this market, Orange expects a loss of $80,000. Orange's managers can choose to do nothing if new construction could not bring in profits. If they choose to do nothing, their profit is 0 no matter whether Pear comes with a competitive product or not It is estimated that, with a 50% chance Pear will come out with a competitive product. Choose the appropriate decision tree for this decision process.

D. (add assembly line, add plant, do nothing) (has competitive products 0.5 , doesn't 0.5 )=1 (has competitive products 0.5, doesn't 0.5)=1

Which of the following is NOT an example of competing on the basis of responses? A. A company that delivers faster than its competitors. B. A firm's products are introduced into the market faster than its competitors' products are. C. A company that always delivers at the promised time. D. A firm that delivers high-value products with unique security features.

D. A firm that delivers high-value products with unique security features.

Which of the following statement about decision making is correct? A. The maximin criterion is optimistic, while the maximax criterion is pessimistic. B. The maximax criterion of decision making requires that all decision alternatives have an equal probability of occurrence. C. Expected monetary value is most appropriate for decision making under conditions of uncertainty. D. If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

D. If a decision maker knows for sure which state of nature will occur, he/she is making a decision under certainty.

forecasting

It is based on the assumption that the analysis of past demand helps predict future demand.

advantage of changing from a push system to a pull​ system

Lower cost Enhanced customer satisfaction Improved schedule performance

Which of the following is generally found in most Lean​ environments?

Pull systems

In trend​ projection, the trend component is the intercept of the regression equation.

false

Regression lines graphically depict​ "cause-and-effect" relationships.

false

The larger the number of periods in the simple moving average forecasting​ method, the greater the​ method's responsiveness to changes in demand.

false

trend refers to a data pattern that repeats itself after a period of​ days, weeks,​ months, or quarters.

false

A fundamental distinction between trend projection and linear regression is​ that:

in trend projection the independent variable is​ time; in linear regression the independent variable need not be​ time, but can be any variable with explanatory power.

For a given product​ demand, the​ time-series trend equation is 53 -4x. The negative sign on the slope of the​ equation:

is an indication that product demand is declining.

One advantage of exponential smoothing

is the limited amount of record keeping involved.

3 approaches to competitive advantage

response differentiation cost leadership

Increasing the number of periods in a moving average will accomplish greater smoothing, but at the expense of:

sensitivity to real changes in the data.

Increasing the number of periods in a moving average will accomplish greater​ smoothing, but at the expense​ of:

sensitivity to real changes in the data.

MAD

sum of (actual-forecast)/ n smaller the better

expected monetary value of a decision alternative

the sum of all possible payoffs from the​ alternative, each weighted by the probability of that payoff occurring.

A trend projection equation with a slope of 0.78 means that there is a 0.78 unit rise in Y per period.

true

Time series model

uses a series of past data points to make the forecast.

associative models

uses variables such as price and promotional​ expenditures, which are related to product​ demand, to predict​ demand

Time-series models

•: a series of data observed at successful equally-spaced time points •Forecast the future only based on past values. 1.Naïve approach 2.Moving averages 3.Exponential smoothing 4.Trend projection

Alternatives

•A course of action or strategy that may be chosen by the decision maker. •E.g., I will or will not buy the binary lottery ticket

State of nature

•A situation over which the decision maker has little or no control. •E.g., whether the ticket I will get is a "thank you!" or "you win!" ticket

Naïve Approach

•Assumes demand in next period is the same as demand in most recent period •Cost effective and sometimes efficient

Associative model

•Incorporate variables/factors that might be influential CH 4: simple linear regression

Decision making under risk

•Known probability of each state's occurrence •E.g., I am told that the winning chance is 90% beforehand.

Decision making under uncertainty

•No information which state of nature may occur •E.g., I have no clue about the chance of getting which tickets (not even the probability) maximax, maximin, equal likelihood

Decision making under certainty

•State of nature is known •E.g., Ticket seller is my friend and he/she told me that the one I will buy is a winning or losing ticket.