Business Decision Analysis
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Course Introduction
Business Decision Analysis explores the quantitative and qualitative tools essential for effective decision-making in complex business environments. The course covers techniques such as decision trees, risk analysis, linear programming, simulation, and forecasting, enabling students to analyze data, assess uncertainty, and evaluate various strategic options. With a focus on real-world business scenarios, students learn to apply analytical models and support informed decision-making processes that drive organizational success. By the end of the course, participants will be equipped to apply structured decision analysis methods to optimize business outcomes and address managerial problems systematically.
Recommended Textbook
Introduction to Management Science A Modeling and Case Studies 5th Edition by Hillier
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Chapter 1: Introduction
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Sample Questions
Q1) Which of the following are steps in a typical management science study?
A)Define the problem and gather data
B)Formulate a model to represent the problem
C)Test the model and refine it as needed
D)Help to implement the recommendations
E)All of the above
Answer: E
Q2) The objective function for a model is a mathematical expression of the measure of performance for the problem in terms of the decision variables
A)True
B)False
Answer: True
Q3) Spreadsheets allow many managers to conduct their own analyses in management science studies
A)True
B)False
Answer: True
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Page 3
Chapter 2: Linear programming: Basic Concepts
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Sample Questions
Q1) What is the constraint for Dominican beans?
A)12A + 8B 4,800
B)8A + 12B 4,800
C)4A + 8B 3,200
D)8A + 4B 3,200
E)4A + 8B 4,800
Answer: C
Q2) For the products A,B,C,and D,which of the following could be a linear programming objective function?
A)P = 1A + 2B +3C + 4D
B)P = 1A + 2BC +3D
C)P = 1A + 2AB +3ABC + 4ABCD
D)P = 1A + 2B/C +3D
E)All of the above
Answer: A
Q3) The best feasible solution is called the optimal solution
A)True
B)False
Answer: True
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Page 4
Chapter 3: Linear programming: Formulation and applications
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Sample Questions
Q1) Strict inequalities (i e ,< or >)are not permitted in linear programming formulations A)True
B)False Answer: True
Q2) When formulating a linear programming problem on a spreadsheet,data cells will show the levels of activities for the decisions being made
A)True
B)False Answer: False
Q3) When formulating a linear programming model on a spreadsheet,the measure of performance is located in the objective cell
A)True
B)False Answer: True
Q4) Model formulation should precede problem formulation A)True
B)False Answer: False
Page 5
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Chapter 4: Theart of modeling with spread sheets
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Sample Questions
Q1) There is a systematic procedure that will lead to a single correct spreadsheet model
A)True
B)False
Q2) Which of the following is not a major step in the process of modeling with spreadsheets?
A)Plan
B)Build
C)Test
D)Analyze
E)All of the above are major steps
Q3) When testing a spreadsheet model by entering values in the changing cells,which of the following are appropriate values to enter?
A)Zeroes
B)Values for which you know what the values of the output cells should be
C)Large numbers
D)All of the above
E)b and c only
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Chapter 5: What-If Analysis for linear programming
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Sample Questions
Q1) Shadow price analysis is widely used to help management find the best trade-off between costs and benefits for a problem
A)True
B)False
Q2) If the sum of the percentage changes of the right-hand sides does not exceed 100%,then the solution will definitely remain optimal
A)True
B)False
Q3) If the right-hand side of Resource B changes to 80,then the objective function value:
A)will decrease by $75
B)will decrease by $150
C)will decrease by $225
D)will remain the same
E)can only be discovered by resolving the problem
Q4) The term "allowable range for the right-hand-side" refers to coefficients of the objective function
A)True
B)False
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Chapter 6: Network optimization problems
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Sample Questions
Q1) A shortest path problem is required to have only a single destination
A)True
B)False
Q2) In a shortest path problem there are no arcs permitted,only links
A)True
B)False
Q3) In a true maximum flow problem there is only one source and one sink
A)True
B)False
Q4) What is the objective of a maximum flow problem?
A)Maximize the amount flowing through a network
B)Maximize the profit of the network
C)Maximize the routes being used
D)Maximize the amount produced at the origin
E)None of the above
Q5) A network representation is a very specific conceptual aid and is only used in special cases
A)True
B)False
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Chapter 7: Using binary integer programming to deal withy
es-Or-No decisions
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Sample Questions
Q1) A linear programming formulation is not valid for a product mix problem when there are setup costs for initiating production
A)True
B)False
Q2) The algorithms available for solving BIP problems are much more efficient than those for linear programming which is one of the advantages of formulating problems this way
A)True
B)False
Q3) A parameter analysis report can be used to perform sensitivity analysis for integer programming problems
A)True
B)False
Q4) Binary integer programming problems are those where all the decision variables restricted to integer values are further restricted to be binary variables
A)True
B)False
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Chapter 8: Non linear programming
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Sample Questions
Q1) Profit = 3x<sub>1</sub> + 2x<sub>2</sub> + 9x<sub>1</sub>x<sub>2</sub> is an example of a nonlinear function
A)True
B)False
Q2) If the data cells are in column D and the changing cells are in column C,which of the following are not linear formulas in a spreadsheet?
A)IF(D1 >= 6,C1,C2)
B)ROUND(C3)
C)ABS(C3)
D)All of the above
E)b and c only
Q3) The additivity assumption can be violated by nonlinear programming because of cross-product terms involving the product of two variables
A)True
B)False
Q4) Applying separable programming requires having profit graphs that are smooth curves
A)True
B)False
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Chapter 9: Decision Analysis
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Sample Questions
Q1) An example of maximax decision making is a person buying lottery tickets in hopes of a very big payoff
A)True
B)False
Q2) Bayes' theorem is a formula for determining prior probabilities of a state of nature
A)True
B)False
Q3) Two people who face the same problem and use the same decision-making methodology must always arrive at the same decision
A)True
B)False
Q4) Which one of the following statements is not correct when making decisions?
A)The sum of the state of nature probabilities must be 1
B)Every probability must be greater than or equal to 0
C)All probabilities are assumed to be equal
D)Probabilities are used to compute expected values
E)Perfect information assumes that the state of nature that will actually occur is known
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Chapter 10: Forecasting
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Sample Questions
Q1) The goal of time-series forecasting methods is to estimate the mean of the underlying probability distribution of the next value of the time-series as closely as possible
A)True
B)False
Q2) The mean absolute deviation is used to:
A)estimate the trend line
B)eliminate forecast errors
C)measure forecast accuracy
D)seasonally adjust the forecast
E)All of the above
Q3) What is the moving-average forecast for the next period based on the last three periods
A)58
B)62
C)60
D)61
E)None of the above
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Chapter 11: Queuing models
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Sample Questions
Q1) What is the average time in line (in minutes)for a high priority item?
A)2
B)5
C)24
D)35
E)54
Q2) A single-server queueing system has an average service time of 16 minutes per customer,which is exponentially distributed The manager is thinking of converting to a system with a constant service time of 16 minutes The arrival rate will remain the same
The effect will be to:
A)increase the utilization factor
B)decrease the utilization factor
C)increase the average waiting time
D)decrease the average waiting time
E)not have any effect since the service time is unchanged
Q3) All single-server queueing models require the utilization factor to be less than 1
A)True
B)False
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Chapter 12: Computer simulation: Basic Concepts
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Sample Questions
Q1) A simulation model includes a description of the components of the system that is to be simulated
A)True
B)False
Q2) The main procedure for advancing the time on the simulation clock is called next-event time advance
A)True B)False
Q3) A stochastic system is one that evolved over time according to a continuous probability distribution
A)True
B)False
Q4) How many times is David late for work?
A)0
B)1
C)2 D)3
E)4
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Page 14
Chapter 13: Computer simulation with risks olver platform
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Sample Questions
Q1) Which of the following provide the mean,median,standard deviation,range,etc for the results cell in RSPE?
A)Frequency chart
B)Statistics table
C)Percentiles table
D)Cumulative frequency chart
E)None of the above
Q2) RSPE can not handle constraints in a simulation model
A)True
B)False
Q3) Increasing the number of trials increases the accuracy of a simulation
A)True
B)False
Q4) The sensitivity chart in RSPE indicates how strongly various uncertain variable cells influence the results cell
A)True
B)False
Q5) A danger of using the normal distribution is that values can fall below zero
A)True
B)False
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Chapter 14: Solution concepts for linear programming
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Sample Questions
Q1) The ability to solve large problems with the simplex method is limited primarily by:
A)the number of decision variables
B)the size of the parameters in the model
C)the number of functional constraints
D)the software package chosen
E)None of the above
Q2) When choosing which corner point to advance to next,the simplex method chooses the one:
A)that is closest
B)along the edge with the largest rate of improvement
C)along the edge with a negative rate of improvement
D)that is furthest from the origin
E)None of the above
Q3) If some necessary constraints were not included in a linear programming model,it is possible to have no limit on the best objective function value
A)True
B)False
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Chapter 15: Transportation and assignment problems
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Sample Questions
Q1) Transportation problems must satisfy which of the following assumptions?
A)The supply assumption
B)The cost assumption
C)The integer assumption
D)All of the above
E)None of the above
Q2) Which of the following can be used to solve transportation problems?
A)The simplex method
B)The transportation simplex method
C)The network simplex method
D)All of the above
E)None of the above
Q3) Transportation problems always involve shipping goods from one location to another
A)True
B)False
Q4) When the number of people and the number of tasks are not equal in an assignment problem then the problem cannot be solved
A)True
B)False
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Chapter 16: Pert CPM models for project management
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Sample Questions
Q1) PERT/Cost:
A)finds the penalty costs if a project is not completed on time
B)compares the actual budget with the planned budget
C)shows management where to focus attention during the project
D)a and b only
E)b and c only
Q2) In crashing a project,a manager will generally focus on activities which:
A)are not on the critical path
B)are the least costly to crash
C)are costly to crash and are on the critical path
D)are on the critical path and are the least costly to crash
E)None of the above
Q3) What is the estimated mean time for project completion?
A)100 days
B)140 days
C)199 days
D)200 days
E)440 days
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18
Chapter 17: Goal programming
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Sample Questions
Q1) In which of the following situations is preemptive goal programming more appropriate than weighted goal programming?
A)When there are major differences in the importance of the goals
B)When all of the goals are roughly equal in importance
C)When there is a single objective or goal
D)None of the above
E)b and c only
Q2) Goal programming provides a way to identify the most important goal and achieve it
A)True
B)False
Q3) Goal programming problems cannot be easily reformulated as linear programming problems and,therefore,require a special algorithm to solve
A)True
B)False
Q4) In weighted goal programming,the objective cell is the weighted sum of the deviations from the goals
A)True
B)False
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Chapter 18: Inventory management with known demand
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Sample Questions
Q1) Annual setup cost is inversely related to order size
A)True
B)False
Q2) If the cost of holding inventory is high relative to shortage costs,then allowing shortages may be a good policy
A)True
B)False
Q3) The objective of inventory management is to minimize the cost of holding inventory
A)True
B)False
Q4) In the EOQ model with quantity discounts,with holding cost stated as a percentage of unit purchase price,in order for the EOQ of the lowest curve to be optimum,it must:
A)have the lowest total cost
B)be in a feasible range
C)be to the left of the pricebreak quantity for that price
D)have the largest quantity compared to other EOQs
E)None of the above
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Chapter 19: Inventory management with uncertain demand
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Q1) When the item is used in production or is a spare part for a production machine,shortage costs in the perishable product model include the cost of lost production
A)True
B)False
Q2) One consequence of uncertain demand is the risk of incurring shortages
A)True
B)False
Q3) The goal of the perishable product model is to identify the order quantity that will minimize the shortage costs
A)True
B)False
Q4) Holding backorders when shortages occur and then filling them when inventory is replenished is referred to as shortordering
A)True
B)False
Q5) Variability in demand and/or lead time can be compensated for by safety stock
A)True
B)False
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Chapter 20: Computer simulation with crystal ball
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Sample Questions
Q1) Which of the following are advantages of computer simulation over analytical methods like PERT/CPM for predicting the probability that a project will complete by a deadline?
A)It does not need to make as many simplifying assumptions
B)It is more flexible about which probability distributions can be used
C)It provides a solution more quickly
D)All of the above
E)a and b only
Q2) Which of the following is not a characteristic of the normal distribution?
A)Some value is the most likely
B)Values closest to the mean are more likely
C)It must be symmetric
D)Values cannot fall below zero
E)Extreme values are possible,but rare
Q3) The custom distribution in Crystal Ball allows only discrete distributions to be entered
A)True
B)False
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