Managerial Decision Making
Midterm Exam
Course Introduction
Managerial Decision Making explores the processes, tools, and frameworks that managers use to analyze complex business problems and make effective decisions in organizational settings. The course investigates both rational and behavioral approaches to decision making, emphasizing how cognitive biases, risk, uncertainty, and ethical considerations influence choices at various managerial levels. Students learn to apply quantitative and qualitative techniques for problem-solving, evaluate alternatives, and implement solutions while considering stakeholder impact and organizational goals. Through real-world case studies and interactive exercises, the course develops critical thinking, judgment, and strategic decision-making skills essential for successful leadership.
Recommended Textbook
OM 4th Edition by David Alan Collier
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Chapter 1: Goods, Services, and Operations Management
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Q1) Which one of the following is not an example of biztainment?
A)iPhone applications
B)automobile leasing
C)product demonstrations
D)virtual factory tours
Answer: B
Q2) The greater the customer participation, the more uncertainty the firm has with respect to service time.
A)True
B)False
Answer: True
Q3) Though there are similarities between goods and service, there are significant differences; discuss five.
Answer: Goods are tangible while services are intangible. Customers participate in many service processes, activities and transactions. The demand for services is more difficult to predict than the demand for goods. Services cannot be stored as physical inventory.
Service management skills are paramount to a successful service encounter.
Service facilities typically need to be in close proximity to the customer. Patents do not protect services.
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Chapter 2: Value Chains
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Q1) What makes global value chains more difficult to manage than small domestic value chains?
Answer: Global value chains face higher levels of risk and uncertainty, requiring more inventory and day-to-day monitoring to prevent product shortages.
Transportation is more complex in global value chains. The transportation infrastructure may vary considerably in foreign countries. Global purchasing can be a difficult process to manage when sources of supply, regional economies, and even governments change.
International purchasing can lead to disputes and legal challenges relating to such things as price fixing and quality defects.
Privatizing companies and property is another form of major changes in global trade and regulatory issues.
Q2) A value chain views an organization from an integrative perspective of goods and services, while a supply chain focuses mainly on the creation of physical goods. A)True
B)False
Answer: True
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Chapter 3: Measuring Performance in Operations
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Q1) Errors in service creation and delivery are sometimes called service upsets.
A)True
B)False
Answer: True
Q2) Design flexibility is the ability to respond quickly to changes in the volume and type of demand.
A)True
B)False
Answer: False
Q3) Explain the difference between goods quality and service quality, and how they are measured.
Answer: Goods quality relates to the physical performance and characteristics of a good.Goods quality is generally measured using instruments, technology, and data collection processes.Service quality is consistently meeting or exceeding customer expectations (external focus) and service delivery system performance (internal focus) for all service encounters.Service-quality measures are based primarily on human perceptions of service collected from customer surveys, focus groups, and interviews.
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Chapter 4: Operations Strategy
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Q1) Regarding quality, which statement is not true?
A)Businesses offering premium quality goods usually have larger market share and are early entrants into their market.
B)Quality is positively and significantly related to higher return on investment for almost all kinds of market situations.
C)A strategy of quality improvement usually leads to increased market share but at a cost in terms of reduced short-run profits.
D)High goods quality producers can usually excel by charging low prices.
Q2) In an automobile, which of the following would not be considered an order winner?
A)Self-parking capability
B)Voice-activated music system
C)Front-seat airbags
D)Collision-avoidance system
Q3) Of the three types of attributes customers use to evaluate goods and services, goods are high in search attributes while services are high in experience and credence attributes.
A)True
B)False
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Chapter 5: Technology and Operations Management
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Q1) A sociotechnical system integrates technology, people, and processes.
A)True
B)False
Q2) Amazon.com would be an example of a customer-to-customer value chain.
A)True
B)False
Q3) Dell Computer would best be described as what type of company?
A)B2B
B)B2C
C)C2C
D)Both a and b
Q4) According to the National Research Council, companies with computer-integrated manufacturing system experience have been able to
A)improve quality by a factor of ten
B)increase equipment utilization to 100 percent
C)decrease engineering design costs by up to 30 percent
D)reduce finished goods inventory by five percent
Q5) List some of the key issues that organizations face in using technology.
Q6) Explain the concept of ERP - Enterprise Resource Planning Systems.
Q7) What are some of the benefits and challenges of technology?
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Chapter 6: Goods and Service Design
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Q1) In a two-component parallel system, the overall reliability is 0.9994.If the reliability of the first component is 0.9890, determine the reliability of the second component.
Q2) List the five elements of a service delivery system.
Q3) Which of the following is not an important element of reliability definition?
A)probability
B)time
C)redundancy
D)operating conditions
Q4) Customer contact requirements are either technical or behavioral in nature.
A)True
B)False
Q5) The roof of the house of quality shows the relationship matrix between customer requirements and the technical features.
A)True
B)False
Q6) Assume the specifications for a part (in inches) are 5.00 \(\pm\) 0.37, and the Taguchi loss function is estimated to be L(x) = 9,300 (x - T)<sup>2</sup>.Determine the estimated loss if the quality characteristic under study takes on a value of 5.50 inches.
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Chapter 7: Process Selection, Design, and Analysis
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Q1) In service applications, flowcharts generally highlight the points of contact with the customer.
A)True
B)False
Q2) What is the implied service rate at a bank teller's window if demand is 26 customers per hour and the bank staffs 3 tellers with an average utilization of 80%?
Q3) Explain and differentiate the characteristics of a project, job shop, flow shop and continuous flow process.
Q4) The average number of hotel rooms occupied per day during the month of March is 225.Rooms are booked on average for 2.5 days.On average, how many new bookings occur each day?
Q5) Little's Law
A)Removes process bottlenecks
B)Is a form of simulation
C)Focuses on finished goods inventory
D)Evaluates average process performance
Q6) Explain Little's Law and how it can be used.
Q7) Define a value stream map.How does this differ from a regular process map?
Q8) Explain why the product-process matrix does not transfer well to services.
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Chapter 8: Facility and Work Design
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Q1) A fixed position layout is based on the sequence of operations that is performed during the manufacturing of a good or delivery of a service.
A)True
B)False
Q2) Explain assembly line balancing.Discuss the three types of information needed to balance an assembly line.
Q3) ____ classifies parts into families so that cellular layouts can be effectively used.
A)Ergonomics
B)Job enlargement
C)Group technology
D)CRAFT
Q4) A ____ layout is an arrangement based on self-contained groups of equipment needed to produce a particular set of goods or services.
A)Product
B)Process
C)Cellular
D)Fixed position
Q5) List the many questions that must be addressed in designing a workstation.
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Chapter 9: Supply Chain Design
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Q1) The metric "perfect order fulfillment" is often used to measure ____.
A)Delivery reliability
B)Responsiveness
C)Supply chain efficiency
D)Supply chain financial performance
Q2) The basic purpose of a supply chain is to coordinate communication among employees and customers in order to maximize customer satisfaction.
A)True
B)False
Q3) Which one of the following is not directly related to a supply chain?
A)Distribution center
B)Inventory
C)Promotion/Advertising
D)Supplier
Q4) Explain the difference between an efficient and a responsive supply chain, and the business context for which each works best.
Q5) Explain the difference between a supply chain and a value chain.
Q6) Explain the importance of the bullwhip effect.What can managers do to reduce it?
Q7) Explain the concept of postponement and provide an example of it.
Page 11
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Chapter 10: Capacity Management
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Q1) Safety capacity is most closely related to A)Bottlenecks
B)Economies of scale
C)Unanticipated events
D)Focused factory
Q2) A doctor's office would charge no-show patients $30 if they did not cancel their appointment 24 hours ahead of the appointment because A)insurance will pay the no-show fee anyway.
B)the appointment time and associated revenue is perishable, and the doctor may lose revenue.
C)the doctor's office does a poor job of forecasting demand.
D)the no-show price of $30 can be added to medical fees for reimbursement.
Q3) For a Marriott hotel call center the expected service rate was 3.0 minutes per telephone call per customer service representative (CSR).With 3 telephone CSRs on-duty during the 6:30 to 7:00 am time period, and assuming a 90% target CSR labor utilization rate, how many telephone calls can these 3 CSRs handle during this time period.
Q4) What is safety capacity? Discuss reasons for using it.
Q5) What are complementary goods and services and why do firms have them?
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Chapter 11: Forecasting and Demand Planning
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Q1) A(n) ____ is a one-time variation that is explainable.
A)Cyclical pattern
B)Random Variation
C)Irregular variation
D)Seasonal pattern
Q2) Aggregate forecasts are generally much easier to develop whereas detailed forecasts require more time and resources.
A)True
B)False
Q3) A moving average model works best when ____ in the time series.
A)Only irregular variation is present
B)Only a trend is present
C)There is no trend, seasonal, or cyclical pattern
D)Trend, seasonal, and cyclical patterns all exist
Q4) ____ forecasts are needed to plan for facility expansion.
A)Long-range
B)Intermediate-range
C)Short-range
D)Demand planning
Q5) Define forecast error and describe ways that it is measured.
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Chapter 12: Managing Inventories
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Q1) Which is not an advantage of the periodic review system?
A)Helps to control "A" items
B)Inventory need not be monitored continually
C)Useful when a large number of items is ordered from the same supplier
D)Consolidated shipments lower freight costs
Q2) Explain the different types of inventories maintained throughout a value chain.
Q3) The operations manager at a chemical company that produces insecticide for use in commercial applications is attempting to set a safety stock level for a key ingredient that is used in their most powerful product.She believes that demand during lead time for this ingredient is normally distributed based on past data.In addition, she believes that future use is accurately depicted by these historical demand-during-lead-time data (in gallons): 55, 75, 75, 70, 80, 60, 50, 70, 60, and 85.She estimates the standard deviation of demand during the lead time to be 8.5 gallons.
a.What is the average demand during the lead time for this key ingredient?
b.What is the safety stock they need to provide a 95% service level?
c.What is the order point the company should use?
Q4) What are the four categories of inventory costs?
Q5) Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.
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Chapter 13: Resource Management
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Q1) Pacific Chemical Products, Inc.produces a liquid laundry detergent and is currently in the process of developing an aggregate plan for the upcoming year.They don't know whether to use a level capacity or a matching demand approach.The costs that they are concerned with are the cost of hiring more workers, the cost of laying off workers, and the cost of carrying inventory.Currently at Pacific it costs $200 to hire a new worker, the cost of laying off one worker is $250, and the inventory carrying cost per unit per quarter is $4.The company has 65 working days per quarter and each person works only an 8 hour day.The labor standard for each gallon of detergent is 1.5 hours and the forecasted demand for the next four quarters is 30,000, 35,000, 47,000, 43,000 gallons.
a.Using a level capacity plan, how many workers are needed each quarter?
b.What is the average inventory level under the level capacity plan?
c.What is the total annual inventory cost under a level capacity plan?
d.Under a matching demand plan, how many workers are needed in the second quarter?
e.What is the total hiring and firing costs using a matching demand plan?
Q2) End items in a master production schedule or final assembly schedule must be forecast.
A)True
B)False
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Chapter 14: Operations Scheduling and Sequencing
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Q1) The numerical difference between the completion time and the due date is called
A)Flow time
B)Lateness
C)Makespan
D)Tardiness
Q2) Scheduling refers to specifying
A)The sequence that jobs must be completed
B)The due date for each job
C)The start and completion times of jobs
D)The makespan of each job
Q3) The sequencing rule that minimizes the maximum number of jobs that are past due from a given set of jobs is
A)Shortest processing time
B)Earliest due date
C)First come, first served
D)Least work remaining
Q4) Scheduling problems occur almost exclusively in manufacturing.
A)True
B)False
Q5) Describe Johnson's sequencing rule for the two-resource sequencing problem.
Page 16
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Chapter 15: Quality Management
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Q1) In the act stage of the Deming cycle, improvements become standardized and the plan is implemented as a "current best practice" and communicated throughout the organization.
A)True
B)False
Q2) Discuss Kaizen and how it differs from a Kaizen Blitz.
Q3) Corporate sponsors who support Six Sigma activities are typically called "black belts."
A)True
B)False
Q4) Using color coded wires to reduce mistakes associated with assembling complex electronic products is an example of poka-yoke.
A)True
B)False
Q5) Performance standards in services are analogous to manufacturing specifications.
A)True
B)False
Q6) Define Six Sigma and explain the key concepts used to implement a Six Sigma quality initiative.
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Chapter 16: Quality Control and Spc
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Q1) A key element of a control system is the ability to measure performance and compare it to a performance standard.
A)True
B)False
Q2) Define "quality at the source."
Q3) Explain the issues associated with selecting the appropriate sample size and sampling frequency for control charts.
Q4) Special cause variation tends to be easily detectable using statistical methods.
A)True
B)False
Q5) A high-paced discount store in Los Angeles has noticed that checking errors have increased recently.They plan to use control charts with three standard deviation control limits to monitor the process.They decided to take a sample of 100 transactions over each of 10 days.The number of transactions in error for each day was 5, 7, 6, 5, 6, 4, 6, 3, 10, and 8.
a.What is the center line for the p chart?
b.What is the upper control limit for the p chart?
c.What is the lower control limit for the p chart?
Q6) Find the control limits for a c chart with \(\overline{c}\) = 7.
Page 18
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Chapter 17: Lean Operating Systems
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Q1) Define lean enterprise and the four principles of lean operating systems.
Q2) Total Productive Maintenance (TPM) strives to relieve machine operators of routine maintenance so that they can focus entirely on being productive.
A)True
B)False
Q3) A company is using a Kanban system with 2 containers, each holding 50 parts, between a downstream (using) and an upstream (producing) work center.The using work center can handle 250 jobs per day.The average elapsed time for the entire cycle is currently .25 days.The company is concerned with the safety factor for the operation and the size of the containers.
a.What is the efficiency rating of the current operation?
b.If the company decides to use only one container, how many parts must it hold?
c.If the safety factor is changed to .12 and there are still 2 containers, how many parts must each container now hold?
Q4) Which of the following is not one of the 5Ss?
A)Synchronize
B)Standardize
C)Shine
D)Sustain
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Chapter 18: Project Management
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Q1) In which stage in the project life cycle would crashing likely be performed?
A)Define
B)Plan
C)Organize
D)Control
Q2) When finding the earliest finish (EF) time for an activity with two or more predecessor activities, the largest EF among the predecessor activities is used to calculate the EF for that activity.
A)True
B)False
Q3) Which step in the project management process would involve developing alternative plans in anticipation of problems that might arise?
A)Project definition
B)Resource planning
C)Project scheduling
D)Project control
Q4) Define a project.Give some non-manufacturing or non-construction examples.
Q5) Describe how a project fits into each of the three common organizational structures.
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Chapter 19: Work Measurement, Learning Curves, and Standards
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Q1) All of the following are advantages of using regression analysis to determine standard time except
A)A smaller cycle time is used
B)Avoids the assumption of additive task times
C)Statistically significant variables can be determined
D)Confidence intervals for the prediction can be developed
Q2) For a time study, it is assumed the distribution of task times follow a Poisson distribution.
A)True
B)False
Q3) When timing a work activity with multiple tasks, the general rule is to take the largest sample size estimate and use it for all activities or tasks.
A)True
B)False
Q4) Explain the use of regression analysis in establishing standard times.
Q5) Determine the sample size for the following time study given a standard deviation of three ounces and a 92% probability that the value of the sample mean is within two ounces?
Q6) Define work sampling.Give both manufacturing and service applications.
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Chapter 20: Queuing Analysis
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Q1) A sandwich shop near campus has a special counter, open from 11 am to 1 pm, which is used exclusively for selling pre-made sandwiches.This is much faster than making sandwiches to order at lunch time.The clerk can handle a customer in about one minute.Customers arrive at a rate of 40 per hour on average.
a.How long (in minutes) does a customer have to wait?
b.What percentage of the time is the employee working?
c.What is the average number of customers waiting in line?
d.What is the probability of there being 3 or more customers in the system?
Q2) ____ is the process of a customer evaluating the waiting line and server system and deciding not to join the queue.
A)Triage
B)Reneging
C)Balking
D)Value-based queuing
Q3) Generally for queuing models, the slower the rate of arrivals, the shorter the time period chosen.
A)True
B)False
Q4) Discuss three categories of information necessary to analyze a waiting line.
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Chapter 21: Modeling Using Linear Programming
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Q1) (a month's production) + (beginning inventory) - (ending inventory) - (number of lost sales for the month) =
A)Overtime limits
B)Demand in the month
C)Increase in product
D)Decrease in production
Q2) Explain the essence of a transportation problem.
Q3) A company is considering a rate change, either an increase or a decrease in production, and
X<sub>t</sub> = production in a time period
R<sub>t</sub> = increase in production rate from Period t-1 to Period t
D<sub>t</sub> = decrease in production rate from Period t-1 to Period t
Which of the following is correct?
A)X<sub>t</sub> - X<sub>t - 1</sub> = D<sub>t</sub> - R<sub>t</sub>
B)X<sub>t - 1</sub> - X<sub>t</sub> = D<sub>t</sub> - R<sub>t</sub>
C)X<sub>t - 1</sub> - X<sub>t</sub> = R<sub>t</sub> -D<sub>t</sub>
D)X<sub>t</sub> - X<sub>t - 1</sub> = R<sub>t</sub> - D<sub>t</sub>
Q4) Differentiate between a feasible solution and an optimal solution.
Q5) Discuss the concept of constrained optimization.Include some examples.
Q6) What characterizes a linear function?
Page 23
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Chapter 22: Simulation
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Q1) 'Face validity' means the programmers agree to the model's logic.
A)True
B)False
Q2) Differentiate and explain the importance of verification and validation.
Q3) All of the following are disadvantages of simulation except A)Limited application
B)Difficulty of collecting the appropriate input data
C)Selecting the correct probability distribution
D)The accuracy of outputs
Q4) Discuss three advantages and three disadvantages of simulation models.
Q5) With a fixed-time-increment simulation model, detailed information is lost.
A)True
B)False
Q6) In general, as the number of probabilistic components of a system increases, the more likely it is that simulation will be the best analysis approach.
A)True
B)False
Q7) Explain the major differences between a fixed-time and a next-event simulation model.Include advantages and disadvantages of each.
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Chapter 23: Decision Analysis
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Q1) Uncertainty refers to not knowing what will happen in the future.Which of the following least applies to uncertainty?
A)Usually does not involve a sequence of decisions
B)Little or no data available
C)Some data is very expensive
D)Some data is time-consuming to obtain
Q2) All of the following are characteristics of management decisions for which decision analysis techniques apply except
A)They must be important
B)They are probably unique
C)They are usually deterministic
D)They are complex
Q3) Risk is a form of uncertainty associated with an unexpected good or undesirable outcome.
A)True
B)False
Q4) Differentiate between uncertainty and risk.
Q5) Explain the structure and purpose of a decision tree.
Q6) Define the four major elements of a decision problem.
Page 25
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