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25 Cards in this Set
- Front
- Back
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What are the steps in Decesion Process?
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1- Define Problem
2- Obtain Information 3- Identify the alternative courses of action. 4- Making predictions about future costs. 5- Choosing & Justifying and alternativ 6- Implementing the decesion 7- Evaluating performance to provide feedback |
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A company experiences both variable usage rates and variable lead times for its inventory items. The probability distributions for both usage and lead times are known. A technique the company could use for determining the optimal safety stock levels for an inventory item is
A. Linear programming. B. Decision tree analysis. C. Queuing theory. D. The Monte Carlo method. |
Answer (D) is correct .
Simulation is a technique for experimenting with mathematical models using a computer. The Monte Carlo method is a technique used to generate the individual values for a random variable. This simulates the uncertainty inherent in real-world situations. The model is then run a large number of times, and the variance of the probability distribution of the results and the average performance are determined. |
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A company has a computer that it no longer needs because of a discontinued operation. Currently, there are several computer projects that may be able to use the machine but some modification will be necessary if such new application is to be successful. Which of the following techniques is most appropriate to use?
A. Synectics. B. Morphological matrix analysis. C. Attribute listing. D. Operations research. |
Answer (C) is correct.
Attribute listing is applied primarily to improve a tangible object. It lists the parts and essential features of the object and systematically analyzes modifications intended as improvements. |
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A company is concerned that spare parts inventories are too large. It has attempted to keep critical parts for its fleet in stock so that equipment will have minimal downtime. Management wants to know what the optimal spare parts inventory should be if downtime is estimated to cost $150 per day. Carrying cost and order cost have not been measured. You have been asked to make a formal recommendation on spare parts stocking levels. Which of the following techniques is most appropriate to use?
A. Operations research. B. Value analysis. C. Brainstorming. D. Attribute listing. |
Answer (A) is correct .
Operations research attempts to find optimal solutions using classical concepts such as statistics, simulation, logical thinking, and other scientific and mathematical techniques to develop and test hypotheses. This application closely fits the problem and charge given. |
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The operations research approach to evaluating solutions includes all of the following except:
A. Testing of a mathematical model. B. Constructing a quantitative model. C. Recognizing the complete system in which the problem operates. D. Formulating a mathematical model. |
Answer (B) is correct.
Operations research is an overall approach that applies a variety of scientific and mathematical techniques. It involves the following: recognition of the complete system, including interrelationships, in which the problem operates; formulation of a mathematical model; testing of the model; and implementation of the optimal solution as produced by the model. Simulation requires the construction of a quantitative model. |
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Evaluating performance and giving feedback is the final step in the decision-making process. This step involves
I. Proper delegation of authority. II. Placement of the solution in a feasible framework. III. Effective communication of the decision. A. I, II, and III. B. II only. C. I and II. D. I only. |
Answer (A) is correct .
The step of evaluating performance and giving feedback is vital to improve future execution of the prior steps or even the decision model itself. The proper delegation of authority is made to the individual responsible for implementing the action to be taken. Performance measurement is then provided for. This process puts the solution into a feasible framework, which assures it will be carried out. Finally, decisions cannot be fully implemented until they are effectively communicated. |
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A company is concerned that spare parts inventories are too large. It has attempted to keep critical parts for its fleet in stock so that equipment will have minimal downtime. Management wants to know what the optimal spare parts inventory should be if downtime is estimated to cost $150 per day. Carrying cost and order cost have not been measured. You have been asked to make a formal recommendation on spare parts stocking levels. Which of the following techniques is most appropriate to use?
A. Attribute listing. B. Value analysis. C. Brainstorming. D. Operations research. |
Answer (D) is correct.
Operations research attempts to find optimal solutions using classical concepts such as statistics, simulation, logical thinking, and other scientific and mathematical techniques to develop and test hypotheses. This application closely fits the problem and charge given. |
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The Delphi technique is used during which step of the decision-making process?
A. Defining the problem. B. Obtaining information. C. Evaluating the different problem solutions. D. Identifying alternative courses of action. |
Answer (D) is correct .
The Delphi technique is used in identifying alternative courses of action. It is an approach in which the manager solicits opinions on a problem from experts in the field, summarizes the opinions, and feeds the summaries back to the experts. |
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Determining what issues must be addressed and considering the objectives of the desired course of action are accomplished during which step of the decision-making process?
A. Obtaining information. B. Defining the problem. C. Evaluating solutions. D. Implementing the decision. |
Answer (A) is correct.
During the step in the decision-making process of obtaining information, the decision maker determines which issues must be addressed, for example, whether to make or outsource a component. The decision maker also considers the objectives of the desired course of action, for example, to increase return on investment or to enter a new market. |
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Satisficing is the concept in decision making where:
A- all alternatives may be possible solutions but only the lowest cost alternative is selected. B- the alternative chosen is the first alternative to meet the minimum acceptable requirements. C- all alternatives satisfying the solution requirements are assigned risk factors. D- alternatives are ranked according to their degree of satisfying the solution requirements. |
B is correct.
Satisficing is the concept in decision making where the first alternative to meet the minimum requirements is chosen, thus the optimum solution may not be selected or even identified. |
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In the decision-making process:
A- fixed costs are always irrelevant. B- fixed costs may be relevant, as where a relevant range is changed. C- variable costs are always relevant. D- income tax costs are always irrelevant. |
Fixed costs are never totally fixed but are defined for some relevant range.
A relevant cost is a cost that is expected to differ among alternative future courses of action. A relevant range is the limits within which the volume of activity can vary and cost relationships still remain valid. Fixed costs that will not change among alternatives are irrelevant. Fixed costs that will be eliminated or added due to the project under consideration are relevant. Variable costs are relevant if they differ among alternatives (per-unit cost) or if production volume is changed (change in total cost). Income taxes are normally a significant cost component of every business decision. Pitfalls of relevant costing: Assuming that all variable costs are relevant. For example, normal variable marketing costs may not be relevant for a special order, or there might be incremental marketing costs associated with the proposed alternative. Assuming that all fixed costs are irrelevant. If a proposal would require operating outside the relevant range, fixed costs could increase or decrease. When purchasing new equipment, fixed costs are likely to change. The use of unit costs can be misleading. Original unit costs could contain a combination of both relevant and irrelevant costs. |
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In deciding a course of action, the choice should:
A- most likely result in achieving the objectives of the decision maker. B- maximize return on assets. C- maximize return on investment. D- maximize return on stockholders' equity. |
The purpose of decision making is to achieve the objectives of the decision maker. In addition to future cash flows of the potential courses of action, the decision maker should also consider qualitative factors and nonfinancial quantitative factors.
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The concept of bounded rationality states that the decision maker is limited not only by imposed restrictions and guidelines but also by:
A- incomplete knowledge and/or understanding of the decision situation. B- incomplete knowledge of all possible alternatives. C- misconceptions of goal and purpose. D- All of the answer choices are correct. |
D is correct
The concept of bounded rationality states that the decision maker is limited not only by imposed restrictions and guidelines but also by the following: * Incomplete knowledge and/or understanding of the decision situation * Incomplete knowledge of all possible alternatives * Misconceptions of goal and purpose * Individual values, unconscious reflexes, skills, and habits The incomplete knowledge, unrecognized reflexes, and individual values, and misconceptions contribute to limiting the decision maker's field of knowledge and capability of selecting an optimum solution. |
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The decision to determine the number of classroom teachers needed for grades 10, 11 and 12 is an example of decision making:
A- based on trial and error. B- under conditions of uncertainty. C- by ranking of alternatives. D- under conditions of risk. |
D is correct.
In this situation, the alternatives are clear and historical data is available to assist in making the decision; thus, this is an example of decision making under conditions of risk. |
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In the decision-making process, sunk costs refer to:
A- all historical costs. B- fixed historical costs. C- costs that have no effect because they are unavoidable. D- land-related costs. |
C is correct.
Sunk costs always refers to costs which are unavoidable. A sunk cost is a past cost that has been incurred and cannot be reversed. Critical in management decision making is the recognition that past (sunk) costs are irrelevant. |
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In the decision-making process:
A- fixed costs are always irrelevant. B- fixed costs may be relevant, as where a relevant range is changed. C- variable costs are always relevant. D- income tax costs are always irrelevant. |
B is correct.
Fixed costs are never totally fixed but are defined for some relevant range. A relevant cost is a cost that is expected to differ among alternative future courses of action. A relevant range is the limits within which the volume of activity can vary and cost relationships still remain valid. Fixed costs that will not change among alternatives are irrelevant. Fixed costs that will be eliminated or added due to the project under consideration are relevant. Variable costs are relevant if they differ among alternatives (per-unit cost) or if production volume is changed (change in total cost). |
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Which of the following is not an assumption that is made when assuming rationality on the part of the company?
A. The company seeks solutions that minimize conflict. B. The criteria and alternatives can be ranked according to their importance. C. The company chooses the decision that results in the maximum economic payoff. D. Specific decision criteria are constant and the weights assigned to them are stable over time. |
A is correct.
According to Robbins, Organizational Behavior, rationality has the same assumptions as the optimizing (outcome maximizing) model for decision making. Rational decision making is fully objective and logical. The model assumes that a single, well-defined goal is to be maximized; that all relevant criteria and feasible options are known; that the criteria and options can be assigned numerical values and ranked; that preferences are constant (criteria and their assigned weights do not change); and that the decision maker will choose the option with the highest rank (the maximum benefits). However, rationality does not require an assumption about the avoidance of conflict. |
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A highly risk-averse decision maker will often react to bounded rationality by
A. Increasing the number of solutions considered. B. Satisficing. C. Ignoring the limiting factor. D. Attempting to find the optimum solution. |
B is correct.
Rational decision making is almost always subject to limitations that make the certain determination of the optimal decision impossible. A very risk-averse decision maker may react to such uncertainty by satisficing, that is, choosing an adequate course of action that is perceived to be safe. Satisficing thus leads to decisions that are not only less than optimal but also less than the best available. |
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A company has a computer that it no longer needs because of a discontinued operation. Currently, there are several computer projects that may be able to use the machine but some modification will be necessary if such new application is to be successful. Which of the following techniques is most appropriate to use?
A. Synectics. B. Operations research. C. Attribute listing. D. Morphological matrix analysis. |
C is correct.
Attribute listing is applied primarily to improve a tangible object. It lists the parts and essential features of the object and systematically analyzes modifications intended as improvements. |
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The Delphi technique is used during which step of the decision-making process?
A. Identifying alternative courses of action. B. Defining the problem. C. Obtaining information. D. Evaluating the different problem solutions. |
A is correct.
The Delphi technique is used in identifying alternative courses of action. It is an approach in which the manager solicits opinions on a problem from experts in the field, summarizes the opinions, and feeds the summaries back to the experts. |
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Faulty perception may preclude the decision maker from seeing the correct problem. Which of the following is an example of faulty perception?
A. A person does not see what (s)he is trained to see. B. Group pressure may influence which problems are perceived. C. A person’s needs do not influence what is observed. D. A person does not see what (s)he expects to see. |
B is correct.
The inability to see all aspects of a situation may prevent accurate problem definition. This inability may be caused by faulty perception. Faulty perception includes group pressure influencing which problems are perceived or how the problems are defined. |
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A company experiences both variable usage rates and variable lead times for its inventory items. The probability distributions for both usage and lead times are known. A technique the company could use for determining the optimal safety stock levels for an inventory item is
A. Decision tree analysis. B. The Monte Carlo method. C. Linear programming. D. Queuing theory. |
B is correct.
Simulation is a technique for experimenting with mathematical models using a computer. The Monte Carlo method is a technique used to generate the individual values for a random variable. This simulates the uncertainty inherent in real-world situations. The model is then run a large number of times, and the variance of the probability distribution of the results and the average performance are determined. |
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Information processing for decision making is characterized by two styles: analytic and intuitive. Which of the following is a characteristic of the intuitive style?
A. Deductive. B. Unstructured. C. Detailed. D. Objective. |
B is correct.
The intuitive style of information processing for decision making is subjective, inductive, nonroutine, and unstructured. Intuitive people may rely on hunches and reach decisions without explicitly applying a formal process. The thinking or analytic style of decision making is objective, deductive, precise, detailed, logical, and repetitive. It tends to prevail in the traditional organization. |
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Determining what issues must be addressed and considering the objectives of the desired course of action are accomplished during which step of the decision-making process?
A. Obtaining information. B. Implementing the decision. C. Evaluating solutions. D. Defining the problem. |
A is correct.
During the step in the decision-making process of obtaining information, the decision maker determines which issues must be addressed, for example, whether to make or outsource a component. The decision maker also considers the objectives of the desired course of action, for example, to increase return on investment or to enter a new market. |
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The operations research approach to evaluating solutions includes all of the following except:
A. Formulating a mathematical model. B. Recognizing the complete system in which the problem operates. C. Testing of a mathematical model. D. Constructing a quantitative model. |
D is correct.
Operations research is an overall approach that applies a variety of scientific and mathematical techniques. It involves the following: recognition of the complete system, including interrelationships, in which the problem operates; formulation of a mathematical model; testing of the model; and implementation of the optimal solution as produced by the model. Simulation requires the construction of a quantitative model. |
