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THEORY B. Queuing theory analysis.

Forecasting C. Time-series or trend regression analysis.
1. The calculation of reasonable probabilities about the future, based D. Program evaluation review technique (PERT)
on the analysis of all the latest relevant information by tested and
logically sound statistical and economic techniques, and applied in
terms of an executive’s personal judgement and knowledge of his 6. Which of the following statements is the least pertinent to the
business is Project Evaluation Review Technique (PERT)
A. Budgeting C. Planning and control A. It is a system, which uses network analysis and critical path
B. Business forecasting D. Project feasibility studies methods.
B. It is more useful for analyzing the interrelationships of time and
Learning curve activities to discover potential bottlenecks.
2. Which formula describes the learning curve? C. It involves measuring progress in relation to schedule,
A. y = axb C. y = ax-b evaluating changes to schedule, forecasting future progress and
B. y = abx D. x = ayb predicting and controlling costs.
D. Time is a primary consideration and this technique is particularly
Project management suite for problems, which involve the combination of resources
3. Various tools are employed to control large scale projects. They that maximize profits or minimize costs.
include all of the following except:
A. CPM. C. PERT. 7. Which one of the following statements best describes a difference
B. Gantt charts. D. Statistical process control. between basic PERT and the Critical Path Method (CPM) of network
analysis?
4. Which of the following terms is not used in project management? A. PERT does not allow for slack times on the activities while CPM
A. Dummy activity. C. Lumpy demand. does.
B. Latest finish. D. Optimistic time. B. PERT considers only activity cost while CPM considers only
activity time.
5. A management consultant is scheduling a long-term research and C. PERT uses probability distribution on the activity times while
development project. The time table is very tight due to the advent CPM uses point estimates for the activity times.
of the rainy season and to inadequate research and development D. PERT determines the least-cost path through a network while
staff complement. As the requirements are extensive and complex, CPM determines the least-time path through a network.
what is the most appropriate approach for planning and controlling
the government highway project? 8. When using the PERT method for network analysis, the critical path
A. Cost-volume-profit analysis. through the network is

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A. The least cost path. C. The path with the most slack. 12.A quantitative technique used for selecting the combination of
B. The longest path through the network. D. The shortest path resources that maximize profits or minimize costs is
through the network. A. Curvilenear analysis C. Linear programming
B. Dynamic programming D. Queuing theory
9. Of these statements, which is the least pertinent to the concept of
“slack” in relation to the Project Evaluation and Review Technique 13.Linear programming is used most commonly to determine the
(PERT)? A. Fastest timing.
A. The less the amount of slack time, the more critical an activity B. Most advantageous prices.
or path. C. Best use of scarce resources.
B. Slack time information is useful for planning and continuous D. Mix of variables that will result in the largest quantity.
monitoring.
C. It is computed by subtracting the earliest expected time from 14.AB Woods Co. is planning to expand its production facilities, which
the earliest allowable time. is at present, a constraint. You are asked to review the linear
D. If not exceeded, non-critical activities can be delayed without programming model. Among the items in the model, which will not
delaying the project’s completion time. be found?
A. Networks.
B. Constraints.
C. Slack variables.
10.In a Program Evaluation and Review Technique (PERT) system, D. Independent and dependent variables.
activities along the critical path:
A. have a slack of zero
B. follow the line of best fit 15.Linear programming models are mathematical techniques in which
C. may be delayed without affecting completion time an objective function is maximized or minimized subject to
D. intersect at a corner point described by the feasible area constraints. These constraints must be fully specified before a
linear programming problem can be solved, and generally
11.The process of adding resources to shorten selected activity times described:
on the critical path in project scheduling is called A. Costs. C. Inefficiencies.
A. A branch-and-bound solution. C. Material-requirements B. Dependent variables. D. Resources.
planning.
B. Crashing. D. The Delphi technique. 16.In a linear programming maximization problem for business
problem solving, the coefficient of the objective function usually are
Linear Programming A. Variable costs.

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B. Marginal contributions per unit. 1. The following information applies to a project:

C. Usage rates for scarce resources. Activity Time (days) Immediate Predecessor
D. Profit based on allocations of overhead and all indirect costs. A 5 None
B 3 None
17.A transportation model is a special case of C 4 A
A. Dynamic programming model. C. Linear programming model. D 2 B
B. Economic order quantity model. D. PERT/CPM. E 6 C, D
The earliest completion time for the project is
Questions 18 through 20 are based on the following information. A. 11 days. C. 15 days.
ReMetal, Inc. uses the following model to determine blends of new (n) B. 14 days. D. 20 days.
metal and scrap (s) metal.
Max Z = $30N + $70S Expected value
subject to: 2. Sampaguita Company is planning to market a new product. The
3N + 2S < 15 marketing research staff prepared the following payoff probability
2N + 4S < 18 distribution giving the relative likelihood of monthly sales volume
levels and the corresponding income (loss) for the new product;
18.These mathematical functions are an example of a(n) Monthly sales Probability Income(loss)
A. Economic order quantity model. C. Parametric model. volume
B. Linear programming model. D. Present value model.
2,500 0.10 P(25,000)
5,000 0.20 7,500
19.The two inequality functions are
10,000 0.50 37,500
A. Conditions. C. Objectives.
15,000 0.10 50,000
B. Constraints. D. Shadow prices.
25,000 0.10 75,000
The expected value of the monthly income from the new product:
20.The point where N = 2 and S = 3 would A. P18,750 C. P30,250
A. Be a feasible point. C. Lie in a corner. B. P22,500 D. P32,750
B. Be the optimal solution point. D. Minimize cost.
3. The Sigma Company wants more information on the demand for its
products. The following data are relevant
PROBLEMS Units Probability of unit Total cost of units
Project management demanded demand demanded

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0 0.10 P0.00 at the same time is an additional $200,000.

1 0.15 1.00
2 0.20 2.00 If the control procedures are not made more effective, the expected
3 0.40 3.00 cost to the organization is
4 0.10 4.00 A. $1,000 C. $3,250
5 0.05 5.00 B. $2,250 D. $32,250
What is the total expected value of the total cost of units
demanded? 6. In actual business, it is difficult to ascertain the value of information
A. P2.40 C. P9.00 about a future event. However, it is possible to compute the
B. P7.40 D. P9.15 maximum expected value of additional information by computing
the expected value under conditions of certainty and comparing it
4. Dough Distributors has decided to increase its daily muffin with the expected value of the best strategy under uncertainty.
purchases by 100 boxes. A box of muffins costs $2 and sells for $3 Assuming:
through regular stores. Any boxes not sold through regular stores Expected value under certainty conditions P12,000
are sold through Dough’s thrift store for $1. Dough assigns the Expected value using best strategy under uncertainty
following probabilities to selling additional boxes: 10,900
Additional sales Probability Expected value of perfect information 1,100
60 0.6 This means
100 0.4 A. Management is uncertain it will incur P10,900.
B. Management is certain it will realize P12,000.
What is the expected value of Dough’s decision to buy 100
C. Management can afford to spendP1,100 for perfect information.
additional boxes of muffins?
D. Management can afford to incur P10,900 since it will earn a net
A. $28 C. $52
income of P1,100.
B. $40 D. $68
Questions 7 and 8 are based on the following information.
5. The auditor is attempting to evaluate the potential dollar effect of a
control breakdown in the sales cycle. Two controls are involved. The A company has the following probabilities of profit (or loss) from an
probability that control A will fail is 10%, and the probability that investment opportunity:
control B will fail is 5%. The controls are independent such that the Profit Outlook Profit (Loss) Probability
failure of one does not affect the failure of the other. In evaluating Amount
the potential exposure to the organization, the auditor determines Optimistic $10,000 .30
that the cost of control A's failure is $10,000, the cost of control B's Most likely 6,000 .55
failure is $25,000, and the cost of failure of both control procedures Pessimistic (1,000) .15
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7. What is the expected profit? 11.The conditional profit per game of having 4,000 pretzels available
A. $6,000 C. $6,300 but only selling 3,000 pretzels is
B. $6,150 D. $6,450 A. $1,800 C. $2,800
B. $2,100 D. $3,500
8. How much would the company be willing to pay before investing in
the project to learn in advance which of the three scenarios
12.The conditional profit per game of having 4,000 pretzels available
(optimistic, pessimistic, or most likely) would actually occur?
and selling all 4,000 pretzels is
A. $0 C. $300
A. $800 C. $2,100
B. $150 D. $550
B. $1,200 D. $2,800
Questions 9 through 13 are based on the following information.
The College Honor Society sells hot pretzels at the home football
games. The pretzels are sold for $1.00 each, and the cost per pretzel
is $0.30. Any unsold pretzels are discarded because they will be stale 13.The conditional profit (loss) per game of having 4,000 pretzels
before the next home game. available but being able to sell 5,000 pretzels if they had been
The frequency distribution of the demand for pretzels per game is available is
presented below. A. $(1,225). C. $3,500.
Unit Sales Volume Probability B. $2,800. D. $4,025.
2,000 pretzels .10
3,000 pretzels .15 Questions 14 through 18 are based on the following information.
4,000 pretzels .20
Gleason Co. has two products, a frozen dessert and ready-to-bake
5,000 pretzels .35
breakfast rolls, ready for introduction. However, plant capacity is
6,000 pretzels .20
limited, and only one product can be introduced at present. Therefore,
9. The estimated demand for pretzels at the next home football game
Gleason has conducted a market study, at a cost of $26,000, to
using an expected value approach is
determine which product will be more profitable. The results of the
A. 4,000 pretzels. C. 5,000 pretzels.
study follow.
B. 4,400 pretzels. D. 6,000 pretzels.
Sales of Desserts at $1.80/unit Sales of Rolls at $1.20/unit
Volume Probability Volume Probability
10.The estimated demand for pretzels at the next home football game
250,000 .30 200,000 .20
using a determinate approach based on the most likely outcome is
300,000 .40 250,000 .50
A. 4,000 pretzels. C. 5,000 pretzels.
350,000 .20 300,000 .20
B. 4,400 pretzels. D. 6,000 pretzels.
400,000 .10 350,000 .10
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The costs associated with the two products have been estimated by 17.In order to recover the costs of production tooling and advertising
Gleason's cost accounting department and are shown as follows. for the breakfast rolls, Gleason's sales of the breakfast rolls would
Dessert Rolls have to be
Ingredients per $.40 $.25 A. 37,500 units. C. 100,000 units.
unit B. 60,000 units. D. Some amount other than
Direct labor per .35 .30 those given.
unit
Variable overhead .40 .20 18.The advertising expense estimated by Gleason for the introduction
per unit of the new products is an example of a(n)
Production 48,000 25,000 A. Conversion cost. C. Discretionary cost.
tooling* B. Committed cost. D. Opportunity cost.
Advertising 30,000 20,000
*Gleason treats production tooling as a current operating expense Decision tree
rather than capitalizing it as a fixed asset. 19.Ron Bagley is contemplating whether to investigate a labor
14.According to Gleason's market study, the expected value of the efficiency variance in the Assembly Department. It will cost $6,000
sales volume of the breakfast rolls is to undertake the investigation and another $18,000 to correct
A. 125,000 units. C. 275,000 units. operations if the department is found to be operating improperly. If
B. 260,000 units. D. Some amount other than the department is operating improperly and Bagley fails to
those given. investigate, operating costs from the various inefficiencies are
expected to amount to $33,000. Bagley will be indifferent between
15.Applying a deterministic approach, Gleason's revenue from sales of investigating and not investigating the variance if the probability of
frozen desserts would be improper operation is
A. $216,000. C. $549,000. A. 0.29 C. 0.60
B. $540,000. D. Some amount other than B. 0.40 D. 0.71
those given.
20.Under favorable weather conditions, the management of Flesher
16.The expected value of Gleason's operating profit directly traceable Farms expects its raspberry crop to have a $120,000 market value.
to the sale of frozen desserts is An unprotected crop subject to frost has an expected market value
A. $120,250. C. $198,250. of $80,000. If Flesher protects the raspberries against frost, the
B. $150,250. D. Some amount other than market value of the crop is still expected to be $120,000 under
those given. frost-free conditions and $180,000 if a frost occurs. What must be
the probability of a frost for Flesher to be indifferent to spending

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$20,000 for tents to provide frost protection? What is the probability that an employee will arrive on time the
A. 0.167 C. 0.250 fourth day if they arrived on time the first day?
B. 0.200 D. 0.333 A. .575 C. .61
B. .583 D. .7
Questions 21 and 22 are based on the following information:
Superior Craft is evaluating the launching of a new product. If the
product becomes successful, the present value of future cash flows Learning curve
(excluding investment) is estimated at P2,000,000. If the product is not 24.Hennepin Co. used 30 hours to produce the first batch of units. The
successful, the present value of this flow is estimated at P400,000. second batch took an additional 18 hours. How many total hours
The required investment is P1,000,000. will the first four batches require?
21.What are the probabilities that would have to be assigned to the A. 61.44 hours. C. 96.2 hours.
events “success” and “not success” to make Superior Craft B. 76.8 hours. D. 120.0 hours.
indifferent between the two actions “invest” and “do not invest”?
A. B. C. D. 25.Lake Corporation manufactures specialty components for the
Probability of 37.5% 40% 45.5% 50% electronics industry in a highly labor intensive environment. Are
success Electronics has asked Lake to bid on a component that Lake made
Probability of not 62.5% 60% 54.5% 50% for Arc last month. The previous order was for 80 units and
success required 120 hours of direct labor to manufacture. Arc would now
like 240 additional components. Lake experiences an 80% learning
22.If Superior Craft thinks the probability of “success” is 60%, how curve on all of its jobs. The number of direct labor hours needed for
much higher would be the expected value of the act “invest” over Lake to complete the 240 additional components is
the expected value of the act “do not invest”? A. 187.2 C. 307.2
A. P360,000 C. P600,000 B. 256.0 D. 360.0
B. P400,000 D. P1,000,000
26.Tofte has a target total labor cost of $1,500 for the first four batches
Markov analysis of a product. Labor is paid $10 an hour. If Tofte expects an 80%
23.Rusty, the night manager at a local fast food restaurant, has had learning rate, how many hours should the first batch take?
problems with his employees not arriving on time. After doing some A. 58.6 hours. C. 96.0 hours.
research, he discovered that, if his employees were on time the B. 73.2 hours. D. 150 hours.
night before, the probability that they would arrive on time again 27.CBA Company expects a 90% learning curve. The first batch of a
is .7. On the other hand, if they were late the night before, the new product required 100 hours. The second batch should take
probability that they would arrive on time the following day is .4. A. 80 hours. C. 95 hours
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B. 90 hours. D. 100 hours. Component P180 P45 4 6

810
Linear programming
28.If plant capacity for cutting time and shaping time is 80 hours and Demand for Component 818 far exceeds the company’s capacity,
but the company can only sell 60 units of component 810 each
100 hours, respectively, and it takes four hours to cut and two
week. Workers in the Assembly department work a total of 200
hours to shape a standard model and two hours to cut and five
hours per week, and workers in the Finishing department work a
hours to shape a deluxe model, the maximum number of standard
total of 250 hours per week. The company wants to know how
and deluxe models that can be produced are:
many units of each component to produce to maximize profit. If X
A. 20 standard and 20 deluxe D. 40 standard and 20 deluxe
represents the number of units of Component 818 and Y represents
B. 20 standard and 40 deluxe E. 50 standard and 40 deluxe
the number of units of Component 810, the objective function
C. 20 standard and 50 deluxe
would be
29.Colfax Creations produces three products: A, B, and C. Four
A. Maximize 30X + 45Y C. Minimize 30X + 45Y
machines are used to produce the products. The sales demands
B. Maximize 120X + 180Y D. Minimize 90X + 135Y
and time on each machine (in minutes) is as follows:
Demand Time on Time on M2 Time on Time on M4
31.A mathematical technique that can be used to find the best
M1 M3
possible combination of the company’s limited resources is called
A 100 10 15 10 5 linear programming. Star Electronics manufactures two types of
B 80 10 5 10 5 calculators, Star 1 and Star 2. Each calculator is processed in two
C 60 5 5 15 15 departments, departments 1 and 2. Daily labor requirements are
There are 2,400 minutes available on each machine during the as follows:
week. Which machine is the bottleneck?
A. M1 C. M3
B. M2 D. M4 Hours Required per Calculator Total Hours
Depart Star 1 Star 2 Available
30.Phil-Fuji Co. manufactures two types of electronic components, both ment
of which must pass through the Assembly and Finishing
1 15 5 450
Departments. The following constraints apply:
2 18 9 720
Unit Contribution Hrs Required per
The marginal contributions are P15 on Star 1 and P0.10 on Star 2.
Product Selling Margin per unit
From the items listed below what are the labor constraints?
Price Unit Assembly Finishing (Assume X represents the number of units of Star 1, Y represents
Component P120 P30 3 4 the number of units of Star 2, P represents profit).
818 A. X > 0 ; Y > 0 C. 15X + 5Y < 450; 18X + 9Y <
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720 is P180,000, other facts are:

B. P = 15X + 10Y; P = 15X + 5Y D. combination of (b) and (c) PRODUCTS
32.Consider the following linear programming problem and assume X Y Z
Selling price P 8 P 23 P 5
that non-negativity constraints apply to the independent variables:
Variable cost 7 12 2
Max CM = $14X + $23Y
No. of hours 1 hr. 10 hrs. 2 hrs.
Subject to
per unit
Constraint 1: 4X + 5Y < 3,200
Market limits 5,000 50,000
Constraint 2: 2X + 6Y < 2,400
Which of the following are feasible solutions to the linear
programming problem? 34.The best possible combination of product is:
A. X = 0, Y = 400 C. X = 800, Y = 640 A. B. C. D.
B. X = 600, Y = 240 D. X = 1,200, Y = 0 Produc 4,000 30,000 30,000 80,000
tX
33.The Katangalan Company makes toys Y and Z each of which needs Produc 4,000 3,000 5,000 0
two processes, cutting and sanding. The contribution margin is tY
P3.00 for product Y and P4.00 for product Z. The table below shows Produc 50,000 50,000 50,000 50,000
the maximum number of units (constraints) of each product that tZ
may be processed in the two departments.
Maximum Capacities (in Product Units) 35.The net profit associated with the best combination of products is:
Product Cutting Sanding A. P33,000 C. P54,000
Y 30 40 B. P50,000 D. P55,000
Z 30 20
Considering the constraint on processing, which combination of Questions 36 through 38 are based on the following information.
product Y and Z maximizes the total contribution margin? In the two following constraint equations, X and Y represent two
A. B. C. D. products (in units) produced by the Generic Co.
Product 0 units 20 units 30 units 40 units Constraint 1: 3X + 5Y < 4,200
Y Constraint 2: 5X + 2Y > 3,000
Product 20 units 10 units 0 units 0 units 36.What is the maximum number of units of Product X that can be
Z produced?
Questions 34 and 35 are based on the following information. A. 600 C. 3,000
D Company has available production capacity of 180,000 hours. This B. 1,400 D. 4,200
can be used to produce 3 products in any combination. Total fixed cost
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37.What is the feasible range for the production of Y?

A. 0 to 631 units C. 0 to 1500 units
B. 0 to 840 units D. 840 to 1,500 units
38.A solution of X = 500 and Y = 600 would violate
A. Constraint 1. C. both constraints.
B. Constraint 2. D. neither constraint.

Theory Problem
1. B 1. C 21. A
2. A 2. C 22. A
3. D 3. A 23. B
4. C 4. C 24. B
5. D 5. C 25. A
6. C 6. C 26. A
7. C 7. B 27. A
8. B 8. B 28. A
9. C 9. B 29. C
10. A 10. C 30. A
11. B 11. A 31. C
12. C 12. D 32. A
13. C 13. B 33. B
14. A 14. B 34. C
15. D 15. B 35. D
16. C 16. A 36. B
17. C 17. C 37. B
18. B 18. C 38. A
19. B 19. B
20. A 20. B

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