1.

It is a mathematical method for making decisions about the likelihood of future events, such as sales and profits, in the
face of uncertainty
a. Learning curves c. Queuing theory
b. Probability distribution theory d. Gantt charting

2. Probability analysis or risk analysis is

a. Incompatible with sensitivity analysis
b. An extension of sensitivity analysis
c. Used only for situations involving three or fewer possible outcomes
d. Used only when the sum of probabilities is greater than one

3. It is found by multiplying the probability of each outcome by its payoff and summing the products. It represents the
long-term average payoff for repeated trials.
a. Expected value c. Present value
b. Face value d. Maturity value

4. Decision tree analysis is

a. An approach to solving problems by dividing a large mathematical model into smaller, more manageable pieces in such
a way that once the smaller problems have been solved, the result is the optimal solution to the overall model
b. A group of mathematical models of systems involving waiting lines
c. Used for situations involving a sequence of events with several possible outcomes associated with each event
d. A network model used to help control large scale, complex projects

5. The following statements apply to decision tree analysis, except

a. Its use is appropriate for decision making under conditions of risk
b. The sum of probabilities of the events is equal to one (1)
c. Not all the events are included in the decision
d. All of the events are mutually exclusive

6. It is a mathematical model that shows a constant percentage reduction in the average direct labor input time required
per unit as the cumulative output doubles.
a. PERT c. Queuing Theory
b. CPM d. Learning Curve

7. Both PERT and CPM are network analysis techniques that are used for
a. Determining the appropriate number of tellers needed in a bank
b. Determining the optimal product mix
c. Project planning and control
d. Family planning and birth control

8. PERT is different from CPM in that

a. Unlike CPM, PERT is a network technique
b. PERT uses probabilities on the activity times, whereas CPM uses deterministic time and cost estimates
c. PERT considers crash efforts and costs, while CPM does not
d. PERT may be thought of as a mere subset of CPM

9. In PERT, the expected time (te) for an activity when given an optimistic time (to), a most likely time (tm) and a
pessimistic time (tp) is calculated by which one of the following formulas?
a. (to + tm + tp) / 3 c. (to + 6tm + tp) / 4
b. [4(to + tm + tp)] / 6 d. (to + 4tm + tp) / 6

10. In a PERT network, the critical path is the path that

a. Has the most number of activities c. Requires the shortest time to complete
b. Requires the longest time to complete d. Has the most slack

11. In a PERT network, slack is the

a. Average of the time estimates for an activity
b. Path that requires the longest completion time
c. Time an activity can be delayed without forcing a delay for the entire project
d. Most likely time estimate for an activity
12. In CPM, crashing the network means
a. Abandoning the entire project for practical reasons
b. Finding the minimum cost for completing the project in minimum time
c. Minimizing the number of activities in the project
d. Working overtime to complete a non-critical path earlier than expected

13. When making a cost-time trade-off in CPM, the first activity that should be crashed is the activity
a. With the lowest crash cost per unit
b. On the critical path with the lowest crash cost per unit
c. On a non-critical path
d. With the longest expected time to complete

14. It is a mathematical technique used to maximize a revenue, contribution margin, or profit function, or minimize a cost
function subject to constraints, such as scarce resources and production capacity
a. PERT c. Linear programming
b. Queuing theory d. High-low points method

15. Linear programming is a mathematical technique that is used to allocate scarce resources. Mathematical expressions
are used to describe a problem. In a linear programming model, the measure of effectiveness that is to be maximized or
minimized is the
a. Set of decision variables c. Constraints function
b. Set of slack variables d. Objective function

16. In a linear programming model, the constraints are

a. Minimized c. The revenues or profits to be maximized
b. The costs d. The scarce resources

17. Mucho Company wants to allocate its variable funds between two investment alternatives: stocks and bonds, which
differ in terms of return and risk. The company will invest at most 60% in either investment choice and desires to earn at
least 20% from the investment. To allocate its available funds between stocks and bonds, the appropriate mathematical
technique that Mucho Company can use is
a. Queuing theory c. PERT/CPM
b. Capital budgeting d. Linear programming

18. To solve a linear programming problem, slack, surplus and artificial variables must be employed. Which of the
following statements about a slack variable is correct?
a. It is the benefit foregone by using a scarce resource in a given way
b. Its total amount varies with change in cost driver, but its cost per cost driver is constant within the relevant range
c. It represents unused capacity and is added to inequalities of the ≤ type to convert them into equalities
d. It refers to the benefit of moving the feasible are

19. The quantitative technique most commonly used to arrive at the optimal solution in linear programming problem is
a. Regression analysis c. Simulation
b. Sensitivity analysis d. Simplex method analysis

20. In linear programming, sensitivity analysis is used to

a. Develop coefficients for the objective function
b. Determine how the optimal solution will react to changes in parameters, such as the objective function coefficient, the
limiting value of a resource constraint, or a constraint coefficient
c. Develop the optimal solution to the problem
d. Identify the constraints