Thank You All for Your Great Responses

This document is for review purposes and does not represent every type of problem that may be on the 40 question QMB3600 cumulative final exam.

1. This problem is in reference to students who may or may not take advantage of the opportunities provided in QMB such as homework. Some of the students pass the course, and some of them do not pass. Research indicates that 40% of the students do the assigned homework. Of the students who do homework, there is an 80% chance they will pass the course. The probability of not passing if the student does not do the home work is 90%. What is the probability of a student not doing homework or passing?

A. .32 B. .52 C. .94 D. .92 E. .38

2. Suppose that for a certain football game the probability that the home team will be ahead at half-time is 0.60 and the probability that the home team will be ahead at half- time as well as at the final gun is 0.45. What is the probability that the home team will win this game given that it is ahead at the half?

A. .45 B. .75 C. .15 D. .27 E. None of the above.

3. A company markets two products (Product A and Product B) through mail order. The company will market them in sequence with the first mail order offer for product A. It f feels that there is a 30% chance that any customer will purchase product A. Product B is offered some months later. It is felt, for product B, that there is a 30% chance of selling product B to a customer if the customer purchased product A and a 5% chance of selling product B to a customer who did not purchase product A.

What is the probability of not selling product B to a particular customer?

A. .875 B. .665 C. .125 D. .210 E. None of the above

1 4. A quality control department finds that it accepted only 5% of all bad items and it rejected only 1% of good items. A supplier has just delivered a shipment of a certain item. Past records show that only 90% of the parts of that supplier are good. If the department accepts an item, what is the probability that the item is bad? Round your answer to five decimal places.

A. 0.05000 B. 0.00558 C. 0.35714 D. 0.09635 E. None of the above

5. The probability that house sales will increase over the next six months is estimated at 0.25. It is also estimated that the probability is 0.74 that 30 year fixed-loan mortgage rates will increase over this period. Economists estimate that the probability is 0.89 that either housing sales or interest rates will increase.

The probability that both house sales and interest rates will increase is estimated at: A. .100 B. .185 C. .705 D. .900 E. .500

6. Over the last 100 business days, Harry had 20 customers on 30 of those days, 25 customers on 20 days, 35 customers on 30 days, 40 customers on 10 days, and 45 customers on 10 days. What is the variance of the number of Harry’s customers?

A. 30 B. 38 C. 59 D. 75 E. 83

7. What is the probability that exactly 1 out of 10 cars experience a breakdown if the probability of a breakdown is 30%? A. .5121 B. .1211 C. .0282 D. .3828 E. .4276

2 8. An accounts receivable auditor is examining accounts for a client. The accounts receivable balance can be considered as a continuous random variable that exhibits normal distribution characteristics. The mean amount due per account is $5000. The standard deviation is $1000. The auditor selects an account at random.

The probability that the account selected by the Auditor has a balance which is outside of the range between $6500 and $7000 is:

A. .05 B. .10 C. 1.20 D. .96 E. .00

9. Suppose the length of time (in days) between sales for an automobile salesperson is modeled as an exponential distribution with a mean of 2 days. What is the probability the salesperson goes more than 5 days without a sale?

A. .75 B. .92 C. .08 D. .40 E. None of the above.

10. During lunch time, customers arrive at Joe’s Lunch counter according to a Poisson distribution with an average of 2 per 30 second period. What is the probability of having more than two arrivals in a two-minute period?

A. .9863 B. .9970 C. .0027 D .7619 E. None of the above

3 Use the following to answer questions 11-12

The new owner of a beauty shop is trying to decide whether to hire one, two, or three beauticians. She estimates that profits next year (in thousands of dollars) will vary with demand for her services and has estimated demand in three categories low, medium and high.

NUMBER OF DEMAND BEAUTICIANS LOW MEDIUM HIGH One 50 75 100 Two 0 100 100 Three 100 70 300

11. If she uses the optimistic criterion, how many beauticians will she decide to hire? A. one B. two C. three D. either one or two E. either two or three

12. If she uses the minimax regret criterion, how many beauticians will she decide to hire? A. one B. two C. three D. either one or two E. either two or three

4 Use the following decision tree to respond to the next 5 questions:

Low Demand .75 30 Small Store 6 Survey Shows High Demand .25 Low Demand P=.60 50 3 Low Demand .75 10 Large 7 Store High Demand .25 80 Survey 2 Low Demand .125 Small 30 Store 1 8 High Demand Survey Shows .875 50 High Demand P=.40 4 Low Demand .125 10

Large 9 Store High Demand .875 80 No Survey Low Demand .50 30 Small 1 Store 0 0 High Demand .50 50 5 Low Demand .50 10 1 Large 1 Store High Demand .50 80

5 13. What is the expected value at node 4?

A. 47.50 B. 43.75 C. 70.00 D. 45.00 E. 71.25

14. What is the expected value of perfect information?

A. 45.00 B. 40.00 C. 10.00 D. 5.00 E. 49.25

15. What is the expected value at node 2? A. 35.00 B. 7.50 C. 47.50 D. 49.50 E. 55.00

16. What is the best decision strategy for the manager? A. Do not do the survey, select a large store B. Do not do the survey, select a Small store C. Do the survey. If the survey shows low demand then select a small store; If the survey shows high demand then select a large store. D. Do the survey. If the survey shows low demand then select a large store; If the survey shows high demand then select a small store. E. None of the above is correct

17. What is the expected value of sample information? A. 45.00 B. 71.25 C. 49.50 D. 1.25 E. 4.50

6 18. A statistician working for a car manufacturer developed a statistical model for predicting delivery time (the number of days between ordering a car and actual delivery) of a particular model for which there is a range of factory-fitted options. Use the output below to forecast the difference in delivery times for cars with 6 options and 9 options, rounded to two decimal places.

A. 4.38 B. 3.28 C. 6.58 D. 9.84 E. 29.73

SUMMARY OUTPUT Regression Statistics Multiple R 0.92 R Square 0.85 Adjusted R Square 0.83 Standard Error 4.38 Observations 10 Analysis of Variance df SS Regression 1 890.19 Residual 8 153.41 Total 9 1043.59 Coefficients Standard Error Intercept 29.73 2.99 Factory-Fitted Options 3.28 0.48

7 19. Given the table below what is the MAD and the MSE?

Period Actual Forecast 1 95 100 2 108 110 3 123 120 4 130 130

MAD = ______MSE = ______

20. The Acme Computer Company has recorded sales of one of its products for a six-week period: Using the three-week simple moving-average method, forecast sales for week 7.

A. 20 B. 21 C. 22 D. 23 F. 24

21. Shown below are data that reflect the number of daily traffic accidents at a dangerous city intersection. The regression equation is: number of accidents = 5.3 + 0.5 t What is the forecasted number of accidents for day 6?

Day (t) number of accidents 1 5 2 7 3 8 4 6 5 8

A. 8.0 B. 5.8 C. 8.3 D. 0.6 E. 9.0

8 22. The following table contains the number of consumer complaints received in a Publix supermarket in Florida. Use exponential smoothing with a constant of α = 0.33 to forecast the number of complaints in March, round to the nearest whole number of complaints. Month Number of Complaints January 36 February 45 March 81 April 90 May 108 June 144

A. 39 B. 42 C. 45 D. 53 E. 64

For the next 3 questions, consider the following summary output from Microsoft Excel for a simple regression of Halliburton (ticker symbol HAL) weekly stock prices on the S&P500 stock index, for the period January 2004 through August 2006.

SUMMARY OUTPUT Regression Statistics Multiple R 0.93 R Square 0.87 Adjusted R 0.86 StandardSquare Error 3.20 Observations 140

ANOVA Df SS MS F Significanc Regression 1 9067.88 9067.8 884.90 6.84E-62e F Residual 138 1414.13 10.249 Total 139 10482.0

Coefficient Standard t Stat P-value Lower 95% Upper Intercept -121.65s Error4.914 -24.74 1.37E- -131.37 -111.9395% S&P500 Index 0.122 0.004 29.75 6.84E-52 0.11 0.13 62 23. According to the regression model, the correlation between Halliburton’s stock price and the S&P500 index value is:

A. Positive. B. Negative. C. Significant and either positive or negative. D. Significant, but it cannot be determined whether the correlation is positive or negative. E. Not significant.

9 24. The regression model ABOVE is:

A. Not significant, because the standard error of the intercept is high compared to the standard error of the independent variable. B. Significant at the 0.01 level, because the coefficient of determination is less than 0.05. C. Significant at the 0.05 level, because the p-value is less than 0.05. D. Not significant, because the coefficient of determination is larger than 1.0. E. Significant at the 0.01 level, because the t-statistic is negative.

25. According to the regression model ABOVE, when the S&P 500 index value is 1,000, the forecasted Halliburton stock price is: A. $29.75/share. B. $0.35/share. C. $122/share. D. $121.65/share. E. Cannot be determined from the tabulated data.

The S&P index value must be ______for the Halliburton stock to be priced at $24.75

26. Corporate AAA bond interest rates for 12 consecutive months are 9.5%, 9.3%, 9.4%, 9.6%, 9.8%, 9.7%, 9.8%, 10.5%, 9.9%, 9.7%, 9.6% and 9.6%. The three-month weighted moving average forecast (with weights 0.2, 0.4 and 0.4 - from oldest to most recent respectively) for the next month, rounded to two decimal places, is:

A. 9.60% B. 9.65% C. 9.70% D. 9.62% E. None of the above.

10 Questions 27 & 28 apply to this information: Quill Manufacturing Business makes two models of marking pens. An unlabeled graph for this problem and the requirements for each lot of pens in the three manufacturing departments are given below. All three departments are necessary in the production of both types of pens. The profit for either kind of pen is $1000 per lot. An unlabeled graph for this problem is given below. The dotted line represents the objective function line.

Fliptop Model Tiptop Model Available production hrs. Ink Assembly 3 4 36 Molding Time 5 4 40 Plastic 5 2 30

0 0 5 10 15

27. What is the optimal production quantity of the Fliptop model? A. 5 lots B. 4 lots C. 2 lots D. 7 lots E. 6 lots

28. If all the constraint inequalities in the original problem were ≥, then the following is true:

A. The value of the objective function at the optimum solution is zero B. There will be multiple optimal solutions C. The problem will become unbounded D. The problem has a unique solution E. None of the above is true

11 29. Let M be the number of units to make and B be the number of units to buy of a certain product. If it costs $2 to make a unit and $3 to buy a unit and 4000 units are needed, the objective function of the LP model to minimize the cost of production would be, A. Min 4000 (M + B) B. Max 8000M + 12000B C. Min 2M + 3B D. Max 2M + 3B E. Min 4000U -2M-3B 30. The Quiet Meadow Studio sells photographs and prints. It cost $20 to purchase each photograph and it takes 2 hours to frame it. It costs $25 to purchase each print and it takes 5 hours to frame it. The store has at most $400 to spend and at most 60 hours to frame. It makes $30 profit on each photograph and $50 profit on each print. Determine the maximum profit. A. 360 B. 600 C. 700 D. 740 E. 800

12 Questions 31 & 32 apply to this information: Quality Bike Maps has produced four map designs for the local area. A limited amount of time (in minutes) is allocated to the printing, cutting and folding of each map. Additionally, at least one thousand of map designs A, B, and C must be printed. The profit per map is $1 for A and B and $2 for C and D. The Excel output is provided below. Max Profit = A + B + 2 C + 2 D s.t. A + 2 B + 3 C + 3 D < 15000 Print 2 A + 4 B + C + 3 D < 20000 Cut 3 A + 2 B + 5 C + 3 D < 20000 Fold A > 1000 Print A B > 1000 Print B C > 1000 Print C

Microsoft Excel 14.0 Sensitivity Report Objective Function Value $10,166.67

Variable Cells Final Reduced Objective Allowable Allowable Cell Name Value Cost Coefficient Increase Decrease $B$1 8 Map A 1500 0 1 1 0.333333333 $C$1 8 Map B 1000 0 1 0.333333333 1E+30 $D$1 8 Map C 1000 0 2 0.333333333 1E+30 $E$1 8 Map D 2833.333333 0 2 1 0.5

Constraints Final Shadow Constraint Allowable Allowable Cell Name Value Price R.H. Side Increase Decrease $B$2 4 Print 15000 0.5 15000 1000 5666.666667 $B$2 5 Cut 16500 0 20000 1E+30 3500 $B$2 6 Fold 20000 0.166666667 20000 7000 1000 $B$2 7 Print A 1500 0 1000 500 1E+30 $B$2 8 Print B 1000 -0.33333333 1000 1750 1000 $B$2 9 Print C 1000 -0.33333333 1000 500 1000

31. Answer the following question using the Excel output above. Which constraint(s) are binding? A. Print and Fold B. Cut and Print A C. Print B and Print C D. Print and Cut E. Print, Fold, Print B and Print C

13 32. Answer the following question using the Excel output above. Keeping within the confines of the problem, the profit on Map A has increased by one dollar. Determine the new objective function value. A. 1,500 B. 11,166.67 C. 11,500.67 D. 11,666.67 E. 12,566.67

33. Quentin Magic Brown manufactures sports shoes and wants to maximize the company's profits. The company makes two types of sport shoe, Airwalkers and Bouncy Basketball shoes. The company earns $10 profit on each pair of Airwalkers and $18 profit on each pair of Bouncy Basketball shoes. The manufacturing process includes cutting the materials on a machine and having workers assemble the pieces. Each pair of Airwalkers requires 3 minutes of cutting time and the Bouncy Basketball shoes require 2 minutes. The machines that cut the material can run at most 1200 minutes a week. Each worker takes 7 hours to assemble a pair of Airwalkers and 8 hours to assemble a pair of Bouncy Basketball shoes; the maximum number of hours available is 3500 per week. Determine the maximum profit for this problem?

A. $3200 B. $4000 C. $4280 D. $6295 E. $7875

15 Questions 34-37 apply to the Excel output for the Quantum Mo-Botics model is below. The company makes three types of machines and has limitations with regards to the amount of skilled and unskilled labor hours available and time on the assembly line.

MAX Profit = 800SemiAuto+1000Robotic + 500Manual s.t. 30SemiAuto + 100Robotic + 45Manual < 4500 Skilled Labor 100SemiAuto + 70Robotic + 90Manual < 9000 Unskilled Labor 15SemiAuto + 20Robotic + 10Manual < 2000 Assembly Line

Microsoft Excel 14.0 Sensitivity Report Objective Function Value $ 82,025.32

Variable Cells Final Reduced Objective Allowable Allowable Cell Name Value Cost Coefficient Increase Decrease $B$18 SemiAuto 74.05063291 0 800 628.5714286 432.4786325 $C$18 Robotic 22.78481013 0 1000 1666.666667 440 $D$18 Manual 0 -320.253164 500 320.2531646 1E+30

Constraints Final Shadow Constraint Allowable Allowable Cell Name Value Price R.H. Side Increase Decrease $B$24 Skilled labor 4500 5.569620253 4500 3605.263158 1800 $B$25 Unskilled labor 9000 6.329113924 9000 3805.555556 5850 $B$26 Assembly line 1566.455696 0 2000 1E+30 433.5443038

34. Answer the following question using the Excel output above, determine the new objective function value if the profit on the second variable, Robotic, increases by $1000?

A. $22,785.00 B. $19,125.64 C. $33,800.00 D. $102,805.32 E. $104,810.32

35. Answer the following question using the Excel output above. Keeping within the confines of the problem, you are required to hire a full time (40 hours) person who is qualified to work in any department. Select the constraint where you will gain the most profit and determine the additional profit to be gained?

A. $253.16 B. $222.80 C. $341.00 D. $129.50 E. $119.50

16 36. Answer the following question using the Excel output above. Keeping within the confines of the problem, how many more hours of skilled workers could you add to the department?

A. 2875.33 B. 1280.56 C. 1550.56 D. 3805.56 E. 3605.26

37. Using the Excel output above, how much is each additional unit of unskilled labor worth?

A. $74.500 B. $22.790 C. $5.570 D. $6.329 E. $3.250

17 38. An ice cream plant make’s Chocolate and Strawberry ice cream. There is $40 profit for a case of Chocolate and $32 for a case of Strawberry and has the following constraints:

32C + 8S < 4,800 Flavoring 28C + 32S < 14,000 Coloring a. What is the optimal solution? b. Now add a constraint: demand for Strawberry is always less than 200 cases and determine the optimal solution. c. Add another constraint: demand for Chocolate is always less than 400 cases and determine the optimal solution.

18 39. Using the decision table below a. Determine the expected value for the best decision b. Determine the most you would pay for a highly reliable forecast.

0.2 0.7 0.1 S1 S2 S3 D1 500 300 -400 D2 600 200 200 D3 -100 -300 900

40. In a survey about soft drinks it was found that 5% of the respondents like diet soft drinks. 12% of them liked the brand Coke. Of all the Diet soda drinkers 40% liked Coke. a. What is the probability that a respondent like Coke and Diet drinks? b. What is the probability that the respondent like Diet or not Coke? c. Of the people who did not like diet drinks what is the probability that that liked Coke?