BUSOBA 2321 – Midterm Exam – business operations study
material
characteristics of a good decision - CORRECT ANSWER ✔✔-based on logic
-considers all options and info available
-sometimes gives unfavorable results
5 steps of the decision making process - CORRECT ANSWER ✔✔1) define problem
2) list all alternatives (options, rows)
3) identify outcomes (states of nature, columns) for each alternative
4) identify payoff for each combo of alternatives and outcome
5) pick a technique
profit = - CORRECT ANSWER ✔✔revenue - cost
revenue = - CORRECT ANSWER ✔✔Price x Quantity
costs = - CORRECT ANSWER ✔✔fixed costs + (quantity x variable costs)
Profit line equation - CORRECT ANSWER ✔✔(P-VC) x Q - FC
break even point graph - CORRECT ANSWER ✔✔FC= intercept
(P-VC)= slope
x intercept = break even point
indifference point - CORRECT ANSWER ✔✔when total costs are equal to profit
indifference point equation (with price) - CORRECT ANSWER ✔✔(Pa-VCa)Q-FCa=(Pb-VCb)Q-FCb
, indifference point equation (with costs only) - CORRECT ANSWER ✔✔FCa+VCa*Q=FCb+VCb*Q
Steps to calculating indifference point - CORRECT ANSWER ✔✔1) Determine Equations for each
2) Set each equation equal to each other and solve for Q
3) make indifference point table, set test points, plug back into equation
4) determine which points yield the highest profit
MAXIMAX - CORRECT ANSWER ✔✔optimistic, choosing biggest return option (rows), then max of
these options
MAXMIN - CORRECT ANSWER ✔✔pessimistic, choosing the smallest return option (rows), then take
the max of these options
MINIMAX Regret - CORRECT ANSWER ✔✔1) find best outcome for each state of nature (column)
2) determine the regret for each combo
- what you could have had - what you got aka
best payoff - actual payoff
3) find the max regret of each option (row)
4) take the min of these max'sperfec
EMV stands for - CORRECT ANSWER ✔✔expected monetary value
EMV 's are - CORRECT ANSWER ✔✔the lines on your graph
how to find EMV - CORRECT ANSWER ✔✔Value (p) + Value (p-1)
EMV Max - CORRECT ANSWER ✔✔range of solutions
material
characteristics of a good decision - CORRECT ANSWER ✔✔-based on logic
-considers all options and info available
-sometimes gives unfavorable results
5 steps of the decision making process - CORRECT ANSWER ✔✔1) define problem
2) list all alternatives (options, rows)
3) identify outcomes (states of nature, columns) for each alternative
4) identify payoff for each combo of alternatives and outcome
5) pick a technique
profit = - CORRECT ANSWER ✔✔revenue - cost
revenue = - CORRECT ANSWER ✔✔Price x Quantity
costs = - CORRECT ANSWER ✔✔fixed costs + (quantity x variable costs)
Profit line equation - CORRECT ANSWER ✔✔(P-VC) x Q - FC
break even point graph - CORRECT ANSWER ✔✔FC= intercept
(P-VC)= slope
x intercept = break even point
indifference point - CORRECT ANSWER ✔✔when total costs are equal to profit
indifference point equation (with price) - CORRECT ANSWER ✔✔(Pa-VCa)Q-FCa=(Pb-VCb)Q-FCb
, indifference point equation (with costs only) - CORRECT ANSWER ✔✔FCa+VCa*Q=FCb+VCb*Q
Steps to calculating indifference point - CORRECT ANSWER ✔✔1) Determine Equations for each
2) Set each equation equal to each other and solve for Q
3) make indifference point table, set test points, plug back into equation
4) determine which points yield the highest profit
MAXIMAX - CORRECT ANSWER ✔✔optimistic, choosing biggest return option (rows), then max of
these options
MAXMIN - CORRECT ANSWER ✔✔pessimistic, choosing the smallest return option (rows), then take
the max of these options
MINIMAX Regret - CORRECT ANSWER ✔✔1) find best outcome for each state of nature (column)
2) determine the regret for each combo
- what you could have had - what you got aka
best payoff - actual payoff
3) find the max regret of each option (row)
4) take the min of these max'sperfec
EMV stands for - CORRECT ANSWER ✔✔expected monetary value
EMV 's are - CORRECT ANSWER ✔✔the lines on your graph
how to find EMV - CORRECT ANSWER ✔✔Value (p) + Value (p-1)
EMV Max - CORRECT ANSWER ✔✔range of solutions
