Question 1 - CMA 690 5-21 - Sensitivity Analysis

Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often the actual results achieved from a particular decision are not what was expected when the decision was made. In addition, an alternative that was not selected would have actually been the best decision for the company. The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is

A. Expected value analysis.B. Program Evaluation Review Technique (PERT).C. Linear programming.D. Sensitivity analysis.

A. Expected value analysis is used to determine expected return or cost. Expected value is calculated by multiplying each projected outcome by its corresponding probability and adding the products together. In other words, expected value is the weighted average of the probable outcomes.

B. PERT is a project scheduling technique used to plan and control projects.

C. Linear programming is used to either maximize or minimize some quantity (called the objective function). At the same time, this maximizing or minimizing must be accomplished in the presence of constraints, or restrictions, such as limited quantities of labor or materials. The maximization or minimization must be done without violating any of the constraints.

D. Sensitivity analysis is a process of changing key variables to determine the possible change in the optimal solution because of changes in the variables. It is used to define how sensitive the project (sales for example) is to a change in those variables.

Question 2 - CMA 689 5-13 - Sensitivity Analysis

Sensitivity analysis in linear programming is used to

A. Determine the degree that the constraints vary.B. Develop the technological matrix.C. Test the accuracy of the parameters.D. Determine how the optimal solution would react to changes in parameters.

A. Sensitivity analysis determines the degree of change in the expected result if the constraints vary.

B. The technological matrix is not developed using sensitivity analysis. The technological matrix is an input of a model and is designed by engineers.

C. Sensitivity analysis does not test the accuracy of the parameters. It rather determines the degree of change in the expected result if the parameters vary.

D. Sensitivity analysis encompasses a variety of methods used to determine how an expected result will change if factors that were involved in predicting an amount change.

Question 3 - CMA 1283 5-19 - Sensitivity Analysis

The process of evaluating the effect of changes in variables such as sales price or wage rates on the optimum solution in a linear programming application is called

A. Matrix analysis.B. Regression analysis.C. Sensitivity analysis.

Part 1 : 07/28/10 08:37:06

(c) HOCK international, page 1

D. Iterative analysis.

A. Matrix analysis is incorrect.

B. Regression analysis is used to find a linear relationship between two or more variables.

C. Sensitivity analysis is used to determine the effect that a change in a variable will have on the final result. It enables management to identify which variables are more critical to the ultimate result of a project.

D. Iterative analysis is incorrect.

Part 1 : 07/28/10 08:37:06

(c) HOCK international, page 2