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A Decision Making

TRUE/FALSE

1. The break-even quantity is the volume at which the total revenue equals total cost.Answer: TrueReference:Break-Even AnalysisDifficulty:EasyKeywords:break-even quantity, total revenue, total cost

2. The variable cost is the portion of total cost that remains constant rear!less of chanes inlevels of pro!uction.

Answer: "alseReference:Break-Even AnalysisDifficulty:EasyKeywords:variable cost, level of output, break-even point

#. "i$e! cost is the portion of the total cost that remains constant rear!less of chanes in levelsof output.

Answer: TrueReference:Break-Even AnalysisDifficulty:%o!erateKeywords:fi$e! cost, level of output, break-even quantity

&. 'ensitivity analysis is a technique for systematically chanin parameters in a mo!el to

!etermine the effects of such chanes.Answer: TrueReference:Break-Even AnalysisDifficulty:%o!erateKeywords:sensitivity analysis, parameter, break-even quantity

(. A preference matri$ is a table that allows the manaer to rate an alternative accor!in to oneperformance criterion.

Answer: "alseReference:)reference %atri$Difficulty:%o!erateKeywords:preference matri$, alternative, performance criteria

*. +ecision theory is a eneral approach to !ecision makin when the outcomes associate! withalternatives are often in !oubt.Answer: TrueReference:+ecision TheoryDifficulty:%o!erateKeywords:!ecision theory, uncertainty, risk

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Supplement A Decision Making

. A payoff table shows the amount for each alternative if each possible event occurs.Answer: TrueReference:+ecision TheoryDifficulty:%o!erateKeywords:payoff table, event

. %a$ima$ is a !ecision rule for the pessimist.Answer: "alse

Reference:+ecision TheoryDifficulty:%o!erateKeywords:ma$ima$, optimist, pessimist

. By !efinition, the ma$ima$ an! ma$imin criteria cannot result in the selection of a commonalternative in !ecision makin un!er uncertainty.

Answer: "alseReference:+ecision TheoryDifficulty:%o!erateKeywords:!ecision makin, ma$ima$, ma$imin

1/. %akin a !ecision un!er risk usin the e$pecte! value criterion is the equivalent of usin the0aplace !ecision rule un!er uncertainty.

Answer: TrueReference:+ecision TheoryDifficulty:%o!erateKeywords:0aplace !ecision rule, e$pecte! value

11. The square no!es in a !ecision tree represent the alternatives in a sequential !ecisionsituation.

Answer: "alseReference:+ecision TheoryDifficulty:%o!erateKeywords:no!e, !ecision tree, sequential !ecisions

MULTIPLE CHOICE

12. hich one of the followin statements about break-even analysis for evaluatin pro!ucts orservices is truea. The break-even quantity will ten! to increase as the variable cost per unit of pro!uction

!ecreases.b. As sales increase beyon! the break-even quantity, total before-ta$ profits ten! to !ecrease.c. A restaurant3s openin of !ownsi4e! facilities with only !rive-throuh service is an

e$ample of lowerin fi$e! costs an! the break-even quantity.!. 5ncreasin the unit sellin price has the effect of increasin the break-even quantity.

Answer: c

Reference:Break-Even AnalysisDifficulty:%o!erateKeywords:break-even, fi$e! cost

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1. A :0ittle 'is; restaurant has been opene! as a prototype to test the concept of a smallerfacility with a limite! menu. E$perience !urin the first two years was as follows