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THEORY 6. Which of the following statements is the least pertinent to the Project Evaluation Review
Forecasting Technique (PERT)
1. The calculation of reasonable probabilities about the future, based on the analysis of all the A. It is a system, which uses network analysis and critical path methods.
latest relevant information by tested and logically sound statistical and economic techniques, B. It is more useful for analyzing the interrelationships of time and activities to discover
and applied in terms of an executives personal judgement and knowledge of his business is potential bottlenecks.
A. Budgeting C. Planning and control C. It involves measuring progress in relation to schedule, evaluating changes to schedule,
B. Business forecasting D. Project feasibility studies forecasting future progress and predicting and controlling costs.
D. Time is a primary consideration and this technique is particularly suite for problems, which
Learning curve involve the combination of resources that maximize profits or minimize costs.
2. Which formula describes the learning curve?
A. y = axb C. y = ax-b 7. Which one of the following statements best describes a difference between basic PERT and
B. y = a x
b D. x = ayb the Critical Path Method (CPM) of network analysis?
A. PERT does not allow for slack times on the activities while CPM does.
Project management B. PERT considers only activity cost while CPM considers only activity time.
3. Various tools are employed to control large scale projects. They include all of the following C. PERT uses probability distribution on the activity times while CPM uses point estimates
except: for the activity times.
A. CPM. C. PERT. D. PERT determines the least-cost path through a network while CPM determines the least-
B. Gantt charts. D. Statistical process control. time path through a network.

4. Which of the following terms is not used in project management? 8. When using the PERT method for network analysis, the critical path through the network is
A. Dummy activity. C. Lumpy demand. A. The least cost path. C. The path with the most slack.
B. Latest finish. D. Optimistic time. B. The longest path through the network. D. The shortest path through the network.

5. A management consultant is scheduling a long-term research and development project. The
time table is very tight due to the advent of the rainy season and to inadequate research and
development staff complement. As the requirements are extensive and complex, what is the
most appropriate approach for planning and controlling the government highway project?
A. Cost-volume-profit analysis.
B. Queuing theory analysis.
C. Time-series or trend regression analysis.
D. Program evaluation review technique (PERT)
9. Of these statements, which is the least pertinent to the concept of slack in relation to the
Project Evaluation and Review Technique (PERT)?
A. The less the amount of slack time, the more critical an activity or path.
B. Slack time information is useful for planning and continuous monitoring.
C. It is computed by subtracting the earliest expected time from the earliest allowable time.
D. If not exceeded, non-critical activities can be delayed without delaying the projects
completion time.

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10. In a Program Evaluation and Review Technique (PERT) system, activities along the critical 15. Linear programming models are mathematical techniques in which an objective function is
path: maximized or minimized subject to constraints. These constraints must be fully specified
A. have a slack of zero before a linear programming problem can be solved, and generally described:
B. follow the line of best fit A. Costs. C. Inefficiencies.
C. may be delayed without affecting completion time B. Dependent variables. D. Resources.
D. intersect at a corner point described by the feasible area
16. In a linear programming maximization problem for business problem solving, the coefficient of
11. The process of adding resources to shorten selected activity times on the critical path in the objective function usually are
project scheduling is called A. Variable costs.
A. A branch-and-bound solution. C. Material-requirements planning. B. Marginal contributions per unit.
B. Crashing. D. The Delphi technique. C. Usage rates for scarce resources.
D. Profit based on allocations of overhead and all indirect costs.
Linear Programming
12. A quantitative technique used for selecting the combination of resources that maximize profits 17. A transportation model is a special case of
or minimize costs is A. Dynamic programming model. C. Linear programming model.
A. Curvilenear analysis C. Linear programming B. Economic order quantity model. D. PERT/CPM.
B. Dynamic programming D. Queuing theory
Questions 18 through 20 are based on the following information.
13. Linear programming is used most commonly to determine the ReMetal, Inc. uses the following model to determine blends of new (n) metal and scrap (s) metal.
A. Fastest timing. Max Z = $30N + $70S
B. Most advantageous prices. subject to:
C. Best use of scarce resources. 3N + 2S < 15
D. Mix of variables that will result in the largest quantity. 2N + 4S < 18

14. AB Woods Co. is planning to expand its production facilities, which is at present, a constraint. 18. These mathematical functions are an example of a(n)
You are asked to review the linear programming model. Among the items in the model, which A. Economic order quantity model. C. Parametric model.
will not be found? B. Linear programming model. D. Present value model.
A. Networks.
B. Constraints. 19. The two inequality functions are
C. Slack variables. A. Conditions. C. Objectives.
D. Independent and dependent variables. B. Constraints. D. Shadow prices.

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20. The point where N = 2 and S = 3 would 3. The Sigma Company wants more information on the demand for its products. The following
A. Be a feasible point. C. Lie in a corner. data are relevant
B. Be the optimal solution point. D. Minimize cost. Units demanded Probability of unit demand Total cost of units demanded
0 0.10 P0.00
1 0.15 1.00
PROBLEMS 2 0.20 2.00
Project management 3 0.40 3.00
1. The following information applies to a project: 4 0.10 4.00
Activity Time (days) Immediate Predecessor 5 0.05 5.00
A 5 None What is the total expected value of the total cost of units demanded?
B 3 None A. P2.40 C. P9.00
C 4 A B. P7.40 D. P9.15
D 2 B
E 6 C, D 4. Dough Distributors has decided to increase its daily muffin purchases by 100 boxes. A box of
The earliest completion time for the project is muffins costs $2 and sells for $3 through regular stores. Any boxes not sold through regular
A. 11 days. C. 15 days. stores are sold through Doughs thrift store for $1. Dough assigns the following probabilities to
B. 14 days. D. 20 days. selling additional boxes:
Additional sales Probability
Expected value 60 0.6
2. Sampaguita Company is planning to market a new product. The marketing research staff 100 0.4
prepared the following payoff probability distribution giving the relative likelihood of monthly What is the expected value of Doughs decision to buy 100 additional boxes of muffins?
sales volume levels and the corresponding income (loss) for the new product; A. $28 C. $52
Monthly sales volume Probability Income(loss) B. $40 D. $68
2,500 0.10 P(25,000)
5,000 0.20 7,500 5. The auditor is attempting to evaluate the potential dollar effect of a control breakdown in the
10,000 0.50 37,500 sales cycle. Two controls are involved. The probability that control A will fail is 10%, and the
15,000 0.10 50,000 probability that control B will fail is 5%. The controls are independent such that the failure of
25,000 0.10 75,000 one does not affect the failure of the other. In evaluating the potential exposure to the
The expected value of the monthly income from the new product: organization, the auditor determines that the cost of control A's failure is $10,000, the cost of
A. P18,750 C. P30,250 control B's failure is $25,000, and the cost of failure of both control procedures at the same
B. P22,500 D. P32,750 time is an additional $200,000.

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If the control procedures are not made more effective, the expected cost to the organization is Questions 9 through 13 are based on the following information.
A. $1,000 C. $3,250 The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for
B. $2,250 D. $32,250 $1.00 each, and the cost per pretzel is $0.30. Any unsold pretzels are discarded because they will
be stale before the next home game.
6. In actual business, it is difficult to ascertain the value of information about a future event. The frequency distribution of the demand for pretzels per game is presented below.
However, it is possible to compute the maximum expected value of additional information by Unit Sales Volume Probability
computing the expected value under conditions of certainty and comparing it with the expected 2,000 pretzels .10
value of the best strategy under uncertainty. Assuming: 3,000 pretzels .15
Expected value under certainty conditions P12,000 4,000 pretzels .20
Expected value using best strategy under uncertainty 10,900 5,000 pretzels .35
Expected value of perfect information 1,100 6,000 pretzels .20
This means 9. The estimated demand for pretzels at the next home football game using an expected value
A. Management is uncertain it will incur P10,900. approach is
B. Management is certain it will realize P12,000. A. 4,000 pretzels. C. 5,000 pretzels.
C. Management can afford to spendP1,100 for perfect information. B. 4,400 pretzels. D. 6,000 pretzels.
D. Management can afford to incur P10,900 since it will earn a net income of P1,100.
10. The estimated demand for pretzels at the next home football game using a determinate
Questions 7 and 8 are based on the following information. approach based on the most likely outcome is
A company has the following probabilities of profit (or loss) from an investment opportunity: A. 4,000 pretzels. C. 5,000 pretzels.
Profit Outlook Profit (Loss) Amount Probability B. 4,400 pretzels. D. 6,000 pretzels.
Optimistic $10,000 .30
Most likely 6,000 .55 11. The conditional profit per game of having 4,000 pretzels available but only selling 3,000
Pessimistic (1,000) .15 pretzels is
A. $1,800 C. $2,800
7. What is the expected profit? B. $2,100 D. $3,500
A. $6,000 C. $6,300
B. $6,150 D. $6,450 12. The conditional profit per game of having 4,000 pretzels available and selling all 4,000 pretzels
is
8. How much would the company be willing to pay before investing in the project to learn in A. $800 C. $2,100
advance which of the three scenarios (optimistic, pessimistic, or most likely) would actually B. $1,200 D. $2,800
occur?
A. $0 C. $300
B. $150 D. $550
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13. The conditional profit (loss) per game of having 4,000 pretzels available but being able to sell 15. Applying a deterministic approach, Gleason's revenue from sales of frozen desserts would be
5,000 pretzels if they had been available is A. $216,000. C. $549,000.
A. $(1,225). C. $3,500. B. $540,000. D. Some amount other than those given.
B. $2,800. D. $4,025.
16. The expected value of Gleason's operating profit directly traceable to the sale of frozen
Questions 14 through 18 are based on the following information. desserts is
Gleason Co. has two products, a frozen dessert and ready-to-bake breakfast rolls, ready for A. $120,250. C. $198,250.
introduction. However, plant capacity is limited, and only one product can be introduced at present. B. $150,250. D. Some amount other than those given.
Therefore, Gleason has conducted a market study, at a cost of $26,000, to determine which
product will be more profitable. The results of the study follow. 17. In order to recover the costs of production tooling and advertising for the breakfast rolls,
Sales of Desserts at $1.80/unit Sales of Rolls at $1.20/unit Gleason's sales of the breakfast rolls would have to be
Volume Probability Volume Probability A. 37,500 units. C. 100,000 units.
250,000 .30 200,000 .20 B. 60,000 units. D. Some amount other than those given.
300,000 .40 250,000 .50
350,000 .20 300,000 .20 18. The advertising expense estimated by Gleason for the introduction of the new products is an
400,000 .10 350,000 .10 example of a(n)
The costs associated with the two products have been estimated by Gleason's cost accounting A. Conversion cost. C. Discretionary cost.
department and are shown as follows. B. Committed cost. D. Opportunity cost.
Dessert Rolls
Ingredients per unit $.40 $.25 Decision tree
Direct labor per unit .35 .30 19. Ron Bagley is contemplating whether to investigate a labor efficiency variance in the Assembly
Variable overhead per .40 .20 Department. It will cost $6,000 to undertake the investigation and another $18,000 to correct
unit operations if the department is found to be operating improperly. If the department is
Production tooling* 48,000 25,000 operating improperly and Bagley fails to investigate, operating costs from the various
Advertising 30,000 20,000 inefficiencies are expected to amount to $33,000. Bagley will be indifferent between
*Gleason treats production tooling as a current operating expense rather than capitalizing it as a investigating and not investigating the variance if the probability of improper operation is
fixed asset. A. 0.29 C. 0.60
14. According to Gleason's market study, the expected value of the sales volume of the breakfast B. 0.40 D. 0.71
rolls is
A. 125,000 units. C. 275,000 units. 20. Under favorable weather conditions, the management of Flesher Farms expects its raspberry
B. 260,000 units. D. Some amount other than those given. crop to have a $120,000 market value. An unprotected crop subject to frost has an expected
market value of $80,000. If Flesher protects the raspberries against frost, the market value of
the crop is still expected to be $120,000 under frost-free conditions and $180,000 if a frost
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occurs. What must be the probability of a frost for Flesher to be indifferent to spending Learning curve
$20,000 for tents to provide frost protection? 24. Hennepin Co. used 30 hours to produce the first batch of units. The second batch took an
A. 0.167 C. 0.250 additional 18 hours. How many total hours will the first four batches require?
B. 0.200 D. 0.333 A. 61.44 hours. C. 96.2 hours.
B. 76.8 hours. D. 120.0 hours.
Questions 21 and 22 are based on the following information:
Superior Craft is evaluating the launching of a new product. If the product becomes successful, the 25. Lake Corporation manufactures specialty components for the electronics industry in a highly
present value of future cash flows (excluding investment) is estimated at P2,000,000. If the product labor intensive environment. Are Electronics has asked Lake to bid on a component that Lake
is not successful, the present value of this flow is estimated at P400,000. The required investment made for Arc last month. The previous order was for 80 units and required 120 hours of direct
is P1,000,000. labor to manufacture. Arc would now like 240 additional components. Lake experiences an
21. What are the probabilities that would have to be assigned to the events success and not 80% learning curve on all of its jobs. The number of direct labor hours needed for Lake to
success to make Superior Craft indifferent between the two actions invest and do not complete the 240 additional components is
invest? A. 187.2 C. 307.2
A. B. C. D. B. 256.0 D. 360.0
Probability of success 37.5% 40% 45.5% 50%
Probability of not success 62.5% 60% 54.5% 50% 26. Tofte has a target total labor cost of $1,500 for the first four batches of a product. Labor is
paid $10 an hour. If Tofte expects an 80% learning rate, how many hours should the first
22. If Superior Craft thinks the probability of success is 60%, how much higher would be the batch take?
expected value of the act invest over the expected value of the act do not invest? A. 58.6 hours. C. 96.0 hours.
A. P360,000 C. P600,000 B. 73.2 hours. D. 150 hours.
B. P400,000 D. P1,000,000 27. CBA Company expects a 90% learning curve. The first batch of a new product required 100
hours. The second batch should take
Markov analysis A. 80 hours. C. 95 hours
23. Rusty, the night manager at a local fast food restaurant, has had problems with his employees B. 90 hours. D. 100 hours.
not arriving on time. After doing some research, he discovered that, if his employees were on
time the night before, the probability that they would arrive on time again is .7. On the other Linear programming
hand, if they were late the night before, the probability that they would arrive on time the 28. If plant capacity for cutting time and shaping time is 80 hours and 100 hours, respectively, and
following day is .4. What is the probability that an employee will arrive on time the fourth day if it takes four hours to cut and two hours to shape a standard model and two hours to cut and
they arrived on time the first day? five hours to shape a deluxe model, the maximum number of standard and deluxe models that
A. .575 C. .61 can be produced are:
B. .583 D. .7 A. 20 standard and 20 deluxe D. 40 standard and 20 deluxe
B. 20 standard and 40 deluxe E. 50 standard and 40 deluxe
C. 20 standard and 50 deluxe
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29. Colfax Creations produces three products: A, B, and C. Four machines are used to produce Hours Required per Calculator Total Hours
the products. The sales demands and time on each machine (in minutes) is as follows: Department Star 1 Star 2 Available
Demand Time on M1 Time on M2 Time on M3 Time on M4 1 15 5 450
A 100 10 15 10 5 2 18 9 720
B 80 10 5 10 5 The marginal contributions are P15 on Star 1 and P0.10 on Star 2. From the items listed
C 60 5 5 15 15 below what are the labor constraints? (Assume X represents the number of units of Star 1, Y
There are 2,400 minutes available on each machine during the week. Which machine is the represents the number of units of Star 2, P represents profit).
bottleneck? A. X > 0 ; Y > 0 C. 15X + 5Y < 450; 18X + 9Y < 720
A. M1 C. M3 B. P = 15X + 10Y; P = 15X + 5Y D. combination of (b) and (c)
B. M2 D. M4
32. Consider the following linear programming problem and assume that non-negativity
30. Phil-Fuji Co. manufactures two types of electronic components, both of which must pass constraints apply to the independent variables:
through the Assembly and Finishing Departments. The following constraints apply: Max CM = $14X + $23Y
Subject to
Unit Contribution Hrs Required per unit
Constraint 1: 4X + 5Y < 3,200
Product Selling Price Margin per Unit Assembly Finishing Constraint 2: 2X + 6Y < 2,400
Component 818 P120 P30 3 4 Which of the following are feasible solutions to the linear programming problem?
Component 810 P180 P45 4 6 A. X = 0, Y = 400 C. X = 800, Y = 640
Demand for Component 818 far exceeds the companys capacity, but the company can only B. X = 600, Y = 240 D. X = 1,200, Y = 0
sell 60 units of component 810 each week. Workers in the Assembly department work a total
of 200 hours per week, and workers in the Finishing department work a total of 250 hours per 33. The Katangalan Company makes toys Y and Z each of which needs two processes, cutting
week. The company wants to know how many units of each component to produce to and sanding. The contribution margin is P3.00 for product Y and P4.00 for product Z. The
maximize profit. If X represents the number of units of Component 818 and Y represents the table below shows the maximum number of units (constraints) of each product that may be
number of units of Component 810, the objective function would be processed in the two departments.
A. Maximize 30X + 45Y C. Minimize 30X + 45Y Maximum Capacities (in Product Units)
B. Maximize 120X + 180Y D. Minimize 90X + 135Y Product Cutting Sanding
Y 30 40
31. A mathematical technique that can be used to find the best possible combination of the Z 30 20
companys limited resources is called linear programming. Star Electronics manufactures two Considering the constraint on processing, which combination of product Y and Z maximizes
types of calculators, Star 1 and Star 2. Each calculator is processed in two departments, the total contribution margin?
departments 1 and 2. Daily labor requirements are as follows: A. B. C. D.
Product Y 0 units 20 units 30 units 40 units
Product Z 20 units 10 units 0 units 0 units
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Questions 34 and 35 are based on the following information. 38. A solution of X = 500 and Y = 600 would violate
D Company has available production capacity of 180,000 hours. This can be used to produce 3 A. Constraint 1. C. both constraints.
products in any combination. Total fixed cost is P180,000, other facts are: B. Constraint 2. D. neither constraint.
PRODUCTS
X Y Z
Selling price P 8 P 23 P 5 Theory Problem
Variable cost 7 12 2 1. B 1. C 21. A
No. of hours per unit 1 hr. 10 hrs. 2 hrs. 2. A 2. C 22. A
Market limits 5,000 50,000 3. D 3. A 23. B
4. C 4. C 24. B
34. The best possible combination of product is: 5. D 5. C 25. A
A. B. C. D. 6. C 6. C 26. A
Product X 4,000 30,000 30,000 80,000 7. C 7. B 27. A
Product Y 4,000 3,000 5,000 0 8. B 8. B 28. A
Product Z 50,000 50,000 50,000 50,000 9. C 9. B 29. C
10. A 10. C 30. A
35. The net profit associated with the best combination of products is: 11. B 11. A 31. C
A. P33,000 C. P54,000 12. C 12. D 32. A
B. P50,000 D. P55,000 13. C 13. B 33. B
14. A 14. B 34. C
Questions 36 through 38 are based on the following information. 15. D 15. B 35. D
In the two following constraint equations, X and Y represent two products (in units) produced by the 16. C 16. A 36. B
Generic Co. 17. C 17. C 37. B
Constraint 1: 3X + 5Y < 4,200 18. B 18. C 38. A
Constraint 2: 5X + 2Y > 3,000 19. B 19. B
36. What is the maximum number of units of Product X that can be produced? 20. A 20. B
A. 600 C. 3,000
B. 1,400 D. 4,200

37. What is the feasible range for the production of Y?

A. 0 to 631 units C. 0 to 1500 units
B. 0 to 840 units D. 840 to 1,500 units
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