Q&A Hero

Q: In a linear programming problem, what is the relationship between the constraints and the feasible region? Explain with reference to a problem with two variables.

Q: Facility level costs vary with the number of units or batches produced.

Q: What are the requirements of all linear programming problems?

Q: Product level costs do not vary with the number of units or batches produced.

Q: Identify three examples of resources that are typically constrained in a linear programming problem.

Q: What is linear programming?

Q: Batch level costs vary with the number of units produced.

Q: The final step of activity-based costing assigns overhead costs to pools rather than to products.

Q: A synonym for shadow price is __________.

Q: Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

Q: Two methods of conducting sensitivity analysis on solved linear programming problems are __________ and __________.

Q: Activity-based costing eliminates the need for overhead allocation rates.

Q: __________ is an analysis that projects how much a solution might change if there were changes in the variables or input data.

Q: Facility level costs are not traceable to individual product lines, batches or units.

Q: Two methods of solving linear programming problems by hand include the corner-point method and the__________.

Q: The __________ is the set of all feasible combinations of the decision variables.

Q: Product design costs are an example of a unit level activity.

Q: __________ are restrictions that limit the degree to which a manager can pursue an objective.

Q: Machine setup costs are an example of a batch level activity.

Q: Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.

Q: The __________ is a mathematical expression in linear programming that maximizes or minimizes some quantity.

Q: The requirements of linear programming problems include an objective function, the presence of constraints, objective and constraints expressed in linear equalities or inequalities, and __________.

Q: In activity-based costing, an activity can involve several related tasks.

Q: __________ is a mathematical technique designed to help operations managers plan and make decisions relative to the trade-offs necessary to allocate resources.

Q: The more activities tracked by activity-based costing, the more accurately overhead costs are assigned.

Q: The difference between minimization and maximization problems is that A) minimization problems cannot be solved with the corner-point method B) maximization problems often have unbounded regions C) minimization problems often have unbounded regions D) minimization problems cannot have shadow prices E) None of the above are true.

Q: Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

Q: Suppose that the shadow price for assembly time is $5/hour. If all assembly hours were used under the initial LP solution and workers normally make $4/hour but can work overtime for $6/hour, what should management do? A) do not change available hours for assembly time B) decrease available hours for assembly time C) increase available hours for assembly time D) not enough information E) Either A or C will result in larger profits than B.

Q: Sensitivity analysis helps to A) see the value of increased scarce resources B) determine even better solutions C) see the impact of parameter changes D) A and C E) A, B, and C

Q: A company produces surgical equipment that goes through threes processes, 1A1, 2B2, and 3C3, before they are complete. Expected costs and activities for the three departments are shown below. All departments have departmental overhead rates based on direct labor hours. Therefore, the overhead rate for each department is $5 per direct labor hour. Department 1A1 Department 2B2 Department 3C3 Machine hours 15,000 MH 25,000 MH 20,000 MH Direct labor hours 22,830 DLH 10,650 DLH 29,200 DLH Overhead costs $114,150 $213,000 $73,000

Q: A company produces garden benches that go through two operations, operation 1A1 and operation 2B2, before they are complete. Expected costs and activities for the two departments are shown below. Both departments have departmental overhead rates based on machine hours. Therefore, the overhead rates for department 1A1 and department 2B2 are the same. Department 1A1 Department 2B2 Machine hours 70,000 MH 60,000 MH Direct labor hours 56,350 DLH 50,160 DLH Overhead costs $225,400 $250,800

Q: A linear programming maximization problem has been solved. In the optimal solution, two resources are scarce. If an added amount could be found for only one of these resources, how would the optimal solution be changed? A) The shadow price of the added resource will rise. B) The solution stays the same; the extra resource can't be used without more of the other scarce resource. C) The extra resource will cause the value of the objective to fall. D) The optimal mix will be rearranged to use the added resource, and the value of the objective function will rise. E) none of the above

Q: A company produces computer chips that go through two operations, operation A1 and operation B2, before they are complete. Expected costs and activities for the two departments are shown below. Departmental overhead rates are based on machine hours in department A1 and direct labor hours in department B2. Therefore, the overhead rates for department A1 and department B2 are $3.62 per machine hour and $5.73 per direct labor hour, respectively. Department A1 Department B2 Machine hours 40,000 MH 30,000 MH Direct labor hours 36,200 DLH 28,650 DLH Overhead costs $144,800 $171,900

Q: Consider the following constraints from a two-variable linear program. (1) X u22651 (2) Y u22651 (3) X + Y u2264 9 If these are the only constraints, which of the following points (X, Y) cannot be the optimal solution? A) (1, 1) B) (1, 8) C) (8, 1) D) (4, 4) E) The question cannot be answered without knowing the objective function.

Q: A maximizing linear programming problem with constraints C1, C2, and C3 has been solved. The dual values associated with the problem are C1 = $2, C2 = $0.50, and C3 = $0. Which statement below is false? A) One more unit of the resource in C1 would add $2 to the objective function value. B) One more unit of the resource in C2 would add one more unit each of X and Y. C) The resource in C3 has not been used up D) The resources in C1 and in C2, but not in C3, are scarce. E) All of the above are true.

Q: A company produces paint that goes through two operations, operation A and operation B, before it is complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for Department B based on machine hours is $4 per machine hour. Department A Department B Machine hours 50,000 MH 60,000 MH Direct labor hours 78,500 DLH 100,800 DLH Overhead costs $392,500 $403,200

Q: A company produces heating elements that go through two operations, casting and assembling, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the assembling department based on direct labor hours is $5 per direct labor hour. Casting Assembling Direct labor hours 1,875 DLH 7,500 DLH Machine hours 12,500 MH 3,750 MH Overhead costs $75,000 $37,500

Q: A linear programming problem has three constraints: 2X + 10Y u2264 1004X + 6Y u2264 1206X + 3Y u2265 90 What is the largest quantity of X that can be made without violating any of these constraints? A) 50 B) 30 C) 20 D) 15 E) 10

Q: Turtle Company produces t-shirts that go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals). Cutting Sewing Direct labor hours 250,000 DLH 75,000 DLH Machine hours 125,000 MH 150,000 MH Overhead costs $500,000 $375,000

Q: A shadow price (or dual value) reflects which of the following in a maximization problem? A) the marginal gain in the objective realized by subtracting one unit of a resource B) the market price that must be paid to obtain additional resources C) the increase in profit that would accompany one added unit of a scarce resource D) the reduction in cost that would accompany a one unit decrease in the resource E) none of the above

Q: The departmental overhead rate method traces costs to each department and then determines an allocation base for each department.

Q: In sensitivity analysis, a zero shadow price (or dual value) for a resource ordinarily means that A) the resource is scarce B) the resource constraint was redundant C) the resource has not been used up D) something is wrong with the problem formulation E) none of the above

Q: The first step in using the departmental overhead rate method requires that overhead be traced to each of the company's departments.

Q: Which of the following correctly describes all iso-profit lines for an LP maximization problem? A) They all pass through the origin B) They are all parallel. C) They all pass through the point of maximum profit. D) Each line passes through at least 2 corners. E) All of the above

Q: If the direct labor time estimates are met, Malone will allocate $10.49 of overhead cost to each unit of Little X.

Q: A linear programming problem has three constraints: 2X + 10Y u2264 1004X + 6Y u2264 1206X + 3Y u2264 90 What is the largest quantity of X that can be made without violating any of these constraints? A) 50 B) 30 C) 20 D) 15 E) 10 Answer: D 28) Suppose that an iso-profit line is given to be X+Y=15. What would be the profit made from producing 20X and 10Y? A) 15 B) 30 C) 0 D) 20X and 10Y is not a feasible solution. E) Unable to determine Answer: B 29) Suppose that an iso-profit line is given to be X+Y=10. Which of the following represents another iso-profit line for the same scenario? A) X+Y=15 B) X-Y=10 C) Y-X=10 D) 2X+Y=10 E) None of the above Answer: A 30) Suppose that a maximization LP problem has corners of (0,0), (10,0), (5,5), and (0,7). If profit is given to be X+ 2Y what is the maximum profit the company can earn? A) $0 B) $10 C) $15 D) $14 E) None of the above or Unable to determine Answer: C 31) Suppose that a maximization LP problem has corners of (0,0), (5,0), and (0,5). How many possible combinations of X and Y will yield the maximum profit if profit is given to be 5X+5Y? A) 0 B) 1 C) 2 D) 5 E) Infinite Answer: E

Q: Malone's plantwide overhead rate will be $20.98 per direct labor hour next year.

Q: A firm makes two products, Y and Z. Each unit of Y costs $10 and sells for $40. Each unit of Z costs $5 and sells for $25. If the firm's goal were to maximize profit, the appropriate objective function would be A) maximize $40Y = $25Z B) maximize $40Y + $25Z C) maximize $30Y + $20Z D) maximize 0.25Y + 0.20Z E) none of the above

Q: Malone has 33,000 total estimated direct labor hours for next year.

Q: A linear programming problem contains a restriction that reads "the quantity of S must be no less than one-fourth as large as T and U combined." Formulate this as a constraint ready for use in problem solving software. A) S / (T + U) u2265 4 B) S - .25T -.25U u2265 0 C) 4S u2264 T + U D) S u2265 4T / 4U E) none of the above

Q: A company estimates total overhead costs for the next year to be $1,200,000 and wishes to use direct labor hours as its overhead allocation base. This company makes two products: (1) Fancy X , which requires three direct labor hours per unit, and (2) Plain X, which requires one direct labor hour per unit. If the company plans to make 10,000 units of Fancy X and 10,000 units of Plain X, then each unit produced will be allocated the same amount of overhead.

Q: A linear programming problem contains a restriction that reads "the quantity of Q must be no larger than the sum of R, S, and T." Formulate this as a constraint ready for use in problem solving software. A) Q + R + S + T u2264 4 B) Q u2265 R + S + T C) Q - R - S - T u2264 0 D) Q / (R + S + T) u2264 0 E) none of the above

Q: A linear programming problem contains a restriction that reads "the quantity of X must be at least three times as large as the quantity of Y." Which of the following inequalities is the proper formulation of this constraint? A) 3X u2265 Y B) X u2264 3Y C) X + Yu22653 D) X - 3Y u2265 0 E) 3X u2264 Y

Q: A company estimates that costs for the next year will be $500,000 for indirect labor, $50,000 for factory utilities, and $1,000,000 for the CEO's salary. The company uses machine hours as its overhead allocation base. If 25,000 machine hours are planned for this next year, then the plantwide overhead rate is $22 per machine hour.

Q: What combination of a and b will yield the optimum for this problem? Maximize $6a + $15b, subject to (1) 4a + 2b < 12 and (2) 5a + 2b < 20 and (3) a, b u2265 0. A) a = 0, b = 0 B) a = 3, b = 3 C) a = 0, b = 6 D) a = 6, b = 0 E) cannot solve without values for a and b Answer: C 19) A maximizing linear programming problem has two constraints: 2X + 4Y < 100 and 3X + 10Y < 210, in addition to constraints stating that both X and Y must be nonnegative. The corner points of the feasible region of this problem are A) (0, 0), (50, 0), (0, 21), and (20, 15) B) (0, 0), (70, 0), (25, 0), and (15, 20) C) (20, 15) D) (0, 0), (0, 100), and (210, 0) E) none of the above Answer: A 20) A linear programming problem has two constraints 2X + 4Y u2264 100 and 1X + 8Y u2264 100, plus nonnegativity constraints on X and Y. Which of the following statements about its feasible region is true? A) There are four corner points including (50, 0) and (0, 12.5). B) The two corner points are (0, 0) and (50, 12.5). C) The graphical origin (0, 0) is not in the feasible region. D) The feasible region includes all points that satisfy one constraint, the other, or both. E) The feasible region cannot be determined without knowing whether the problem is to be minimized or maximized. Answer: A 21) A linear programming problem has two constraints 2X + 4Y u2265 100 and 1X + 8Y u2264 100, plus nonnegativity constraints on X and Y. Which of the following statements about its feasible region is true? A) There are four corner points including (50, 0) and (0, 12.5). B) The two corner points are (0, 0) and (50, 12.5). C) The graphical origin (0, 0) is in the feasible region. D) The feasible region is triangular in shape, bounded by (50, 0), (33-1/3, 8-1/3), and (100, 0). E) The feasible region cannot be determined without knowing whether the problem is to be minimized or maximized. Answer: D 22) A linear programming problem has two constraints 2X + 4Y = 100 and 1X + 8Y u2264 100, plus non-negativity constraints on X and Y. Which of the following statements about its feasible region is true? A) The points (100, 0) and (0, 25) both lie outside the feasible region. B) The two corner points are (33-1/3, 8-1/3) and (50, 0). C) The graphical origin (0, 0) is not in the feasible region. D) The feasible region is a straight line segment, not an area. E) All of the above are true. Answer: E

Q: Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 50,000 direct labor hours are planned for this next year, then the plantwide overhead rate is $.025 per direct labor hour.

Q: What combination of x and y will yield the optimum for this problem? Minimize $3x + $15y, subject to (1) 2x + 4y < 12 and (2) 5x + 2y < 10 and (3) x, y u2265 0. A) x = 2, y = 0 B) x = 0, y = 3 C) x = 0, y = 0 D) x = 1, y = 5 E) none of the above

Q: When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool.

Q: ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.

Q: What combination of x and y will yield the optimum for this problem? Maximize $3x + $15y, subject to (1) 2x + 4y < 12 and (2) 5x + 2y < 10 and (3) x, y u2265 0. A) x = 2, y = 0 B) x = 0, y = 3 C) x = 0, y = 0 D) x = 1, y = 5 E) none of the above

Q: ABC can be used to assign costs to any cost object that is of management interest.

Q: For the constraints given below, which point is in the feasible region of this maximization problem? (1) 14x + 6y < 42 (2) x - y < 3 (3) x, y u2265 0 A) x = 2, y = 1 B) x = 1, y = 5 C) x = -1, y = 1 D) x = 4, y = 4 E) x = 2, y = 8 Answer: A 15) For the two constraints given below, which point is in the feasible region of this minimization problem? (1) 14x + 6y > 42 (2) x - y > 3 A) x = -1, y = 1 B) x = 0, y = 4 C) x = 2, y = 1 D) x = 5, y = 1 E) x = 2, y = 0 Answer: D

Q: Using the iso-profit line solution method to solve a maximization problem requires that we A) find the value of the objective function at the origin B) move the iso-profit line away from the origin until it barely touches some part of the feasible region C) move the iso-cost line to the lowest level that still touches some part of the feasible region D) test the objective function value of every corner point in the feasible region E) none of the above

Q: ABC allocates overhead costs to products based on input measures rather than output measures .

Q: The use of a plantwide overhead rate is not acceptable for external reporting under GAAP .

Q: The region which satisfies all of the constraints in graphical linear programming is called the A) area of optimal solutions B) area of feasible solutions C) profit maximization space D) region of optimality E) region of non-negativity

Q: Which of the following sets of constraints results in an unbounded maximizing problem? A) X + Y > 100 and X + Y < 50 B) X + Y > 15 and X - Y < 10 C) X + Y < 10 and X > 5 D) X < 10 and Y < 20 E) All of the above have a bounded maximum.

Q: Because departmental overhead costs are allocated based on measures closely related to production volume, they accurately assign overhead, such as utility costs.

Q: The corner-point solution method requires A) identifying the corner of the feasible region that has the sharpest angle B) moving the iso-profit line to the highest level that still touches some part of the feasible region C) moving the iso-profit line to the lowest level that still touches some part of the feasible region D) finding the coordinates at each corner of the feasible solution space E) none of the above

Q: Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

Q: Which of the following combinations of constraints has no feasible region? A) X + Y > 15 and X Y < 10 B) X + Y > 5 and X > 10 C) X > 10 and Y > 20 D) X + Y > 100 and X + Y < 50 E) All of the above have a feasible region.

Q: Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

Q: An iso-profit line A) can be used to help solve a profit maximizing linear programming problem B) is parallel to all other iso-profit lines in the same problem C) is a line with the same profit at all points D) all of the above E) none of the above

Q: When products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Q: The feasible region in the diagram below is consistent with which one of the following constraints? A) 8X1 + 4X2 u2265 160 B) 4X1 + 8X2 u2264 160 C) 8X1 - 4X2 u2264 160 D) 8X1 + 4X2 u2264 160 E) 4X1 - 8X2 u2264 160

Q: Allocated overhead costs vary depending upon the allocation methods used.

Q: The feasible region in the diagram below is consistent with which one of the following constraints? A) 8X1 + 4X2 u2264 160 B) 8X1 + 4X2 u2265 160 C) 4X1 + 8X2 u2264 160 D) 8X1 - 4X2 u2264 160 E) 4X1 - 8X2 u2264 160

Q: Some companies allocate their overhead cost using a plantwide overhead rate largely because of its simplicity.

Q: If cars sell for $500 profit and trucks sell for $300 profit which of the following represents the objective function? A) Maximize = 500C+300T B) Minimize = 500C + 300T C) Maximize = 500C 300T D) Minimize = 300T- 500C E) None of the above

Q: The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base; and (2) all products use overhead cost in dissimilar proportions.