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Practice Exam On Management Science

This document provides an overview of key concepts in management science and linear programming techniques. It defines management science as a scientific approach to solving management problems using logical problem solving steps. Linear programming is described as a modeling technique that involves decision variables, an objective function, and constraints to determine the optimal solution. The document outlines various linear programming concepts such as constraints, feasible and infeasible solutions, sensitivity analysis, and the simplex method for solving problems.

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86 views

Practice Exam On Management Science

This document provides an overview of key concepts in management science and linear programming techniques. It defines management science as a scientific approach to solving management problems using logical problem solving steps. Linear programming is described as a modeling technique that involves decision variables, an objective function, and constraints to determine the optimal solution. The document outlines various linear programming concepts such as constraints, feasible and infeasible solutions, sensitivity analysis, and the simplex method for solving problems.

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© © All Rights Reserved
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PRACTICE EXAM ON MANAGEMENT SCIENCE

Management Science
a scientific approach to solving management problems - can be used in a variety of
organizations to solve many different types of problems - encompasses a logical approach to
problem solving

The Steps of the Scientific Method are:


1. Observation
2. Problem Definition
3. Model Construction
4. Model Solution
5. Implementation
Management Scientist
a person skilled in the application of management science techniques

Model
an abstract mathematical representation of a problem situation - a functional relationship
that includes variables, parameters, and equations

Variable
a symbol used to represent an item that can take on any value

Parameters
are known, constant values that are often coefficients of variables in equations - numerical
values that are included in the objective functions and constraints

Data
pieces of information from the problem environment

Management science technique


usually apples to a specific model type

A management science solution


can be either a recommended decision or information that helps a manager make a decision

Implementation
the actual use of a model once it has been developed

Break-even analysis
is a modeling technique to determine the number of units to sell or produce that will result
in zero profit

Fixed costs
independent of volume and remain constant
Variable costs
depend on the number of items produced

Total cost
equals the fixed costs + the variable cost / unit X the volume

Profit
the difference between total revenue (volume multiplied by price) and total cost

Break-even point
is the volume that equates total revenue with total cost where profit is zero

Sensitivity analysis
sees how sensitive a management model is to changes - used to analyze changes in model
parameters - is the analysis of the effect of parameter changes on the optimal solution
In general, an increase in price
lowers the break-even point, all other things held constant

In general, an increase in variable costs


will increase the break-even point, all other things held constant

In general, an increase in fixed costs


will increase the break-even point, all other things held constant

Objectives of a business
frequently are to maximize profit or minimize cost

Linear programming
is a model that consists of linear relationships representing a firm's decision(s), given an
objective and resource constraints
Decision variables
are mathematical symbols that represent levels of activity

Objective function
a linear relationship that reflects the objective of an operation

Model constraint
a linear relationship that represents a restriction on decision making

A linear programming model consists of


decision variables, an objective function, and constraints
Non-negativity constraints
restrict the decision variables to zero or positive values

Feasible solution
does not violate any of the constraints

In-feasible solution
violates at least one of the constraints

Graphical solutions are


limited to linear programming problems with only two decision variables

The graphical method provides


a picture of how a solution is obtained for a linear programming problem

Constraint lines are


plotted as equations
The feasible solution area
is an area on the graph that is bounded by the constraint equations

Optimal solution
is the best feasible solution

The optimal solution point


is the last point the objective function touches as it leaves the feasible solution area

Extreme points
are corner points on the boundary of the feasible solution area
Constraint equations
are solved simultaneously at the optimal extreme point to determine the variable solution
values

Slope
is computed as the "rise" over the "run"

Multiple optimal solutions


can occur when the objective function is parallel to a constraint line - provide greater
flexibility to the decision maker

A slack variable is
added to a </= constraint to convert it to an equation (=)

Slack variable
represents unused resources

A slack variable
contributes nothing to the objective function value

The three types of linear programming constraints are


</=, =, and >/=

The optimal solution of a minimization problem


is at the extreme point closer to the origin

A surplus variable is
subtracted from a >/= constraint to convert it to an equation (=)
Surplus variable
represents an excess above a constraint requirement level

For some linear programming models


the general rules do not always apply

Alternate optimal solutions


are at the endpoints of the constraint line segment that the objective function parallels

In-feasible problem
has no feasible solution area; every possible solution point violates one or more constraint

Unbounded problem
the objective function can increase indefinitely without reaching a maximum value

The solution space - unbound problem


is not completely closed in

The components of a linear programming model are


an objective function, decision variables, and constraints

Proportionality
means the slope of a constraint or objective function line is constant

The terms in the objective function or constraints are


additive
The values of decision variables are continuous or
divisible

All model parameters are assumed to be known with


certainty

Simplex model
a procedure involving a set of mathematical steps to solve linear programming problems

Fractional relationships between variables in contraints


bust be eliminated

Marginal value
the dollar amount one would be willing to pay for one additional resource unit

Sensitivity range
for an objective coefficient is the range of values over which the current optimal solution
point will remain optimal

Other forms of sensitivity analysis include


changing constraint parameter values, adding new constraints, and adding new variables

The sensitivity range for a constraint quantity value


is also the range over which the shadow price is valid

Standard form
requires all variables to be to the left of the inequality and numeric values to the right
Standard form requires that
fractional relationships between variables be eliminated

Double-sub-scripted variable
is simply another form or variable name

Balanced transportation model


supply equals demand such that all constraints are equalities

Unbalanced transportation model


supply does not equal demand, and one set of constraints is </=

Shadow price
is the marginal economic value of one additional unit of a resource

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