final exam

1. A machine shop owner must decide between purchasing a new drill press, grinder, lathe, or stamper.  The income from each machine will be determined by whether the company succeeds in getting a government contract.  The profit (or loss) from each alternative purchase is provided below.  Apply the pessimistic Maximin Rule to select the appropriate machine to purchase.

Purchase	Contract	No Contract
Drill Press	40000	-8000
Grinder	20000	4000
Lathe	15000	10000
Stamper	8000	12000

	Lathe
	Drill Press

	Stamper
	Grinder

2. A lawn and garden wholesaler has annual demand of 2,400 ceramic pots.  These pots are purchased in lots of 400 units.  The cost to place each order is $35 and the holding cost is $4 per pot.  Calculate the wholesaler's annual storage cost of ceramic pots.

3. A manager is comparing alternative investments of $100,000.  One investment being considered pays 5% interest compounded annually for 7 years.  What is the expected future value of this investment at the end of 7 years?

4. A seasonal index for October fuel usage of 109.4 indicates:

 

	Forecasted usage for next October should be 109.4% of this October's level
	October usage is forecasted to be 9.4% higher than September usage

	October fuel usage averages 9.4% of the total annual usage
	October fuel usage averages 9.4% above the long-term trend

5. A reorder system operating under uncertain demand requires:

 

	a Kanban system of inventory control
	economic order quantities

	variable reorder levels
	buffer stock

6. The discount rate is used to account for the timing of a series of cash flows.  The discount rate which yields a net present value equal to zero is called the:

	accounting rate of return
	NPV

	discount factor
	internal rate of return