1. Orange Service Firm is considering a 3-phase research project.

The time estimates for completion of phase 1 of the

project are:
Optimistic 2 months
Most likely 4 months
Pessimistic 9 months

Using PERT-CPM approach, what is the expected time for completion of phase 1?
a. 4 months c. 5 months
b. 4.5 months d. 5.5 months

2. Apple Company presents the following PERT-CPM data for a certain project:
Activity Time in Weeks Preceding Activity
A 3 -
B 3 A
C 7 A
D 4 A
E 2 B
F 4 B
G 1 C,E
H 5 D

Determine the project’s (A) completion time of the critical path and (B) slack time of the shortest path.
a. (A) 12 weeks (B) 3 weeks c. (A) 11 weeks (B) 2 weeks
b. (A) 12 weeks (B) 2 weeks d. (A) 10 weeks (B) 1 week

3. Grapes Builders Corporation uses the critical path method to monitor construction jobs. The company is currently 2
weeks behind schedule on Job #32, which is subject to a P 10,500 per week completion penalty. Path A-B-C-F-G-H-I has
a normal completion time of 20 weeks. The following activities can be crashed:
Activities Cost to Crash 1 Week Cost to Crash 2 Weeks
BC 8,000 15,000
DE 10,000 19,600
EF 8,800 19,500

Grapes Builders desires to reduce the normal completion time of Job #32 and, at the same time, report the highest possible
income for the year. What should Grapes Builders crash?
a. Activity EF (2 weeks) c. Activity BC (1 week) & activity DE (1 week)
b. Activity BC (1 week) & activity EF (1 week) d. Activity DE (1 week) & activity EF (1 week)

4. A computer store sells four computer models designated P100, A100, R100, and T100. The store manager has made
random number assignments to represent customer choices based on past sales data. The assignments are shown below:
Model Random Numbers
P100 0-1
A100 2-6
R100 7-8
T100 9

The probability that a customer will select model P100 is

a. 10% c. 50%
b. 20% d. Cannot be determined from given information

5. In running a simulation of the computer demand, the following numbers are drawn in sequence: 2, 8 and 6. The
simulation indicates that the third customer will purchase
a. Model P100 c. Model R100
b. Model A100 d. Model T100

6. Banana Company’s outside marketing consultant prepared the following probability distribution describing the relative
likelihood of monthly sales volume levels and related income (loss):
Monthly sales volume Probability Income (loss)
6,000 10% (P 70,000)
12,000 20% 10,000
18,000 40% 60,000
4,000 20% 100,000
30,000 10% 140,000

If Banana decides to market the new product, what is the expected value of the added monthly income?
a. P 240,000 b. P 60,000 c. P 53,000 d. P 48,000
7. A group of kids sells macapuno candies at a basketball game. The candies are sold for P 1.00 each, and the cost per
candy is P 0.30. Any unsold candies are discarded because they will stale before the next basketball game. The frequency
distribution of the demand for candies per basketball game is:
Unit sales volume Probability
2,000 candies 0.10
3,000 candies 0.15
4,000 candies 0.20
5,000 candies 0.35
6,000 candies 0.20

What is the estimated demand for macapuno candies at the next basketball game using an expected value approach?
a. 4,000 candies c. 5,000 candies
b. 4,400 candies d. 6,000 candies

8. What is the estimated demand for macapuno candies at the next basketball game using a deterministic approach based
on the most likely outcome?
a. 4,000 candies c. 5,000 candies
b. 4,400 candies d. 6,000 candies

9. The conditional profit per game of having 4,000 candies available but only selling 3,000 candies is
a. P 1,800 c. P 2,800
b. P 2,100 d. P 4,000

10. Raspberry Enterprises, distributor of compact disks (CDs), is developing its budgeted cost of goods sold for 2020.
Raspberry has developed the following range of sales estimates and associated probabilities:
Sales estimate Probability
60,000 25%
85,000 40%
100,000 35%

Raspberry’s cost of goods sold averages 80% of sales. What is the expected value of Raspberry’s 2020 cost of goods sold?
a. P 67,200 c. P 84,000
b. P 68,000 d. P 85,000

11. The Pineapple Company produces its product in batches of 100 units. The units each batch are then tested. The results
from testing the most recent 200 batches are shown below:
Units Failed per Batch Number of Batches
0 50
1 40
2 40
3 30
4 40
5 or more 0
Total 200

What is the expected value of the number of failed units per batch?
a. 0 c. 2.00
b. 1.85 d. 13.33

12. The probabilities shown in the table represent the estimate of sales for a new product:
Sales (unit) Probability
0-200 15%
201-400 45%
401-600 25%
601-800 15%

What is the probability of selling between 201 and 600 units of the product?
a. 0% c. 25%
b. 11.25% d. 70%

13. What is the best estimate of the expected sales of the new product? (Hint: compute average of range)
a. 380 c. 480
b. 400 d. 800
14. Cherry Distributors has decided to increase its daily muffin purchases of 100 boxes. A box of muffins costs P 2.00 and
sells for P 3.00 through regular stores. Any boxes not sold through regular store are sold through thrift store for P 1.00.
Cherry assigns the following probabilities to selling additional boxes.
Additional sales Probability
60 60%
100 40%

What is the expected value of Cherry’s decision to buy 100 additional boxes of muffins?
a. P 28 c. P 52
b. P 40 d. P 68

15. Mango Company uses two major inputs in its production. To prepare its manufacturing operations budget, the
company has to project the cost changes of these material inputs. The cost changes are independent of one another. The
purchasing department provides the following probabilities associated with projected cost changes:
Cost change Material 1 Material 2
3% increase 0.3 0.5
5% increase 0.5 0.4
10% increase 0.2 0.1

What is the probability of a 3% increase in the cost of both Material 1 and Material 2?
a. 15% c. 80%
b. 40% d. 20%

16. Watermelon Company has three sales departments, each contributing the following percentages of total sales:
clothing, 50%; hardware, 30%; and grocery, 20%. Each department has had the following average annual damaged goods
rates: clothing, 2%; hardware, 10%; and grocery, 5%. A random corporate audit has found a weekly damaged goods rate
of sufficient magnitude to alarm Watermelon’s management. What is the probability that the damage occurred in the
clothing department?
a. 20% c. 33.33%
b. 25% d. 60%

17. A wine maker must decide whether to harvest grapes now or in four weeks. Harvesting now will yield 100,000 bottles
of wine netting P 2 per bottle. If the wine maker waits and the weather turns cold (probability: 20%), the yield will be cut
in half but net P 3 per bottle. If the weather does not turn cold, the yield will depend on rain. With rain (probability: 50%),
a full yield netting P 4 per bottle will result. Without rain, there will still be a full 100,000 yield, but the net will be only P
3 per bottle. What is the optimal expected value?
a. P 200,000 c. P 350,000
b. P 310,000 d. P 400,000

18. A contractor has been invited to submit a bid on a large and complicated construction project. The preparation of the
bid proposal will cost about P 20,000. Management feels that if the company bids low, enough to result in a net profit of
P 50,000, there would be a 60% chance of getting the job. If the company bids high, enough to result in a P 100,000 net
profit, the chance of getting the contract would be only 20%. What should the company do?
a. Bid low, enough to allow for P 50,000 profit since the expected value of payoff is P 22,000.
b. Bid high, enough to allow for a P 100,000 profit since the expected value of payoff is P 4,000.
c. Bid high, enough to allow for a P 100,000 profit since the expected value of payoff is P 20,000.
d. Make no bid.

19. A beverage stand can sell either soft drinks or coffee on any given day. If the stand sells soft drinks and the weather is
hot, it will make P 2,500; if the weather is cold, the profit will be P 1,000. If the stand sells coffee and the weather is hot,
it will make P 1,900; if the weather is cold, the profit will be P 2,000. The probability of cold weather on a given day at
this time is 60%.

What is the expected payoff for selling coffee?

a. P 1,360 c. P 2,200
b. P 1,960 d. P 3,900

20. What is the expected payoff if the vendor has perfect information?
a. P 1,360 c. P 2,200
b. P 1,960 d. P 3,900

21. Considering only the information given, if the probability of hot weather given a hot weather forecast is 50%, then
how much would the vendor be willing to pay for the forecast?
a. P 300 c. P 600
b. P 500 d. P 1,000
22. A particular manufacturing job is subject to an estimated 90% learning curve. The first unit required 50 labor hours to
complete. What is the cumulative average time per unit after four units are completed?
a. 50 hours c. 40.5 hours
b. 45 hours d. 40 hours

23. The following information on the utilization of a new software package was collected:
Number of tasks Total time to perform all tasks Average time to perform each task
1 10 minutes 10 minutes
2 18 minutes 9 minutes
4 32.4 minutes 8.1 minutes

If the learning effect continues, what is the average time to perform each of the first eight (8) tasks?
a. 6.83 minutes c. 7.75 minutes
b. 7.29 minutes d. 8.10 minutes

24. Mango Company manufactured the first batch of product in 10 hours. The second batch took an additional 6 hours.
What percentage learning occurred?
a. 100% c. 80%
b. 90% d. 60%

25. A company made the first batch of a new product in 100 hours. At an 80% learning rate, the total time for the first four
batches is
a. 400 hours c. 256 hours
b. 320 hours d. 204.8 hours

26. Orange Company expects a 90% learning curve. The first batch of a new product required 100 hours. The second
batch should take
a. 100 hours c. 80 hours
b. 90 hours d. 45 hours

27. The average labor cost per unit for the first batch produced by a new process is P 120. The cumulative average labor
cost after the second batch is P 72 per product. Using a batch size of 100 and assuming the learning curve continues, the
total labor cost of four batches will be
a. P 4,320 c. P 2,592
b. P 10,368 d. P 17,280

28. Kiwi Company used 30 hours to produce the first batch of units. The second batch took an additional 18 hours. How
many hours will the first four batches require?
a. 48 hours c. 96.2 hours
b. 76.8 hours d. 120.0 hours

29. Fruit Point Manufacturing recently completed and sold an order of 50 units that had the following costs:
Direct materials P 1,500
Direct labor 8,500
Variable overhead 4,000*
Fixed overhead 1,400**
Total 15,400

* Applied on the basis of direct labor hours

** Applied at the rate of 10% of variable cost
The company has been requested to prepare a bid for 350 units of the same product

If an 80% learning curve is applied, what is the total cost on the bid-order for 350 units?
a. P 26,400 c. P 37,950
b. P 31,790 d. P 54,120

30. Guava Co. uses the following model to determine its product mix for metal (M) and scrap metal (S):
Max Z = P 30 M + P 70 S If: #M + 2S ≤ 15, 2M + 4S ≤ 18, M & S are non-negative values

The two inequality functions are

a. Contributions c. Conditions
b. Shadow prices d. Constraints

31. The point at which M = 2 and S = 3 would

a. Minimize cost c. Be a feasible point
b. Lie in a corner d. Be an infeasible point
32. Strawberry Company manufactures two models, small and large. Each model is processed as follows:
Machining Polishing
Small (X) 2 hours 1 hour
Large (Y) 4 hours 3 hours

The available time for processing the two models is 100 hours a week in the Machining Department and 90 hours a week
in the Polishing Department. The contribution margin expected is P 5 for the small model and P 7 for the large model.

How would the objective function be expressed?

a. 5 X + 7 Y c. 5 X (3) + 7 Y (7) ≤ 190
b. 5 X + 7 Y ≤ 190 d. 12 X + 10 Y

33. How would the restriction (constraint) for the Machining Department be expressed?
a. 2 X + 4 Y c. 2 X + 4 Y ≤ 100
b. 2 (5 X) + 4 (7 Y) d. 5 X + 7 Y ≤ 100

34. Durian Manufacturing intends to produce two products, X and Y. Product X requires six hours of time on machine 1
and twelve hours of time on machine 2. Product Y requires four hours of time on machine 1 and no time on machine 2.
Both machines are available for twenty-four hours. Assuming that the objective function of the total contribution margin
is 2X + 1Y, what product mix will produce the maximum profit?
a. No units of product X and six units of product Y
b. One unit of product X and four units of product Y
c. Two units of product X and three units of product Y
d. Four units of product X and no units of product Y

35. Lemon Company makes only two products with the following two production constraints representing two machines
and their maximum availability: 2X + 3Y ≤ 18; 2X + Y ≤ 10.

If the profit equation is Z = 4 X + 2Y, then what is the maximum possible profit?
a. P 18 c. P 21
b. P 20 d. P 24