Economic Order Quantity and Significant Predictor.

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1. Stock prices over a period of fifty (50) years would most likely exhibit no cyclical component.

a. True
b. False

2. On the plot labeled “a”, which of the following is correct?

a. There is a trend present.
b. There is a linear relationship.
c. There is an obvious outlier.
d. There is a negative relationship.

3. On the plot labeled “b”, there is an outlier present.

a. True
b. False

4. On the plot labeled “c”, which of the following models is most appropriate?

a. single-parameter exponential smoothing
b. regression
c. regression with seasonality (classical time-series)
d. none of the above are appropriate

5. In a simple linear regression, we are using monthly advertising expenditures (in $000) to predict monthly profits (in $000). If the least squares equation is y = 21.5 - .1x and the coefficient of determination is .49, the correlation coefficient = ______.

a. 0.70
b. -0.70
c. unable to be determined from the data.

6. In a simple linear regression, we are using monthly advertising expenditures (in $000) to predict monthly profits (in $000). If the least squares equation is y = 21.5 - .1x and the coefficient of determination is .49. The predicted profit = __________ when advertising expenses are $0.

a. 21.5
b. -0.1
c. $21,500
d. none of the above.

7. If the correlation coefficient is zero, there is no relationship between x and y.

a. True
b. False

8. Kelvin Shoe Stores carries a basic black dress shoe for men that sells at a rate of 500 each quarter. Their current policy is to order 500 per quarter, with a fixed cost of $30/order. The annual holding cost is 20% of the cost of items held. The following cost structure is applicable:

|Order Quantity |Price/pair | |0-99 |$36 | |100-199 |32 | |200-299 |30 | |300+ |28 |

For a price of $36, the optimal order quantity is

a. 129
b. infeasible for this cost structure.
c. neither of the above.
d. both a and b.

9. Kelvin Shoe Stores carries a basic black dress shoe for men that sells at a rate of 500 each quarter. Their current policy is to order 500 per quarter, with a fixed cost of $30/order. The annual holding cost is 20% of the cost of items held. The following cost structure is applicable:

|Order Quantity |Price/pair | |0-99 |$36 | |100-199 |32 | |200-299 |30 | |300+ |28 |

The optimal order quantity is

a. 129
b. 141
c. 146
d. 300

10. Foster Inc. carries special holiday items, including Happy Angels (HAs). During the season, the demand for HAs is approximately normally distributed, with a mean of 320 and a standard deviation of 30. It costs Foster $5.00 for each HA unless he orders at least 400, at which the price drops to $4.50/HA. The HAs’ retail price is $10. Unsold items will be given to a local hospital, with a disposal cost of $0.05/HA. Mr. Foster estimates that the goodwill cost of each item short is close to $0.25.

a. This is a single-period inventory problem.
b. This is an EOQ problem.
c. This is a periodic-review problem.
d. None of the above

11. Foster Inc. carries special holiday items, including Happy Angels (HAs). During the season, the demand for HAs is approximately normally distributed, with a mean of 320 and a standard deviation of 30. It costs Foster $5.00 for each HA unless he...
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