STAT-201 QUANTITATIVE METHODS

Note: 1. All the questions are compulsory.
2. Due date:
3. Points: Section-I 1×6=6
Section-II 1×6=6
Section-III 6×3=18
Total 30

Section-I

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State whether the following statements are True or False. (1×6 = 6)
1. Develop a model is the first step in quantitative analysis.
2. Quantitative factors are data that can be accurately calculated.
3. Minimum EOL will always equal EVwPI.
4. When using the EOL as a decision criterion, the best decision is the alternative with the
largest EOL value.
5. A medium-term forecast typically covers a two- to four-year time horizon.
6. Daily demand for newspapers for the last 10 days has been as follows: 12, 13, 16, 15,
12, 18, 14, 12, 13, 15 (listed from oldest to most recent), then the Forecast sales for the
next day using a two-day moving average is 14.

2

2
Section-II

Circle/tick the right answer from the answers given below. (1×6 = 6)
1. Which of the following is not a quantitative factor:
a) Inventory levels
b) Technological breakthroughs
c) Demand
d) Labor cost.
2. Expressing profits through the relationship among unit price, fixed costs, and variable
costs is an example of
a) a sensitivity analysis model.
b) a quantitative analysis model.
c) a post-optimality relationship.
d) a parameter specification model.
3. A pessimistic decision-making criterion is
a) maximax.
b) maximin.
c) decision making under certainty.
d) minimax regret.
4. The following is an opportunity loss table.

What decision should be made based on the minimax regret criterion?
a) Alternative 1
b) Alternative 2
c) Alternative 3
d) State of Nature C
5. Which of the following is not considered to be one of the components of a time series?
a) Trend
b) Seasonality
c) Cycles
d) variance
6. A tracking signal was calculated for a particular set of demand forecasts. This tracking
signal was positive. This would indicate that
A) demand is greater than the forecast.
B) demand is less than the forecast.
C) demand is equal to the forecast.
D) the MAD is negative.

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3
Section-III

Answer the following Essay Type Questions (6×3=18)
1- A manufacturing company manufactures T-Shirts. The fixed cost for a year is 8100 SAR.
Each T-Shirt carries on average a variable cost of 30 SAR and the selling price of 120
SAR.
a. Determine the number of T-Shirts that the company must sell to reach its break-even
point.
b. What will be its profit if Company sells 120 T-Shirt per year?

2. The following payoff table provides profits based on various possible decision
alternatives and various levels of demand.

States of Nature
Demand

Alternatives Low Medium High
Alternative 1 50 80 130
Alternative 2 60 70 80
a) What decision would be taken using Maximax method?
b) What decision would be taken using Maximin method?
c) What decision would be taken using equally likely method?

3. From the following payoff table

State of nature
Action 1 2 3
A 10 200 300
B 50 100 500
Probability 0.8 0.1 0.1
a. Compute the expected opportunity loss (EOL) for actions A and B.
b. What decision will you take based on Minimax opportunity loss method?
c. What will be the expected Value for perfect information?

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4

4. Demand for your companies’ product is growing and has now outpaced their production
capacity. With further growth in demand anticipated for next year, the company must
find some way to expand capacity or risk losing customers when demand cannot be met.
Your boss came to you and announced that three options were being considered: to
expand the existing plant, to build a whole new plant from the ground up, or simply to
subcontract with another company based on the following data in tree diagram. What
decision would you suggest?

5. Following table represents the sales data from January to April for certain company:

Month

Automobile
Battery Sales
January 28
February 21
March 39
April 34
a. Use 2 period moving averages to forecast the automobile batteries sales for
march through April
b. Find MAD (Mean Absolute Deviation)

6. Given an actual demand of 125 for current period when forecast of 129 was anticipated.
a. What is forecast error for current period?
b. For given alpha of 0.5 what would the forecast for the next period by using simple
exponential smoothing?

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