As part of a risk analysis, an auditor wishes to forecast the percentage growth in next month's sales for a particular plant using the past 30 months" sales results. Significant changes in the organization affecting sales volumes were made within the last 9 months. The most effective analysis technique to use would be:
Answer(s): B
Under exponential smoothing, each forecast equals the sum of the last observation times the smoothing constant, plus the last forecast times one minus the constant. Thus, exponential means that greater weight is placed on the most recent data, with the weights of all data falling off exponentially as the data age. This feature is important because of the organizational changes that affected sales volume.
A plumbing company, a wholesale distributor, supplies plumbing contractors and retailers throughout the Northeast on a next-day delivery basis. The company has a centrally located warehouse to accept receipts of plumbing supplies. The warehouse has a single dock to accept and unload railroad freight cars during the night. It takes 5 hours to unload each freight car. The company's prior records indicate that the number of freight cars that arrive in the course of a night range from zero to five or more, with no indicated pattern of arrivals. If more than two freight cars arrive on the same night, some freight must be held until the next day for unloading. The company wants to estimate the wait time when more than two freight cars arrive in the same night. The appropriate technique to analyze the arrival of freight cars is:
Answer(s): C
Monte Carlo simulation is often used in computer modeling to generate the individual values for a random variable. The performance of a quantitative model under uncertainty may be investigated by randomly selecting values for each variable in the model (based on the probability distribution of each variable) and then calculating the value of the solution. If this process is performed many times, the distribution of results from the model will be obtained.
Through the use of decision models, managers thoroughly analyze many alternatives and decide on the best alternative for the company. Often the actual results achieved from a particular decision are not what was expected when the decision was made In addition, an alternative that was not selected would have actually been the best decision for the company. The appropriate technique to analyze the alternatives by using expected inputs and altering them before a decision is made is:
Answer(s): D
After a problem has been formulated into any mathematical model, it may be subjected to sensitivity analysis. Sensitivity analysis examines how the model's outcomes change as the parameters change.
A firm is attempting to estimate its allowance for doubtful accounts. The probabilities of these doubtful accounts follow a transition process over time. They evolve from their starting value to a changed value. As such, the most effective technique to analyze the problem is:
Answer(s): A
A Markov chain is a series of events in which the probability of an event depends on the immediately preceding event. An example is the game of blackjack in which the probability of certain cards being dealt is dependent upon what cards have already been dealt. In the analysis of bad debts, preceding events, such as collections, credit policy changes, and write offs, affect the probabilities of future losses.
A chief executive officer (CEO) believes that a major competitor may be planning a new campaign. The CEO sends a questionnaire to key personnel asking for original thinking concerning what the new campaign may be. The CEO selects the best possibilities and then sends another questionnaire asking for the most likely option. The process employed by the CEO is called the:
The Delphi technique is a forecasting or decision-making approach that attempts to avoid groupthink (the tendency of individuals to conform to what they perceive to be the consensus). The technique allows only written, anonymous communication among group members. Each member takes a position on the problem at hand. A summary of these positions is communicated to each member. The process is repeated for several iterations as the members move toward a consensus Thus, the Delphi technique is a qualitative, not quantitative, technique.
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