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Free IIA IIA-CIA-Part3 Exam Braindumps (page: 62)

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PDF with 1555 Questions

Philip enterprises, distributor of compact disks(CDS),is developing its budgeted cost of goods sold for 1998.Philip has developed the following range of sales estimates and associated probabilities for the year:

Philip's cost of goods sold averages 80% of sales. t hat is the expected value of Philip's 1998 budgeted cost of goods sold?

  1. US $85,000
  2. US $84,000
  3. US $68,000
  4. US $67,200

Answer(s): D

Explanation:

The expected value is calculated by weighting each sales estimate by the probability of its occurrence. Consequently, the expected value of sales is US $84,000 [$60,000 .25) + $85,000 .40) + $100,000 .35)]. Cost of goods sold is therefore US $67,200 800/0 $84,000).



The expected value of perfect information is the:

  1. Same as the expected profit under certainty.
  2. Sum of the conditional profit loss) for the best event of each act times the probability of each event occurring.
  3. Difference between the expected profit under certainty and the expected opportunity loss.
  4. Difference between the expected profit under certainty and the expected monetary value of the best act under uncertainty:

Answer(s): D

Explanation:

Perfect information permits certainty that a future state of nature will occur. The expected value of perfect information determines the maximum amount a decision maker is willing to pay for information. It is the difference between the expected value without perfect information, that is, the expected value of the best action under uncertainty and the expected value under certainty. Under certainty, a decision maker knows in each case which state of nature will occur and can act accordingly.



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 then sends another questionnaire asking for the most likely option. The process employed by the CEO is called the

  1. Least squares technique.
  2. Delphi technique.
  3. Maximum likelihood technique.
  4. Optimizing of expected payoffs.

Answer(s): B

Explanation:

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 more toward a consensus. Thus, the Delphi technique is a qualitative, not quantitative, technique. The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for US $1.00 each, and the cost per pretzel is U $.30. Any unsold pretzels are discarded because they will be stale before the next home game. 95. The estimated demand for pretzel at the next home football game.



The estimated demand for pretzels at the next home football game using an expected value approach is:

  1. 4,000 pretzels.
  2. 4,400 pretzels.
  3. 5,000 pretzels.
  4. 6,000 pretzels.

Answer(s): B

Explanation:

The calculation using an expected value approach weights each possible sales volume by its probability. Thus, the estimated demand is 4,400 pretzels.
The College Honor Society sells hot pretzels at the home football games. The pretzels are sold for US $1.00 each, and the cost per pretzel is U $.30. Any unsold pretzels are discarded because they will be stale before the next home game. 95. The estimated demand for pretzel at the next home football game. The frequency distribution of the demand for pretzels pe game is presented as follows.



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