MSIS 3223 Final Exam Oklahoma State

What are the three techniques used for What-If Analysis in Excel?

• Data Tables (one-way and two-way)

• Scenario Manager

• Goal Seek

What is the formula for calculating Total Cost?

Total Cost = Fixed Cost + (Variable Cost × Quantity Produced)

How does demand influence production decisions?

Demand predicts how many units will be sold, and production is adjusted accordingly.

Name three possible outcomes of an optimization problem.

• Unique optimal solution

• Alternative optimal solutions

• Unbounded solution

What are the key components of a linear optimization model?

• Decision variables

• Objective function

• Constraints

What is a binding constraint?

A constraint that is exactly met at the optimal solution (left-hand side = right-hand side).

What are the parameters of a triangular distribution?

Minimum, maximum, and most likely values.

How do integer optimization models differ from linear optimization models?

Integer models require decision variables to be whole numbers, while linear models allow continuous values.

What is the purpose of a cash budget?

To project cash inflows and outflows and manage cash shortfalls or borrowing needs.

What Excel function generates random numbers between 0 and 1?

RAND()

What should you do if Solver gives an "infeasible solution" error?

Check if constraints are conflicting or missing.

What is Monte Carlo Simulation?

It generates random values for uncertain inputs and runs multiple trials to analyze possible outcomes.

What is the feasible region in an optimization problem?

The set of all possible solutions that meet the constraints.

What is the main difference between a predictive model and an optimization model?

Predictive models focus on forecasting future trends, while optimization models aim to maximize or minimize an objective function.

What is Solver's "Integer Tolerance" used for?

It determines when to stop looking for an optimal integer solution.

What is the difference between a one-way data table and a two-way data table?

• One-way data table: Analyzes the impact of changing one input variable on multiple output variables.

• Two-way data table: Analyzes the impact of changing two input variables on a single output variable.

What is the formula for calculating profit in a spreadsheet model?

Profit = Revenue – Variable Cost – Fixed Cost

What are the steps to develop a linear optimization model?

• Identify decision variables (unknowns to be solved).

• Identify the objective function (what to maximize or minimize).

• Identify all constraints (limits or restrictions on the solution).

• Write the objective function and constraints as mathematical expressions.

• Implement the model in a spreadsheet (like Excel) using Solver.

What are proportional relationship constraints in optimization?

Proportional constraints arise when certain elements (like materials) must be combined in fixed ratios.

What is the purpose of Solver’s "Use Automatic Scaling" option?

It rescales objective function and constraint values to prevent numerical instability caused by large differences in magnitude.

What is the difference between an alternative optimal solution and a unique optimal solution?

• Alternative optimal solution: Multiple sets of decision variables achieve the same objective value.

• Unique optimal solution: Only one set of decision variables produces the optimal objective value.

What does it mean if an optimization problem is unbounded?

The objective function can increase (or decrease) indefinitely without violating constraints, often due to a missing constraint.

What are "decision variables" in an optimization model?

Decision variables are the unknowns that the model seeks to determine in order to optimize the objective function.

What is the role of the "objective function" in an optimization model?

The objective function defines the goal of the optimization, such as maximizing profit or minimizing cost.

What are three types of constraints in optimization models?

• Simple bounds: Limit a variable's possible values (e.g., 0 ≤ x ≤ 10).

• Limitations: Restrict use of resources like time, money, or materials.

• Balance constraints: Ensure inflows equal outflows (like production = sales).

What is the purpose of the Scenario Manager in Excel?

Scenario Manager allows you to create and compare multiple "what-if" scenarios within a spreadsheet.

What are the four possible outcomes of a linear optimization model using Solver?

• Unique optimal solution

• Alternative optimal solutions

• Unbounded solution

• Infeasible problem

What is the primary use of Monte Carlo simulation in business models?

To analyze the impact of uncertainty in inputs on outputs through repeated random sampling.

What is the difference between verification and validation in spreadsheet models?

• Verification: Ensuring the model works as intended (free of errors).

• Validation: Ensuring the model accurately represents the real-world problem.

How can you tell if a constraint is "binding" in an optimization model?

A constraint is binding if its left-hand side value equals its right-hand side value at the optimal solution.