Supplement A - Decision Making

Question 1

break even analysis

Answer 1

the use of the break even quantity; it can be used to compare processes by finding the volume at which two different processes have equal total costs

Question 2

variable cost

Answer 2

the portion of the total cost that varies directly with volume output

Question 3

fixed cost

Answer 3

the portion of the total cost that remains constant regardless of changes in levels of output

Question 4

sensitivity analysis

Answer 4

a technique for systematically changing parameters in a model to determine the effects of such changes

Question 5

preference matrix

Answer 5

a table that allows the manager to rate an alternative according to several performance criteria

Question 6

decision theory

Answer 6

a general approach to decision making when the outcomes associated with alternatives are often in doubt

Question 7

payoff table

Answer 7

a table that shows the amount for each alternative if each possible event occurs

Question 8

decision tree

Answer 8

a schematic model of alternatives available to the decision maker, along with their possible consequences

Question 9

break even quantity

Answer 9

the volume at which total revenues equal total costs