Which of the following is used in determining the economic order quantity (EOQ)?

• A.Regression analysis.
• B.Calculus.
• C.Markov process.
• D.Queuing theory.

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Which of the following risks is best addressed by encryption?

• A.Privacy risk
• B.Access risk
• C.Software risk
• D.Information integrity risk.

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Which of the following types of accounts must be closed at the end of the period?

• A.Permanent accounts.
• B.Balance sheet accounts.
• C.Income statement accounts.
• D.Real accounts.

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The problem just described is best approached by use of which quantitative method?

• A.Integrated autoregressive-moving average (ARIMA) modeling.
• B.Exponential smoothing, multiple parameters.
• C.Queuing theory.
• D.Linear programming.

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During the past few gears, Wilder Company has experienced the following average number of power outages:

Each power outage results in out-of-pocket costs of U $300. For U $1,000 per month, At US
$800 can lease generator to provide power during outages. If Wilder leases a generator in the coming year, the estimated savings or additional expense) for the year will be:

• A.U $ 15,200)
• B.US $ 1,267)
• C.U $3,200
• D.U $7,200

Correct Answer: C

Each outage costs US $800, but this experience can be avoided by paying US $1,000 per month US $12,000 for the year). The expected-value approach uses the probability distribution derived from past experience to determine the average expected outages per month.

The company can expect to have, on average, 1.58334 outages per month. At US $800 per outage, the expected costs is US $1,266.67. Thus, paying US $1,000 to avoid an expense of US $1,266.67 saves US $266.67 per month, or US $3,200 per year.

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