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understanding management
Quantitative Techniques In Management 4th Edition N D VOHRA - Solutions
33. The manager of Good-Morning Stores is considering opening a new store in the rapidly expanding NOIDA. Two sizes of the store are under consideration: Regular and Large. The initial costs, expected demand situation and profits along with their probabilities are:Assuming a discount rate of 10%,
Two businesses, AB Ltd. and CD Ltd. sell the same type of product in the same market. Their budgeted profit and loss accounts for the year ending 30th June 20XX are as follows:Now, (a) calculate the break-even point of each business, and(b) state which business is likely to earn greater profits in
37. A firm is engaged in manufacturing four products: ~. ~. ~. and JJ.i. The data on the product-mix, selling prices and variable costs are:Compute (a) the contribution margin ratio, and (b) the break-even sales. What is the margin of safety at the given sales level?For making computations, take
40. (a) Kolkata Company Ltd. manufactures and sells four types of products under the brand names ACE, UTILITY, LUXURY, and SUPREME. The sales mix in value comprises:The total budgeted sales (100%) are Rs 6,00,000 per month. The operating costs are:The fixed costs are Rs 1,59,000 per month.
The demand for an item is observed for 15 months and recorded below:Calculate (i) 3-monthly and (ii) 4-monthly moving averages. What is the forecast for month 16 for each one? Month Demand Month Demand 12345678 280 9 309 288 10 315 266 11 320 295 12 332 302 13 310 310 14 308 303 15 320 328
The demand for a particular item during the ten months of a year is as given below. The manager is considering how well the exponential smoothing serves as an appropriate technique in forecasting the demand of this item. She is testing three values of the smoothing constant: a= 0.2, a= 0.5 and a =
Calculate mean squared error (MSE), and mean absolute percentage error (MAPE) for the forecasts obtained in Example 19.2 using a= 0.5.These measures are shown calculated in Table 19.3. TABLE 19.3 Calculation of MSE and MAPE Y-F Month Demand Forecasted Value |Y-F\ (Y,-FV) x 100 Y Y, F,(= 0.5) 1 213
Calculate trend-adjusted forecasts using the following data:Further, given initial estimate = 208, initial trend = 0, a = 0.2 and 13 = 0.1 Quarter: 1 2 3 4 5 6 7 8 9 10 10 Demand: 213 201 198 207 220 232 210 217 212 225
The sales of a company, in millions of rupees, are given below:Using the principle of least squares, fit a straight line trend equation to the above data. Show that the sum of deviations is equal to zero. Also determine the sum of squares of deviations. Forecast the sales for the years 2009 and
The sales data given in Example 19.5 are reproduced below, with the break-up of the yearly sales on a quarterly basis. You are required to (a) obtain seasonal indices, and (b) forecast the sales for the years 2009 and 2010 on a quarterly basis Quarter Year Total 1 III IV 2001 18 27 2002 17 2003 21
A car manufacturer has recently held 3-day road side exhibits on the introduction of a new model of its deluxe cars. The number of sales personnel employed at each of a sample of 10 exhibitions and the number of cars booked at each one are given as follows:Using these data, regress the number of
Given the following data:(i) Develop the estimating equation best describing these data.(ii) If an employee scored 83 on the aptitude test and had a prior experience of 7, what performance evaluation would be expected? Performance Evaluation (Y) : 28 Aptitude Test Score (X): 74 Prior Experience
Using the following data on the demand of a product, calculate (i) 3-monthly moving averages,(ii) exponentially smoothed averages, assuming initial forecast = 250 and a = 0.3, and (iii) trend-adjusted exponentially smoothed averages, assuming initial forecast = 250, initial trend = 0.7, a = 0.3 and
An analysis of the past data reveals the following information:On the basis of the given data, forecast the demand for the months of January, 2011 through June, 2011 Trend equation: Y 1,008+15.8X Origin : January, 2009 X Unit : One Month Y Unit : Monthly Demand Seasonal Indices: January 103.4 July
In the following table are recorded data showing the experience of machine operators and their performance rating as given by the number of good parts turned out per 100 piecesObtain the regression equation of performance rating on experience. Use this equation to estimate the probable performance
A company keeps track of its expenditure on advertising (X1) and its spending on in-store displays (X2) over a period of 10 weeks. The resulting sales for each week are recorded as the dependent variable Y. Use the data given below to estimate the least squares equation relating these variables 99
1. Qualitative methods of forecasting are employed where the variable under consideration cannot be quantified. Mark the statement as T (True) or F (False).
2. Opinions and judgements play no role in quantitative forecasting. Mark the statement as T (True) or F (False).
3. Delphi method is the most important method of forecasting involving judgements. Mark the statement as T (True) or F (False).
4. Exponential smoothing is a causal method of forecasting. Mark the statement as T (True) or F (False).
5. Decomposition of a time series involves breaking down the historical data into explained and unexplained variation. Mark the statement as T (True) or F (False).
6. In moving averages method, the broader the base (for calculating moving average), the better the results, since forecasts are then made on the basis of more data. Mark the statement as T (True) or F (False).
7. In exponential smoothing, the weight applied to actual value of a period k is (1 -a) times the weight applied to the value of the period k- 1. Mark the statement as T (True) or F (False).
8. In the exponential smoothing method of forecasting, the previous forecast is adjusted by a fraction of the error in that forecast to obtain the next forecast. Mark the statement as T (True) or F (False).
9. Exponential smoothing method of forecasting is the appropriate one under all conditions. Mark the statement as T (True) or F (False).
10. A high value of a would always lead to better forecasts since it allows making quick adjustements to the forecasts. Mark the statement as T (True) or F (False).
11. For demand forecasting purposes, a company should always use the same value of a for reasons of stability. Mark the statement as T (True) or F (False).
12. MAPE represents the mean of absolute forecast errors expressed as a percentage of the forecasted values. Mark the statement as T (True) or F (False).
13. The choice ofa determined by MAD, MSE and MAPE is always identical and therefore, only one of these may be considered. Mark the statement as T (True) or F (False).
14. In a regression-based forecast, the standard error of estimate gives the maximum error of forecast. Mark the statement as T (True) or F (False).
15. The simple regression analysis is based on the assumption that the changes in the dependent variable are caused by changes in the independent variable only and none else. Mark the statement as T (True) or F (False).
16. The coefficient of determination is equal to the ratio SSR/SST. Mark the statement as T (True) or F (False).
17. Multiple regression analysis allows to have multiple dependent and independent variables. Mark the statement as T (True) or F (False).
18. In multiple regression analysis, constants b1, b2, b3 and so on are termed as partial regression coefficients. Mark the statement as T (True) or F (False).
19. The coefficient of determination measures the percentage variation in the dependent variable which is explained by the independent variable/s. Mark the statement as T (True) or F (False).
20. For a given set of data, about 95% of the actual data points are likely to fall within twice the standard error of estimate. Mark the statement as T (True) or F (False).
1. What is the difference between qualitative and quantitative techniques of forecasting? When is a qualitative model appropriate?
2. Briefly discuss the Delphi method of making forecasts.
3. What is a time-series forecasting model? Explain the principle underlying the trend line.
4. Discuss the moving average model of forecasting and mention its drawbacks.
5. Do you think the exponential smoothing model of forecasting is in any way better than the moving average model?
6. How would you make a choice between selected values of smoothing constants for making forecasts?
7. Discuss the method of obtaining trend-adjusted exponential smoothed forecasts.
8. What is MAD? Discuss its importance in selection and use of forecasting models.
9. What is coefficient of determination in the regression model of forecasting? How is it measured?
10. What is standard error of estimate? What does it indicate?
1. You are given the following information about demand of an item:Calculate forecasted values using (i) 3-monthly moving averages, (ii) 5-monthly moving averages, and (iii) 4-monthly weighted moving averages with weights as 4 : 3 : 2 : 1, the largest weight being for the most recent value. Month 1
Obtain the profit forecasts using (i) 4-Yearly moving averages, and (ii) 5-Yearly moving averages, from the following data relating to profits (in '000 Rs): Year Profit Year Profit Year Profit Year Profit 1994 48 1998 58 2002 61 2006 70 1995 53 1999 63 2003 68 2007 76 1996 55 2000 68 2004 58 2008
3. Given the following data about the demand of an item, use exponential smoothing to forecast demand taking a= 0.1 and a= 0.3. Also, plot the original data and the forecasts on graph.Further, calculate MAD for each of the series and suggest which value of a is more appropriate.Does the method of
4. Using the following data, compute the exponential forecasts using a= 0.3 but use MAD as a tracking signal. Whenever the MAD exceeds 50, switch to a= 0.8, and when the MAD is less than or equal to 50, return to a= 0.3. Quarter Year I II III IV 2005 2006 28 70 160 110 200 90 120 60 110 2007 100
5. Demand (in '000 metric tonnes) for sugar of Sweet India is given below:(i) Fit a straight line trend by method ofleast squares.(ii) Calculate trend values and plot observed and trend values on a graph.(iii) Obtain the forecast of demand for the year 2010. Year : Demand: 2002 2003 2004 2005 2006
6. Fit a straight line trend to the following data on demand of steel ingots (in millions) and project the demand for the year 2009. Year : 2002 2003 2004 2005 2006 2007 2008 Demand: 80 44 84 90 90 93 98 100 104
7. Fit a straight line trend to the following data on average monthly domestic demand (in millions of barrels) for motor fuel:What is the forecast of demand for the Year 2009? Year Demand : 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 : 61 66 72 76 82 90 96 100 103 110 114
The data on monthly sales (in thousands of Rs) of a company are given as follows:Assuming there is no trend, compute the monthly seasonal indices. Using these indices, prepare the monthly sales schedule for the year 2009 if the total sales for the year are projected to be Rs 5,60,000. Year Jan Feb
9. Obtain the least squares regression equation of Yon X from the following data:Use the regression equation to forecast values of Y when (i) X = 70, and (ii) X = 85. X : Y : 1 % 86 91 57 4 75 74 84
10. In security analysis, the returns on a share are related to the returns on the market portfolio to calculate the beta of that security. For a share the return is usually calculated as (P1-P1_ 1)/P1_ 1, where P1is the current day's closing price while P1_ 1 is the closing price of the previous
11. Ashish, owner of a business unit is concerned about the sales behaviour of his product. He realises that there are many factors that might help explain sales, but believes that advertising and prices are major determinants. He has collected the following data:(i) Calculate the regression
12. A company recently embarked on an in-store promotional compaign, with displays of its antacid featured prominently in the supermarkets. The company also ran its usual radio and television commercials. Over a period of 10 weeks, the company kept track of its expenditure on radio and television
39. Aggarwal and Company sold in two successive years 7,000 and 9,000 units and incurred a loss of Rs 10,000 and earned Rs 10,000 as profit, respectively. The selling price per unit is Rs 100. Calculate:(a) the amount of fixed cost,(b) the number of units to break-even, and(c) the number of units
38. The PN ratio for an item is 40% and the margin of safety is 50%. Find out the net profit and the breakeven point if the sales volume is Rs 8,00,000.
36. Caravan Company sold 1,00,000 units of its product at Rs 20 per unit. Variable costs are Rs 14 per unit(manufacturing costs of Rs 11 and selling costs of Rs 3). Fixed costs are incurred uniformly throughout the year and amount to Rs 7,92,000 (manufacturing costs of Rs 5,00,000 and selling costs
34. Calculate the break-even point and the profit made in the following case:The fixed costs for the year are Rs 96,000; variable cost per unit of the single product being made is Rs 4 while each unit sells for Rs 20. Estimated sales for the year are valued at Rs 2,00,000. The number of units
20. A firm is considering the introduction of a new product which will have a life of 5 years. Two alternative methods of promoting the product have been identified:Alternative 1: This will involve employing a large number of agents. An immediate expenditure of Rs 5,00,000 will be required to
17. A company is considering the following two mutually exclusive projects:Project X : Initial cost Rs 2,00,000; Rs 30,000 per year after-tax inflows for 10 years Project Y : Initial cost Rs 2,00,000; Rs 20,000 per year after-tax inflows for 20 years Compute the net present value for each project
16. Agfa p.l.c. is considering purchasing for Rs 50 thousand a machine that will reduce cash outlays by Rs 10,500 each year for the next seven years. At the end of the 7-year period, the machine will be worthless.What rate of discount will equate the purchase price of the machine and the cost
15. The Omega Company is considering two alternative capital investment proposals (a) renovating the existing machine at an initial cash outlay of Rs 25,000, or (b) replacing the existing machine with a new machine costing Rs 70,000. The renovation of the existing machine would result in a saving
13. A company can acquire a new machine at a cost of Rs 72,000 to replace a manual process. The annual net cash flow saving would be Rs 18,000 for a period of 7 years at the end of which there would be no salvage value of the machine.(a) Calculate the net present value using a discount rate of
12. The SOFTOUCH Company is engaged in manufacturing software equipment for computers. The company can either build its own factory building for Rs 20 lakhs or rent an equivalent building with a 20-year lease for an annual rental of Rs 2 lakhs, payable at year-ends, together with an option to buy
11. Anil Corporation provides a multitude of benefits to its employees, including a company funded pension plan. Biren is due to retire in five years and will receive annual pension cheques starting one year from the date of his retirement. Each year's pension cheque will equal one-half of his
10. (a) If a perpetuity is worth 20 years' purchase, find the annuity of Rs 1,000 to continue for 2 years.(b) If 20 year' purchase must be paid for an annuity to continue k years and 25 years' purchase for an annuity to continue for 2k years, find the interest rate.(c) Determine the present worth
9. A person is invited to quote the annual rent for a freehold property he has just bought for Rs 30 lakhs.What should the quotation be if the money's worth is 10% pa?
8. A company wishes to establish a sinking fund to replace a machine by a new one at the end of 8 years.The payments to the sinking refund shall be made at the year-ends, the first one being at the end of this year. How much payment should the company make ifit wishes to have an amount of Rs
7. An employee of a factory takes a loan of an amount of Rs 75,000 from Our-Own-Society. It is to be repaid in yearly instalments of Rs 3,750. If the rate of interest charged is 3.5%, how many payments does he have to make?
6. A building owner gets two offers from a prospective buyer:(a) Rs 5 lakhs payable now.(b) Rs 6,20,000 in five equal instalments, payable at the year-ends, the first of the payments to be made 3 years from now.If the time value of money is reckoned to be 8%, which of the two offers is more
5. Mr Green buys a colour TV set for which he has to make a down payment of Rs 2,000 and Rs 500 as monthly instalment for a total of 30 months. What is the cash down price of the TV set if the money is 12% compounded monthly?
4. A housewife is looking at ways of producing domestic hot water and considers two possibilities-an electrical immersion heater having an installation cost of Rs 160 and estimated annual electrical charges of Rs 200, and a gas boiler with an installation cost of Rs 760 with annual fuel bills of Rs
3. Mr K has just retired and received a sum of Rs 3 lakhs as retirement benefits. He wants to invest so that the amount may be repaid to him in 10 equal annual instalments. An insurance company offers an annuity at 8% interest rate. Determine the amount of annuity receivable by K if he invests with
2. Determine the amount of an annuity of Rs 120 payable at the end of each year for 20 years from now, if money is worth 5% per annum.
1. A company has three offers for its existing equipment in one of the divisions. The first buyer is willing to pay Rs 50,000 at the end of 8 years' period. The second buyer offers Rs 39,000-consisting of an immediate payment of Rs 14,000 and Rs 25,000 after 6 years. The third buyer agrees to buy
19. Explain the concept of 'margin of safety'. How can the margin of safety be measured?
18. What is P/Vratio? What does it measure and how is it useful?
17. What is break-even analysis? How is it useful? How can the break-even point for the multi-product firm be calculated?
16. What is sensitivity analysis in the context of investment decisions? Explain.
15. What do you understand by decision-tree analysis? Give its role for investment decisions.
14. Discuss the decision-tree and simulation approaches to the consideration of risky investment proposals.Illustrate each of these.
13. How can the EVPJ of an investment proposal be obtained?
12. Explain the statistical distribution approach to evaluate risky proposals. How would the variance be obtained when the cash flows of the successive time periods are (a) perfectly correlated, and (b)independent in nature?
11. Discuss the certainty-equivalent and risk-adjusted discount rate methods of incorporating risk into capital budgeting process. Which of the two is superior? Why?
10. What do you mean by risk in investment proposals? How can it be measured?
9. Critically examine the Net Present Value and Internal Rate of Return methods used in appraising capital projects. Also discuss a few simple approaches for incorporating risk factor in such decisionmaking.
8. How do you differentiate between NPVand IRR methods of evaluating investment proposals? Do they always lead to same conclusion with respect to (a) accept/reject decision for different proposals, and(b) ranking of various proposals that are mutually exclusive in nature?
7. Discuss the discounted cash flow method and its role in investment decision.
6. Discuss the various methods of evaluating investment proposals.
5. What is investment analysis? Why is it of great significance to a firm? Write a note on OR and investment decision. (CA, May, 1978)
4. What is a perpetuity? How can we determine the present value of a perpetuity at a given interest rate?
3. Derive expressions for obtaining (a) the amount of an annuity, (b) the present value of an annuity, and(c) the present value of a deferred annuity.
2. What is an annuity? Distinguish between various types of annuities on the basis of (a) their terms, and(b) the payment times.
1. 'In financial decision-making, time is of a paramount importance'. Discuss, giving a detailed account of the concept of time value of money.
35. Division of fixed cost plus desired profit by PN ratio gives the required volume of sales necessary to earn such amount of profit. Mark the statement as T (True) or F (False).
34. The formula for calculating the break-even point can be adapted to reflect simultaneous changes in the selling price, variable cost and fixed cost. Mark the statement as T (True) or F (False).
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