OM Data Analysis & Decision Making 2 — Questions and Answers
Question 1: A manager notices that sales data shows a strong correlation (r = 0.92) between advertising spend and revenue. What is the most appropriate next step before concluding that increased advertising causes higher revenue?
- Immediately increase the advertising budget
- Conduct a controlled experiment to test causation (Correct answer)
- Present the correlation finding to senior leadership as proven
- Reduce advertising to test the inverse relationship
Correct answer: Conduct a controlled experiment to test causation
Correlation does not imply causation; a controlled experiment is needed to establish a true cause-and-effect relationship.
Question 2: Which type of data visualization is BEST suited for showing the distribution of a continuous variable such as employee performance scores across a department?
- Pie chart
- Line graph
- Histogram (Correct answer)
- Scatter plot
Correct answer: Histogram
A histogram displays the frequency distribution of a continuous variable by grouping data into bins.
Question 3: An organization uses a balanced scorecard. Which of the following perspectives does the balanced scorecard NOT typically include?
- Financial perspective
- Customer perspective
- Competitive intelligence perspective (Correct answer)
- Internal business process perspective
Correct answer: Competitive intelligence perspective
The four standard balanced scorecard perspectives are financial, customer, internal process, and learning & growth—competitive intelligence is not one of them.
Question 4: A decision tree analysis assigns probabilities and monetary outcomes to each branch. Which metric is used to select the optimal decision node?
- Net Present Value (NPV)
- Expected Monetary Value (EMV) (Correct answer)
- Return on Investment (ROI)
- Internal Rate of Return (IRR)
Correct answer: Expected Monetary Value (EMV)
Expected Monetary Value (EMV) multiplies each outcome's probability by its value and sums the results to identify the best decision node.
Question 5: When performing a root cause analysis using the '5 Whys' technique, what is the primary goal?
- To assign blame for a problem to a specific team member
- To identify the fundamental cause of a problem by repeatedly asking why it occurred (Correct answer)
- To generate five possible solutions to a problem
- To document five separate problems in a single report
Correct answer: To identify the fundamental cause of a problem by repeatedly asking why it occurred
The 5 Whys technique drills down through symptom layers by asking 'why' repeatedly until the root cause is uncovered.
Question 6: In a SWOT analysis used for strategic decision making, which element examines factors EXTERNAL to the organization that could harm its objectives?
- Strengths
- Weaknesses
- Opportunities
- Threats (Correct answer)
Correct answer: Threats
Threats in SWOT analysis represent external factors—such as competition, regulations, or market shifts—that could negatively affect the organization.
Question 7: A project manager wants to prioritize which defects to fix first by identifying the vital few causes responsible for the majority of problems. Which tool should be used?
- Gantt chart
- Pareto chart (Correct answer)
- Control chart
- Fishbone diagram
Correct answer: Pareto chart
A Pareto chart applies the 80/20 rule to rank defect causes by frequency, highlighting the vital few that account for most problems.
OM Data Analysis & Decision Making 2
A manager notices that sales data shows a strong correlation (r = 0.92) between advertising spend and revenue.
What is the most appropriate next step before concluding that increased advertising causes higher revenue?