SAMPLE EXAM – WITH SUGGESTED ANSWERS

Date / Start Time

Course ACCT 418 – Data Modelling and Visualization
Groups (please circle your
group)
Instructor Clarence Goh
Total number of pages
(including this instruction sheet)

Name of Candidate (as in eLearn): ___________________________

NRIC/FIN No: ___________________________

INSTRUCTIONS TO CANDIDATES

1 This is a closed-book examination. You should not have any reference material with
you. Calculators (non-programmable/non-graphical) are allowed in the examination.

2 This sample examination paper contains a total of 2 sections. Section I consists of

multiple choice questions (MCQs) and Section II consists of open-ended questions.
You are required to answer all questions.

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SECTION I: MCQ [6 marks]

1) The following visualization presents the average monthly cost per patient receiving
treatment in public hospitals in the cities of Norriatown and Warren. The average monthly
cost per patient is $213 in Norriatown and $214 in Warren. In the accompanying graphic,
the surface area of the hospital is 6.6 cm2 for Norriatown and 11.2 cm2 for Warren. What
is the lie-factor for this visualization? ANS: A

a. 149
b. 0.0067
c. 175
d. 0.521

2) Simulation should be used to analyse models where one or more of the input (or
independent) variables _____. ANS: A

a. is subject to random variability

b. is a discrete variable
c. is non-negative
d. has a defined mean

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3) Which of the following statements about regression analysis is/are true? ANS: A

I. Dummy variables are used when potential explanatory variables are categorical
and cannot be measured on a quantitative scale.
II. In a simple linear regression model, an arithmetic equation is used to explain the
relationship between the independent variable and dependent variable.
III. In a simple linear regression model, the dependent variable refers to the variable
used to explain the independent variable.
IV. Least squares lines maximise the sum of squared residuals

a. I and II only
b. I, II, and III only
c. I, II, and IV only
d. All of the above

4) Examine the following regression model: y ̂ i= b0 + b1X1 + b2X2. In the model, b1

represents the expected change in y ̂ i when X1 _____ and X2 _____. ANS: B

a. Increases by 1 unit…..increase by the same amount

b. Increases by 1 unit…..remain constant
c. Doubles…..increase by the same amount
d. Doubles…..remain constant

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 SECTION II

Question 1 [Total: 19 marks]

Part A
Consider the following statement: “A Goal Programming problem has no optimal solution in
the sense of a Linear Programming problem where we can mechanically apply an algorithm
(e.g. using Solver in Excel) to locate the “optimal” solution. Instead, the Goal Programming
procedure requires that we search for a "most satisfying" solution.”
Required
With respect to the above statement, discuss what you understand by there being an
“optimal” solution to a Linear Programming problem but a “most satisfying” solution to a
Goal Programming problem. [7 marks]
 Linear programming involves creating and solving optimization problems with
linear objective functions and linear constraints. In linear programming, constraints
are assumed to be hard constraints which cannot be violated. Objective functions
are maximized or minimized based on these hard constraints. Accordingly, solutions
obtained are mathematically optimal.

 In goal programming, we seek to minimize the sum of weighted percentage

deviations from stated goals. In goal programming, constraints (or goals) are viewed
as soft constraints or as targets that a data modeler would like to achieve. These
constraints can be violated. Accordingly, the solution that a data modeler arrives at
would depend on the extent to which s/he is satisfied that it allows him/her to reduce
deviations from his/her stated goals – there is no one optimal solution, unlike in a
linear programming problem.

Part B
Required
i. [Total = 7 marks]
Ai = amount of money (in $1000s) allocated to department i

1 1 1 1 1
MIN ¿+ ¿ ¿ ¿ ¿ [3marks]
450 310 275 187.5 135

ST A1 + d1- - d1+ = 450

A2 + d2- - d2+ = 310
A3 + d3- - d3+ = 275 [2 marks]
A4 + d4- - d4+ = 187.5
A5 + d5- - d5+ = 135
A1 + A2 + A3 + A4 + A5 = 1200
A1 > 0.7(450)
A2 > 0.7(310)
A3 > 0.7(275) [2 marks]
A4 > 0.7(187.5)

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 A5 > 0.7(135)
Ai, di- , di+ > 0

ii. [Total = 6 marks]

C20

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Part C
Required
i. [0.21a + 0.14b] – [R (3a2 + 2b2 + (a + b)3)]
ii. Non-linear programming because the objective function is non-linear in nature.

Part D
Required
Decision variables
X1=number of advertisement assigned to television
X2=number of advertisement assigned to print
X3=number of advertisement assigned to radio

Objective function
maximise: 150000X1+50000X2+20000X3

Constraint functions
X3 ≤ 0.4(X1 + X2 + X3)
X1 + X2 + X3 ≤ 14
X1 ≥ 0.1(X1 + X2 + X3)
2500X1 + 800X2 + 500X3 ≤ 19600

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Question 2 [Total: 10 marks]
Daniel is a salesman for IVA Finance. He travels often for work, and has to make expense
claims for meals and other expenses that he incurs on such trips. On his business trips, Daniel
would make sure that his expenses have a leading digit of “1” where possible. For example,
he would spend $18 for lunch, or $175 on a hotel room.
On his return, Daniel would then use a black ballpoint pen to change the 1s on his receipts to
7 or 9 before scanning the receipts and submitting them for reimbursement. This could, for
instance, inflate his lunch and hotel room claims from $18 and $175 to $98 and $775
respectively.

Required
Explain how an internal auditor could detect Daniel’s fraudulent claims using Benford’s Law.
[10 marks]
• A random (large) set of data such as expense claims follows a predictable pattern.
Benford’s law gives the expected frequencies of digits in tabulated data, which is
extremely hard for a human to fake
• Daniel is systematically changing the (first-digit) 1s in his receipts to either 7 or 9.
Over time, this would result in the first digits of his claims deviating from the
expected frequencies predicted by Benford’s law. Specifically, there would be fewer
1s than predicted and more 7s and 9s than predicted.
• A first-digits test would detect this deviation. An internal auditor could make each
employee a subset, and then run the first-digits test for each employee and calculate
the mean absolute deviation (MAD) for each employee.
• The internal auditor could then compare calculated MADs with a predetermined
MAD that would trigger further investigation into an employee’s claims. If the
deviations of the numbers 1, 7, and 9 in Daniel’s claims deviate significantly from
expected frequencies, the MAD would likely exceed the pre-determined threshold,
triggering further investigation into Daniel’s claims
• The internal auditor could then examine the absolute deviations for individual digits
in Daniel’s claims to identify the digits where actual frequencies deviate significantly
from expected frequencies (the digits 1, 7, and 9 should be identified). The receipts
corresponding to those numbers could then be retrieved and examined more closely.

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Question 3 [Total: 15 marks]
You are the management accountant for FBC Ltd, a manufacturer of motorcycles with
manufacturing plants in the region. Earlier this morning, your Finance Director for Indonesia
approached you to help with developing a forecast model for manufacturing overhead costs
in the Indonesia plant.

He suggests that you could use simple linear regression to develop a forecast model. In
particular, he suggests that direct labour hours varies with manufacturing overhead costs, and
provides you with the relevant data for the last 3 years.

However, you are also aware of the following occurrences in the last 3 years in the Indonesia
plant:

- In the first year, production was severely curtailed for 2 months due to wildcat strikes

- In the second year, production was reduced in one month due to a flood at the plant; it
then increased significantly two months later (resulting in significant overtime) to
meet output required to fulfil a large one-time order

- In year three, there were no significant incidences of note

Required

Discuss which data you would choose to include/exclude in building your regression model.
[15 marks]

• Simple linear regression model, with:

• Dependent variable: Manufacturing overhead cost;
• Independent variable: direct labour hours
• Should seek to include data related to the DV and IV that presents an accurate
picture of cost behaviour
Some consideration:
• All date: could inefficiencies and efficiencies in the data balance out over a longer
period of time?
• Only data that is considered ‘normal’: This would ensure that regression is not
distorted; but what is ‘normal’? (how common are strikes, floods, rushed orders in
the Indonesia plant?)
• Data from most recent 12 months: Most current data may be most reflective of
current cost behaviour (for example if steps were taken to prevent future strikes,
work was done to prevent future flooding, etc)
• Others