Posted: June 19th, 2022

Unit 1 CS MOA

see attachment
Accurate Follow
ATTACHED FILE(S)
Unit I Case Study
Instructions
Imagine you are a business analytics employee at BAT Car Company. The president and CEO of BAT have tasked you with providing them with a data plan addressing expansion of BAT’s production business into Frankfurt, Germany, on a $40 million Model Z plant. This $40 million, which encompasses all fixed costs, the BAT CEO plans to apportion equally (25%) each) among the four types of vehicles the Model Z plant will manufacture.
All economic and environmental impact studies have been approved. The size of the plant is predicted to be 420 soccer fields in size (a soccer field is 100 yards wide by 130 yards long). The car sales are expected to be: $30,000 per sedan; $50,000 per sports model; $20,000 per small cargo van; and $40,000 per passenger minivan. It will create 10,000 jobs for Frankfurt and the surrounding areas.
There have been some issues with protestors regarding the building of an automotive plant that destroys forestland valued at $350 million. There has been some rumbling regarding a group called “Save The Forest” that could implement a cease all actions lawsuit against BAT. Research has shown that previous lawsuits and environmental impact has led to years of litigation and legal fees. The variable costs for the first year’s operation look to be $20,000 per sedan; $40,000 per sports model; $10,000 per small cargo van; and $25,000 per passenger minivan. Sales are expected to be: 40,000 sedans; 5,000 sports cars; 2,000 cargo vans; and 12,000 minivans.
Prepare a brief report for the president and CEO of BAT Car Company. Your report should include the following elements:
· an introduction section that describes how the quantitative analysis approach can be applied to this situation;
· BAT’s profit formula results;
· BAT’s break-even point for each vehicle type; and
· your final recommendation on actions to take. (This section should convey to the CEO if the expansion of the production plant is profitable to BAT over the long haul, as well as how to deal with any possible litigation.)
Your final report must be at least three pages in length, and you must show all of your computations (theUnit I Practice Problem Activitywill help with this).
You can also view a
PDF of the Unit I Practice Problem Activity
.
You should use at least two academic sources in your report, one of which may be your textbook. Adhere to APA Style when constructing this assignment, including in-text citations and references for all sources that are used. Please note that no abstract is needed.
Text Book is:Quantitative Analysis for Management
Barry Render; Ralph M. Stair; Michael E. Hanna; Trevor S. Hale
LDR 5301, Methods of Analysis for Business Operations 1
Course Learning Outcomes for Unit I
Upon completion of this unit, students should be able to:
1. Differentiate the steps of the quantitative analysis approach.
1.1 Explain the quantitative analysis approach.
1.2 Perform a profit analysis and breakeven analysis.
1.3 Determine an action plan for a company using the quantitative analysis approach.
Course/Unit
Learning Outcomes
Learning Activity
1.1
Unit Lesson
Chapter 1
Unit I Case Study
1.2
Unit Lesson
Chapter 1
Video Segment: Breakeven Analysis
Unit I Case Study
1.3
Unit Lesson
Chapter 1
Unit I Case Study
Required Unit Resources
Chapter 1: Introduction to Quantitative Analysis
In order to access the following resource, click the link below.
TV Choice Ltd. (Producer). (2011). Breakeven analysis (Segment 7 of 9) [Video]. In Accounting & finance
clips 1: Accounting, forecasting, and breakeve. Films on Demand.
https://libraryresources.columbiasouthern.edu/login?auth=CAS&url=https://fod.infobase.com/PortalPl
aylists.aspx?wID=273866&xtid=128753&loid=450485
The transcript for this video can be found by clicking on “Transcript” in the gray bar to the right of the video in
the Films on Demand database.
Unit Lesson
Today’s business world is globally connected. From Canada to Mexico, and from China to the United States,
each country is connected to others in many ways. Imagine the business decisions that are made on a daily
basis from every type of organization—finance, manufacturing, video production, automobile production,
retail, fashion, gambling, and food services. Literally, there are hundreds of thousands of decisions that must
be made every day in these organizations regarding cost analyses, debt analyses, return-on-investment
analyses, breakeven analyses, trend analyses, correlations, consumer preferences and change to products,
and market share analyses.
Also, think about the entertainment industry with regard to professional and college sports (football,
basketball, hockey, soccer, and more). Both professional and college sports use business analytics from a
business standpoint and as a strategy application of the game. Data are recorded regarding where points are
UNIT I STUDY GUIDE
Introduction to
Quantitative Analysis
https://libraryresources.columbiasouthern.edu/login?auth=CAS&url=https://fod.infobase.com/PortalPlaylists.aspx?wID=273866&xtid=128753&loid=450485
LDR 5301, Methods of Analysis for Business Operations 2
UNIT x STUDY GUIDE
Title
scored, the distance from which they were scored, what play worked in what given defensive or offensive
situation. There is much effort put into major league and college sports with data gathering and analysis.
Think about this application to minor league baseball: two scouts are sitting behind home plate, each with a
notebook, pencil, and speed gun. They record the speed of each pitch, the call by the umpire, and if there are
runners in position. Why? They are gathering data for future utilization of that pitcher by the parent major
league team.
So, where do leaders and executives begin? It starts with the comprehension of managerial science. They
can begin with the application of quantitative analysis, as mentioned above, with qualitative analysis, which
includes things such as weather, federal and state legislation, and economic disruptors that create positive
change with new product and technological developments.
All of these operations require data and information. This is referred to as the application of management
science. Data drive the decision-making process because there is no room for guesswork or emotions to take
part in quantitative analysis (Render et al., 2018). When corporate leaders look at data, it is usually in the
form of numbers with regard to cost, revenue generated, profit, and market share. To have a good grasp on
decision-making, leaders use a business analytics approach.
Render et al. (2018) have broken down this process into three major areas:
• descriptive analytics: statistical methods mean, standard deviations, mode;
• predictive analytics: decision trees, regression models, forecasting, project scheduling, and waiting
line models such as McDonald’s, Chick-fil-A, and bank drive-through operations; and
• prescriptive analytics: inventory modeling, transportation modeling.
So, what do they do? What is their purpose? How do they help a business leader use both quantitative and
qualitative analysis? Descriptive analytics involves the study and consolidation of historical data for a
business and industry (Render et al., 2018). An example of this would be in the automotive industry. How
many cars were sold last year? What models sold best? What were the regional and world economic
positions (growth, recession)?
Predictive analytics relies on
forecasting to determine future
outcomes based on patterns from past
data (Render et al., 2018). A few
examples of predictive analytics are
business operations in marketing
campaigns conducted by determining
customer purchase patterns based on
billboard ads, television ads, and radio
ads. In addition, predictive analysis can
be used to better manage a company’s
inventory based on seasonality and
weather changes. One more example
is insurance companies’ analyses of
data when predicting insurance rates
for their drivers based on past driving
records, age, accidents, and citations.
The final analytic is prescriptive.
According to Render et al. (2018), this
analytic focuses on using optimization
models such as linear programming,
transportation modeling, and inventory
control through economic order
quantities. The next time you are
driving on the interstate highway in your area or on a main traffic route in your city, look at the trucks that are
LDR 5301, Methods of Analysis for Business Operations 3
UNIT x STUDY GUIDE
Title
on the road. You will likely see a Walmart, Target, Publix, or other such truck. Companies use transportation
modeling for deliveries to maximize time with route and fuel consumption savings.
A great example of prescriptive analytics is from Google’s self-driving, autonomous car called the Waymo.
John Krafcik, Waymo CEO, began work on Waymo in 2009 under the ownership of Google (Waymo, n.d.;
Wakabayashi, 2020). According to Wakabayashi (2020), Google spun out the project in 2016, after vehicles
were driven more than 20 million miles on public roads and more than 10 billion miles in computer simulation
since 2009.
Given Google’s work on this project, other companies have followed their lead because that is what it takes in
business decision-making. Decision makers use and employ business analytics as described above to
comprehend the needs of the consumer and the market. This is done through data gathering, statistics, and
models that assist in forecasting the future needs and sales. Now, all the big names in cars are engaged in
this technological development of designing autonomous cars for the consumer.
Your exposure to the three types of business analytics will expand your perspective on what types of tools
and formulas are used for each analytic, thereby, helping you make a better decision on what quantitative
technique works best.
Now that you have an understanding of what business analytics are and how they are used, let’s see how
they are integrated into the quantitative analysis approach. Render et al. (2018) do a great job of providing a
quality diagram on page 3 in the textbook. If you have taken any courses in business management, the
quantitative analysis approach closely follows the business management decision-making model. Let’s step
through Render et al.’s (2018) quantitative analysis approach.
Defining the Problem
This could be very easy; then again, it could be difficult because many problems may exist. Leaders and
managers need to focus on the operation at hand. What is causing the disruption, lack of sales, or delays?
Developing the Model
Simply put, this is determining whether to use a mathematical model for solving the problem (more than likely
yes), or it could be a physical model on building a bridge. Regardless of the type, there will be data, variables,
and parameters that will be measured.
Acquiring the Data
It is now time to gather data that pertain to the problem at hand. Depending on the problem’s breadth and
depth, the data gathering could be easy or difficult. There is no set number of data points; it depends on the
problem to be solved.
Developing a Solution
You have defined your problem, you have determined the correct model to use, and you have gathered your
data. You now load the data into the equation or computer algorithm selected and let the program crunch the
numbers for you.
Once the data application is completed, leaders, managers, and executives will review the data, determine
the parameters, and do a few things:
• accept the data,
• reject the data, or
• tweak the data by broadening the data gathering and parameters set.
Testing the Solution
Depending on the outcome in the previous step above when the final solution is selected, it will need to be
tested. This usually takes place in a simulation or a test marketing application. A great example is the
LDR 5301, Methods of Analysis for Business Operations 4
UNIT x STUDY GUIDE
Title
marketing practices of the cola wars in the 1970s (predictive analysis) where consumers were put to a taste
test to determine what they liked better, Coca-Cola or Pepsi Cola. The catch was that the survey was a blind
taste test (Little, 2020).
In the example above, hundreds of thousands of dollars were spent by each company to promote their
product. The follow-up in the 1980s was when Coca-Cola did away with “Old Coke” and introduced “New
Coke” (Little, 2020). This is, again, business analytics in motion.
Analyzing the Results
Here is where decision makers earn their worth. They have to make a decision based on the final evidence
provided. It could mean many things. For example, a company might decide to spend a million dollars in LED
lights to save the company overhead costs of $4 million over 2 1/2 years in electrical costs. The decision
could even be to gain more shelf space in supermarkets, drug stores, or gas stations. A company could
change their product taste and name by creating a new marketing hype to gain market share. The costs of
this could be in the billions of dollars.
Implementing the Results
This is putting the plan into action. Of course, after the data is analyzed, the numbers do not do the work.
Leadership, human capital, strategies, planning, resources, and timelines must be put into place to
implement, execute, and measure the results in the real world.
Putting the Data and Decision-Making Into Action
This is where the mathematical model you selected takes action. There are two simple business questions
that are always at the forefront of decision-making:
• How much profit will we make?
• What is our breakeven?
Your assignment this week will allow you to compute the breakeven and profit analysis for the BAT Car
Company. The assignment will expose you to the business analytics model, as well as the decision-making
model in the textbook, and allow you to apply what you have learned in this lesson.
References
Little, B. (2020, March 12). How the ‘blood feud’ between Coke and Pepsi escalated during the 1980s cola
wars: History. https://www.history.com/news/cola-wars-pepsi-new-coke-failure
Render, B., Stair, R. M., Jr., Hanna, M. E., & Hale, T. S. (2018). Quantitative analysis for management (13th
ed.). Pearson. https://online.vitalsource.com/#/books/9780134518558
Wakabayashi, D. (2020, March 2). Waymo includes outsiders in $2.25 billion investment round. The New
York Times. https://www.nytimes.com/2020/03/02/technology/waymo-outside-investors.html
Waymo. (n.d.). Our journey. https://waymo.com/journey/
Suggested Unit Resources
In order to access the following resources, click the links below.
The Chapter 1 PowerPoint Presentation will summarize and reinforce the information from this chapter in your
textbook. You can also view a PDF of the Chapter 1 presentation.
https://online.columbiasouthern.edu/bbcswebdav/xid-145745438_1
https://online.columbiasouthern.edu/bbcswebdav/xid-145745437_1
LDR 5301, Methods of Analysis for Business Operations 5
UNIT x STUDY GUIDE
Title

Learning Activities (Nongraded)
Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.
For an overview of the chapter equations, read the Key Equations on page 17 of the textbook.
Complete the Self-Test on pages 17–18 of your textbook to test your knowledge of concepts and terms in this
unit. Use the key in the back of the book in Appendix H to check your answers.
Complete the Unit I Practice Problem Activity to practice the math skills presented in this unit. These concepts
will be used in your unit assignment, so practicing them here will help you to successfully complete that
assignment.
You can also view a PDF of the Unit I Practice Problem Activity.
https://online.columbiasouthern.edu/bbcswebdav/xid-145745435_1
https://online.columbiasouthern.edu/bbcswebdav/xid-145745439_1
Course Learning Outcomes for Unit I
Required Unit Resources
Unit Lesson
Defining the Problem
Developing the Model
Acquiring the Data
Developing a Solution
Testing the Solution
Analyzing the Results
Implementing the Results
Putting the Data and Decision-Making Into Action
References
Suggested Unit Resources
Learning Activities (Nongraded)
Adobe Captivate Wednesday, April 27, 2022

Page 1 of 12
Slide 1 – Title Slide

Slide notes

Text Captions

Unit I Practice Problems

Adobe Captivate Wednesday, April 27, 2022

Page 2 of 12
Slide 2 – Instructions

Slide notes

Text Captions

The following slides contain practice problems from page
18 in the textbook. Try to solve the problems, then watch
the video solution to check your work. To play the video,
simply click on the video and it will open in a new tab.

Instructions

Adobe Captivate Wednesday, April 27, 2022

Page 3 of 12
Slide 3 – Question 1-16

Slide notes

Text Captions

Problem: Ray Bond sells handcrafted yard decorations at county fairs. The
variable cost to make these is $20 each, and he sells them for $50. The cost
to rent a booth at the fair is $150. How many of these must Ray sell to break
even?

Question 1-16

Solution:

Adobe Captivate Wednesday, April 27, 2022

Page 4 of 12
Slide 4 – Question 1-17

Slide notes

Text Captions

Problem: Ray Bond, from Problem 1-16, is trying to find a new supplier that
will reduce his variable cost of production to $15 per unit. If he was successful
in reducing this cost, what would the break-even point be?

Question 1-17

Solution:

Adobe Captivate Wednesday, April 27, 2022

Page 5 of 12
Slide 5 – Question 1-18

Slide notes

Text Captions

Problem: Katherine D’Ann is planning to finance her college education by selling programs at
the football games for State University. There is a fixed cost of $400 for printing these
programs, and the variable cost is $3. There is also a $1,000 fee that is paid to the university for
the right to sell these programs. If Katherine was able to sell programs for $5 each, how many
would she have to sell in order to break even?

Question 1-18

Solution:
Adobe Captivate Wednesday, April 27, 2022

Page 6 of 12

Adobe Captivate Wednesday, April 27, 2022

Page 7 of 12
Slide 6 – Question 1-19

Slide notes

Text Captions

Problem: Katherine D’Ann, from Problem 1-18, has become concerned that sales may
fall, as the team is on a terrible losing streak and attendance has fallen off. In fact,
Katherine believes that she will sell only 500 programs for the next game. If it was
possible to raise the selling price of the program and still sell 500, what would the price
have to be for Katherine to break even by selling 500?

Question 1-19

Solution:
Adobe Captivate Wednesday, April 27, 2022

Page 8 of 12

Adobe Captivate Wednesday, April 27, 2022

Page 9 of 12
Slide 7 – Question 1-20

Slide notes

Text Captions

Problem: Farris Billiard Supply sells all types of billiard equipment and is considering manufacturing its
own brand of pool cues. Mysti Farris, the production manager, is currenlty investigating the production
of a standard house pool cue that should be very popular. Upon analyzing the costs, Mysti determines
that the materials and labor cost for each cue is $24, and the fixed cost that must be covered is $2,400
per week. With a selling price of $40 each, how many pool cues must be sold to break even? What
would the total revenue be at this break-even point?

Question 1-20

Adobe Captivate Wednesday, April 27, 2022

Page 10 of 12
Solution:

Adobe Captivate Wednesday, April 27, 2022

Page 11 of 12
Slide 8 – End Slide

Slide notes

Text Captions

Unit I Practice Problems

You have reached the end of the Unit I practice problems.
Click the Restart button to return to the beginning if you
need further review. Otherwise, you may close your
browser window to exit.

Title slide image reference:

Adobe Captivate Wednesday, April 27, 2022

Page 12 of 12
Baranau, D. (n.d.). ID 162189502. Dreamstime.
https://www.dreamstime.com/budget-data-people-vector-business-analysis-person-concept-
illustration-financial-account-statistic-graph-management-chart-report-image162189502

Quantitative Analysis for Management
Thirteenth Edition
Chapter 1
Introduction to Quantitative
Analysis
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Learning Objectives
After completing this chapter, students will be able to:
1.1 Describe the quantitative analysis approach and
understand how to apply it in a real situation.
1.2 Describe the three categories of business analytics.
1.3 Describe the use of modeling in quantitative analysis.
1.4 Prepare a quantitative analysis model.
1.5 Use computers and spreadsheet models to perform
quantitative analysis.
1.6 Recognize possible problems in using quantitative
analysis.
1.7 Recognize implementation concerns of quantitative
analysis.
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Chapter Outline
1.1 What Is Quantitative Analysis?
1.2 Business Analytics
1.3 The Quantitative Analysis Approach
1.4 How to Develop a Quantitative Analysis Model
1.5 The Role of Computers and Spreadsheet Models in the
Quantitative Analysis Approach
1.6 Possible Problems in the Quantitative Analysis
Approach
1.7 Implementation — Not Just the Final Step
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Introduction
• Mathematical tools have been used for thousands of years
• Quantitative analysis can be applied to a wide variety of
problems
– Not enough to just know the mathematics of a
technique
– Must understand the specific applicability of the
technique, its limitations, and assumptions
– Successful use of quantitative techniques usually
results in a solution that is timely, accurate, flexible,
economical, reliable, and easy to understand and use
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Examples of Quantitative Analyses
• Taco Bell saved over $150 million using forecasting and
employee scheduling quantitative analysis models
• NBC television increased revenues by over $200 million by
using quantitative analysis to develop better sales plans for
advertisers
• Continental Airlines saved over $40 million every year
using quantitative analysis models to quickly recover from
weather delays and other disruptions
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
What is Quantitative Analysis? (1 of 4)
Quantitative analysis is a scientific approach to managerial
decision making in which raw data are processed and
manipulated to produce meaningful information
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
What is Quantitative Analysis? (2 of 4)
• Quantitative factors are data that can be accurately
calculated
– Different investment alternatives
– Interest rates
– Financial ratios
– Cash flows and rates of return
– Flow of materials through a supply chain
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
What is Quantitative Analysis? (3 of 4)
• Qualitative factors are more difficult to quantify but affect
the decision process
– The weather
– State and federal legislation
– Technological breakthroughs
– The outcome of an election
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
What is Quantitative Analysis? (4 of 4)
• Quantitative and qualitative factors may have different
roles
• Decisions based on quantitative data can be automated
• Generally quantitative analysis will aid the decision-making
process
• Important in many areas of management
– Production/Operations Management
– Supply Chain Management
– Business Analytics
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Business Analytics (1 of 3)
• A data-driven approach to decision making
– Allows better decisions
– Large amounts of data
– Information technology is very important
– Statistical and quantitative analysis are used to analyze
the data and provide useful information
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Business Analytics (2 of 3)
• Descriptive analytics – the study and consolidation of
historical data
• Predictive analytics – forecasting future outcomes based
on patterns in the past data
• Prescriptive analytics – the use of optimization methods
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Business Analytics (3 of 3)
TABLE 1.1 Business Analytics and Quantitative Analysis Models
BUSINESS ANALYTICS CATEGORY QUANTITATIVE ANALYSIS TECHNIQUE
Descriptive analytics Statistical measures such as means and standard deviations
(Chapter 2)
Statistical quality control (Chapter 15)
Predictive analytics Decision analysis and decision trees (Chapter 3)
Regression models (Chapter 4)
Forecasting (Chapter 5)
Project scheduling (Chapter 11)
Waiting line models (Chapter 12)
Simulation (Chapter 13)
Markov analysis (Chapter 14)
Prescriptive analytics Inventory models such as the economic order quantity
(Chapter 6)
Linear programming (Chapters 7, 8)
Transportation and assignment models (Chapter 9)
Integer programming, goal programming, and nonlinear
programming (Chapter 10)
Network models (Chapter 9)
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
The Quantitative Analysis Approach
FIGURE 1.1 The Quantitative
Analysis Approach
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Defining the Problem
• Develop a clear and concise statement of the problem to
provide direction and meaning
– This may be the most important and difficult step
– Go beyond symptoms and identify true causes
– Concentrate on only a few of the problems – selecting
the right problems is very important
– Specific and measurable objectives may have to be
developed
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Developing a Model (1 of 2)
• Models are realistic, solvable,
and understandable
mathematical representations
of a situation
• Different types of models
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Developing a Model (2 of 2)
• Mathematical model – a set of mathematical relationships
• Models generally contain variables and parameters
– Controllable variables, decision variables, are generally
unknown
 How many items should be ordered for inventory?
– Parameters are known quantities that are a part of the
model
 What is the cost of placing an order?
• Required input data must be available
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Acquiring Input Data
• Input data must be accurate – GIGO rule
• Data may come from a variety of sources – company
reports, documents, employee interviews, direct
measurement, or statistical sampling
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Developing a Solution
• Manipulating the model to arrive at the best (optimal)
solution
• Common techniques are
– Solving equations
– Trial and error – trying various approaches and picking
the best result
– Complete enumeration – trying all possible values
– Using an algorithm – a series of repeating steps to
reach a solution
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Testing the Solution
• Both input data and the model should be tested for
accuracy and completeness before analysis and
implementation
– New data can be collected to test the model
– Results should be logical, consistent, and represent the
real situation
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Analyzing the Results
• Determine the implications of the solution
– Implementing results often requires change in an
organization
– The impact of actions or changes needs to be studied
and understood before implementation
• Sensitivity analysis, postoptimality analysis, determines
how much the results will change if the model or input data
changes
– Sensitive models should be very thoroughly tested
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Implementing the Results
• Implementation incorporates the solution into the company
– Implementation can be very difficult
– People may be resistant to changes
– Many quantitative analysis efforts have failed because
a good, workable solution was not properly
implemented
• Changes occur over time, so even successful
implementations must be monitored to determine if
modifications are necessary
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Modeling in the Real World
• Quantitative analysis models are used extensively by real
organizations to solve real problems
– In the real world, quantitative analysis models can be
complex, expensive, and difficult to sell
– Following the steps in the process is an important
component of success
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
How to Develop a Quantitative Analysis
Model (1 of 3)
A mathematical model of profit:
Profit = Revenue − Expenses
• Revenue and expenses can be expressed in different
ways
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
How to Develop a Quantitative Analysis
Model (2 of 3)
Profit = Revenue − (Fixed cost + Variable cost)
Profit = (Selling price per unit)(Number of units sold) −
[Fixed cost + (Variable costs per unit)(Number of
units sold)]
Profit = sX − [f + vX]
Profit = sX − f − vX
where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
How to Develop a Quantitative Analysis
Model (3 of 3)
Profit = Revenue − (Fixed cost + Variable cost)
Profit = (Selling price per unit)(Number of units sold) −
[Fixed cost + (Variable costs per unit)(Number of
units sold)]
Profit = sX − [f + vX]
Profit = sX − f − vX
where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
The parameters of this model
are f, v, and s as these are the
inputs inherent in the model.
The decision variable of interest
is X.
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Pritchett’s Precious Time Pieces (1 of 3)
• The company buys, sells, and repairs old clocks
– Rebuilt springs sell for $8 per unit
– Fixed cost of equipment to build springs is $1,000
– Variable cost for spring material is $3 per unit
s = 8f = 1,000v = 3
Number of spring sets sold = X
Profits = $8X − $1,000 − $3X
If sales = 0, profits = − f = − $1,000
If sales = 1,000, profits = [($8)(1,000) − $1,000 − ($3)(1,000)]
= $4,000
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Pritchett’s Precious Time Pieces (2 of 3)
• Companies are often interested in the break-even point
(BEP), the BEP is the number of units sold that will result
in $0 profit
0 = sX − f − vX, or 0 = (s − v)X − f
Solving for X, we have
f = (s − v)X
X = f÷(s − v)

Fixed cost
BEP =
(Selling price per unit)(Variable cost per unit)
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Pritchett’s Precious Time Pieces (3 of 3)
BEP for Pritchett’s Precious Time Pieces
BEP = $1,000÷($8 − $3) = 200 units
• Sales of less than 200 units of rebuilt springs will
result in a loss
• Sales of over 200 units of rebuilt springs will result in
a profit
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Advantages of Mathematical Modeling
1. Models can accurately represent reality.
2. Models can help a decision maker formulate problems.
3. Models can give us insight and information.
4. Models can save time and money in decision making and
problem solving.
5. A model may be the only way to solve large or complex
problems in a timely fashion.
6. A model can be used to communicate problems and
solutions to others.
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Models Categorized by Risk
• Mathematical models that do not involve risk or chance are
called deterministic models
– All of the values used in the model are known with
complete certainty
• Mathematical models that involve risk or chance are called
probabilistic models
– Values used in the model are estimates based on
probabilities
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Computers and Spreadsheet Models (1 of 6)
POM-QM for Windows
• An easy to use
decision support
system for use in
POM and QM
courses
• This is the main
menu of quantitative
models
• An Excel add-in
PROGRAM 1.1 The QM for
Windows Main Menu
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Computers and Spreadsheet Models (2 of 6)
PROGRAM 1.2A Entering the Data for Pritchett’s Precious
Time Pieces Example into QM for Windows
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Computers and Spreadsheet Models (3 of 6)
PROGRAM 1.2B QM for Windows Solution Screen for
Pritchett’s Precious Time Pieces Example
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Computers and Spreadsheet Models (4 of 6)
PROGRAM 1.3 Excel QM in Excel 2016 Ribbon and Menu
of Techniques
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Computers and Spreadsheet Models (5 of 6)
PROGRAM 1.4 Entering the Data for Pritchett’s Precious
Time Pieces Example into Excel QM in Excel 2016
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Computers and Spreadsheet Models (6 of 6)
PROGRAM 1.5 Using Goal Seek in the Break-Even Problem
to Achieve a Specified Profit
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Possible Problems in the Quantitative
Analysis Approach (1 of 2)
• Defining the problem
– Problems may not be easily identified
– Conflicting viewpoints
– Impact on other departments
– Beginning assumptions
– Solution outdated
• Developing a model
– Fitting the textbook models
– Understanding the model
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Possible Problems in the Quantitative
Analysis Approach (2 of 2)
• Acquiring accurate input data
– Using accounting data
– Validity of the data
• Developing a solution
– Hard-to-understand mathematics
– Only one answer is limiting
• Testing the solution
 Solutions not always intuitively obvious
• Analyzing the results
 How will it affect the total organization
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Implementation – Not Just the Final Step (1 of
2)
• Lack of commitment and resistance to change
– Fear formal analysis processes will reduce
management’s decision-making power
– Fear previous intuitive decisions exposed as
inadequate
– Uncomfortable with new thinking patterns
– Action-oriented managers may want “quick and dirty”
techniques
– Management support and user involvement are
important
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Implementation – Not Just the Final Step (2 of
2)
• Lack of commitment by quantitative analysts
– Analysts should be involved with the problem and care
about the solution
– Analysts should work with users and take their feelings
into account
Copyright © 2018, 2015, 2012 Pearson Education, Inc. All Rights Reserved.
Copyright

Expert paper writers are just a few clicks away

Place an order in 3 easy steps. Takes less than 5 mins.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00