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WelcomeWelcomeWelcomeWelcomeMM305
Quantitative Analysis for ManagementDr. Bob Lockwood
Seminar OutlineSeminar Outline
• Welcome!
• Syllabus Overview
• Contact Information for Instructor
• Seminar Rules and Format
• Discussion
Syllabus OverviewSyllabus OverviewAll projects, discussion question posts, and seminar option 2 are due at 11:59 PM ET on the Tuesday that concludes each unit.
Late projects will be accepted up to three units late with a 10% penalty per late unit, with the exception of Unit 9.
Instructor Contact InformationInstructor Contact Information
• Professor Andy Hynds
• Email: [email protected]
• Office hours: By appointment
• In order to facilitate the tracking of assignments and allcorrespondence with me, please be sure to include your Course/section number and the unit number for the learningactivity you are inquiring about.
• Your unit project MUST be saved and submitted to me using the following naming procedure: Firstname_lastname_unit #
Seminar Rules and FormatSeminar Rules and Format
• Please show up on time for all seminars, participate often in a respectful manner, stay on topic, and stay until the end. If you do come late, please take your “seat” quietly.
• Social posts (Hi, Bye, rough day at work, my car broke down, etc.) will not help your participation grade.
• It is important that you try to participate rather than just simply watching. I highly recommend having your textbook handy and Excel QM and/or QM for Windows open during seminar.
• Usual format of seminar will involve discussing a concept and then working with the technology (Excel, Excel QM, PhStat2, or QM for Windows) applicable to that unit.
What is Quantitative Analysis (QA)?What is Quantitative Analysis (QA)?• The use of statistical techniques to understand quantitative
data and to identify relationships between and among variables.
• QA uses the scientific approach to managerial decision making.
• The development of a (mathematical) model of a real world scenario
• The model provides insight into the solution of the managerial problem
• Deterministic Models Where all the input data values are known with complete certainty
• Probabilistic Models Where some input data values are uncertain
What is Quantitative Analysis (QA)?What is Quantitative Analysis (QA)?• QA uses the scientific approach to managerial decision making. • Must consider both Quantitative and Qualitative factors.
• Quantitative Data Numerical factors such as expenses and revenues
• Qualitative Data Factors that effect the environment which are difficult to
quantify, e.g. weather, state laws, new technology, etc.
Raw DataRaw Data Quantitative Analysis
Quantitative Analysis
Meaningful InformationMeaningful Information
The Quantitative Analysis (QA) ApproachThe Quantitative Analysis (QA) Approach
Steps in Modeling:
1. FormulationTranslating a problem scenario from words to a mathematical model
2. SolutionSolving the model to obtain the optimal solution
3. Interpretation and Sensitivity AnalysisAnalyzing results and implementing a solution
The Quantitative Analysis (QA) ApproachThe Quantitative Analysis (QA) Approach
Steps in Modeling
Modeling in the Real WorldModeling in the Real World
• Models are or can be:
• complex
• expensive
• difficult to sell
• used in the realreal worldworld by realreal organizationsorganizations to solve
realreal problemsproblems
How to Develop a Quantitative Analysis Model
How to Develop a Quantitative Analysis Model
• Profit = Revenue – Expenses• Revenue=
(selling price per unit)*(number of units sold) • Expenses= Fixed cost + (variable cost per unit)*(number of units sold)• Profit = sX - (f + vX) = sX - f - vX, where
• s = selling price per unit• f = fixed cost• v = variable cost per unit• X = number of units sold
Break-Even Point (BEP)Break-Even Point (BEP)• The BEP is the number of units sold that will result in $0 profit,
so Revenue = Expenses
• Profit = sX - (f + vX) = sX - f – vX $0 = sX - f - vX
$0 = (s-v)X – f
X = f/(s-v) BEP =
• Excel QM • Breakeven Analysis
• QM for Windows• Breakeven/Cost-Volume Analysis
Excel QM’s Main Menu of Quantitative Models in Excel 2007Excel QM’s Main Menu of Quantitative Models in Excel 2007
QM for WindowsQM for Windows
Example: Break-Even Point (BEP)Example: Break-Even Point (BEP)Let's say you manufacture widgets. Each unit sells at $5. It costs you $2 to make each one, and the fixed costs for the period are $750. What is the break-even point in units and in sales revenue?
First, identify what you know from the problem:
• s = selling price per unit = $5• f = fixed cost = $750• v = variable cost per unit = $2We need to know:
• X = number of units sold Recall, BEP = $0 = (s-v)X – f , therefore X = f/(s-v) X = $750/($5-$2) = 250 units
break-even sales revenue = 250 * $5 = $1,250
Example: Break-Even Analysis in Excel QMExample: Break-Even Analysis in Excel QM
Questions?Questions?