Material Outline
• Problem Solving and Decision Making• Quantitative Analysis and Decision
making• Quantitative Analysis• Model of Cost Revenue, and Profit
Problem Solving and Decision Making
The Problem Solving Process:
1.Identify and define the problem2.Determine the set of alternative solutions3.Determine the criterion4.Evaluate the alternatives5.Choose an alternative6.Implement the selected alternative7.Evaluate the results to determine weather a satisfactory solution has been obtained
Example:Data for the Job Evaluation Decision-Making Problem
Alternative StartingSalary
Potential for Advancement
Job Location
1. Rochester $48,000 Average Average
2. Dallas $46,000 Excellent Good
3. Greensboro $46,000 Good Excellent
4. Pittsburgh $47,000 Average Good
Problem Solving and Decision Making
* You Decide to select alternative 3, Decision is the alternative selected
A Subclassification of The Decision making Process
Structuring The Problem Analyzing The Problem
DefineThe Problem
IdentifyThe Alternative
Determine the criteria
ChooseAnAlternative
EvaluateThe alternative
The Role of Qualitative and Quantitative Analysis
Structuring the Problem
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Analyzing the Problem
Definethe Problem
Determine the Criteria
Identifythe Alternative
QualitativeAnalysis
Quantitative Analysis
Summaryand Evaluation
Make the Decision
Quantitative Analysis• Model Development - Iconic Model
- Analog Model - Mathematical Model Maximize 10x objective function Subject to (s.t.) 5x≤ 40 x ≥ 0
Constraint
• Data Preparation• Model Solution• Report Generation• A Note Regarding Implementation
Quantitative Analysis
Flowchart of The Process of Transforming Model Inputs into Output
Uncontrollable Inputs(Environmental Factors)
Mathematical Model
Output(Projected result)
Controllable Inputs(Decision Variable)
Quantitative Analysis
Flowchart for the Production Model (a)
Uncontrollable Inputs
Mathematical Model OutputControllable Inputs
Max 10 (8) s.t. 5(8) ≤ 40 8 ≥ 0
$10 profit per unit5 labor-hour per unit
40 labor-hours capacity
Profit = 80 Time Used =40
Value for the Production Quantity (x =8)
Quantitative Analysis
Decision Alternatives(Production
Quantity)x
Projected Profit
Total Hourof Production
Feasible Solution? (Hours Used ≤ 40)
0 0 0 Yes
2 20 10 Yes
4 40 20 Yes
6 60 30 Yes
8 80 40 Yes
10 100 50 No
12 120 60 No
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• Model Solution
Trial and Error Solution for the Production Model of Flowchart (a)
Model of Cost, Revenue, and Profit
• Cost and Volume Model C (x)= (3000 + 2x)• Revenue and Volume Model R(x)= 5x • Profit and Volume Model P(x)= R(x) – C (x) = 5x – (3000 + 2x) = -3000 +3x
• P(x)= R(x) – C (x) = 5x – (3000 + 2x) = -3000 +3x
P(500) = -3000+3(500)= -1500
P(800) = -3000+3(800) = 2400
P(x) = -3000 + 3x = 0 3x = 3000, x=1000
Breakeven Analysis
Model of Cost, Revenue, and Profit