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    Chapter One Problems

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    CHAPTER 1 + INTRODUCTION TO QUANTITATIVE ANALYSIS ‘That is, the analyst accepts the problem as stated by the manager and builds a model to solve ‘only that problem. When the results are computed, he or she hands them back to the manager ‘and considers the job done. The analyst who does not care whether these results help make the final decision is not concemed with implementation, ‘Successful implementation requires thatthe analyst not rel! the users what to do, but work with them and take their feelings into account. An article in Operations Research describes an inventory control system that calculated reorder points end order quantities, But instead of ting that computer-celculated quantities be ordered, a manual override feature was installed. ‘This allowed users to disregard the calculated figures and substitue their own. The override was used quite often when the system was frst installed. Gradually, however, as users came to real- ize that the calculated figures were right more often than not, they allowed the system's igures to stand. Eventually, the override feature was used only in special circumstances, This is a good ‘example of how good relationships can aid in model implementation. Summary ‘Quantitative analysis is a scientific approach to decision mak- ing. The quantitative analysis approach includes defining the problem, developing « model, acquiring input data, developing ‘solution, testing the solution, analyzing the results, and im- plementing the results. In using the quantitative approach, however, there can be potential problems, including conflicting viewpoints, the impact of quantitative analysis models on other Glossary Algorithm A set of logical and mathematical operations per~ formed in a specific sequence, Break-Even Point ‘The quantity of sale that results in zero profit. Deterministic Model A model in which all values used in the model are known with complete certainty. Input Data Data that are used in a model in arriving atthe final solution. ‘Mathematical Model A model that uses mathematical equa~ tions end statements to represent the relationships within the model. ‘Model A representation of reality or of a real-life situation. Parameter A measurable input quantity that is inherent in problem. Key Equations (1-1) Profit = sX - f = »X where 45 = selling price per unit f = fixed cost » = vatiabe cost per unit X = number of units sold ‘An equation to determine profit asa function ofthe sell- ing price pee unit, fixed costs, variable costs, and num- ber of units sold, departments, beginning assumptions, outdated solutions, fitting textbook models, understanding the model, acquiring good input data, hard-to-understand mathematics, obtaining only cone answer, testing the solution, and analyzing the results. In using the quantitative analysis approach, implementation is not the final step. There can be a lack of commitment to the approach and resistance to change. Probabilistic Model A model in which all values used in the model are not known with certainty but rather involve some ‘chance or risk, often measured asa probability value, Problem A statement, which should come from a manager, that indicates a problem to be solved or an objective or a ‘goal to be reached, (Quantitative Analysis or Management Sclence A scientific ‘approach that uses quantitative techniques as a tool in deci- sion making Sensitivity Analysis A process that involves determining ‘how sensitive a solution isto changes inthe formulation of ‘problem, Stochastic Model Another name for a probabilistic model. Variable A measurable quantity that is subject to change. (2) Bep = ‘An equation to determine the break-even point (BEP) in units as a function of the selling price per unit(s), fixed costs (f), and variable costs (»). ores 2 | Self-Test DISCUSSION QUESTIONS AND PROBLEMS 47. © Before taking the self-test, refer to the learning objectives atthe beginning of the chapter, the notes in the margins, and the glossary at the end of the chapter. ‘© Use the key at the back of the book to correct your answers. © Restudy pages that correspond to any questions that you answered incorrectly or material ‘you feel uncertain about. 1. In analyzing a problem, you should normally stedy 1. the qualitative aspects. the quantitative aspects, «. both a and b. <4. neither a nor. 2. Quantitative analysis is «a logical approach to decision making. '. arational approach to decision making. . ascientific approach to decision making, 4. all of the above, 3, Frederick Winslow Taylor a. was a military researcher during World War IL ». pioneered the principles of scientific management. €. developed the use of the algorithm for Qa. 4. all ofthe above. 4, An input (such as variable cost per unit or fixed cost) for a model isan example of, a, a decision variable. . a parameter, an algorithm, 4. astochastic variable, ‘5. The point at which the total revenite equals total cost (meening zero profit) is called the a. zer0-profit solution. ». optimal-profit solution. «. break-even point. 4. fixed-cost solution. 6. Quantitative analysis is typically associated with the use of a. schematic models. b physical models. c, mathematical models, 4. scale models. 7. Sensitivity analysis is most often associated with which step ofthe quantitative analysis approach? a. defining the problem '. acquiring input data Discussion Questions and Problems Discussion Questions 1-1 What is the difference between quantitative and ‘qualitative analysis? Give several examples. 1-2 Define quantitative analysis. What are some of the ‘organizations that support the use of the scientific approach? 1-3. Whats the quantitative analysis process? Give sev- eral examples ofthis process, 10. rt 2 2B. 14. 15. ¢. implementing the results 4, analyzing the results A deterministic mode! is one in which 1. there is some uncertainty about the parameters used in the model, there is a measurable outcome, «all parameters used in the model are known with complete certainty. 4. there is no available computer software, 1. The tem algorithin a. is named after Algorismus. bis named after aninth-century Arabic mathematician. «, deseribes a series of steps or procedures to be repeated. 4.all of the above. ‘An analysis to determine how much a solution would change if there were changes in the mode! or the inpat data is called 8. sensitivity or postoptimality analysis. ». schematic or iconic analysis, ¢. futurama conditioning. 4. both b and c. Decision variables are a. controllabe. ', uncontrollable. . parameters. 4. constant numerical values associated with any complex problem. is the scientific approach to managerial Secision making. is the first step in quantitative analysis. A ‘sa picture, drawing, or chart of realty ‘A series of steps that ae repeated until a solution is found is called a(n) . 1-4 Briefly trace the history of quantitative analysis. ‘What happened to the development of quantitative ‘analysis during World Wer 11? 1-5 Give some examples of various types of models. ‘What is a mathematical model? Develop two exarm- ples of mathematical models. 1-6 List some sources of input data. 1-7 What js implementation, and why is it important? 18 CHAPTER 1 © INTRODUCTION TO QUANTITATIVE ANALYSIS 1-8 Describe the use of sensitivity analysis and postopti- tality analysis in analyzing the results. ‘Managers are quick to claim that quantitative ana- Ast talk to them in a jargon that does not sound like English. List four terms that might not be under- stood by a manager. Then explain in nontechnical terms what each term means. Why do you think many quantitative analysts don’t like to participate in the implementation process? ‘What could be done to change this attitude? ‘Should people who will be using the rests of anew ‘Quantitative model become involved inthe technical aspects of the problem-solving procedure? C. W. Churchman once said that “mathematics . tends fo Tull the unsuspecting into believing that he ‘who thinks elaborately thinks well’ Do you think that the best QA models are the ones that are most

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