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Introduction To Quantitative Analysis
Introduction To Quantitative Analysis
TO
QUANTITATIVE
ANALYSIS
To accompany
Quantitative Analysis for Management, Twelfth
Edition, by Render, Stair, Hanna and Hale
Power Point slides created by Jeff Heyl
LEARNING OBJECTIVES
Students will be able to:
1. Describe the quantitative analysis
approach
2. Understand the application of
quantitative
analysis in a real situation
3. Describe the use of modeling in
quantitative
analysis
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WHAT IS QUANTITATIVE
ANALYSIS?
Quantitative Analysis is a scientific
approach to managerial decision making in
which raw data are processed and
manipulated to produce meaningful
information
Raw Data
Quantitative
Analysis
Meaningful
Information
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WHAT IS QUANTITATIVE
ANALYSIS?
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WHAT IS QUANTITATIVE
ANALYSIS?
Qualitative Data
Overview: Deals with
descriptions.
Data can be observed but
not measured.
Colors, textures, smells,
tastes, appearance, beauty,
etc.
Qualitative Quality
Quantitative Data
Overview: Deals with
numbers.
Data which can be
measured.
Length, height, area, volume,
weight, speed, time,
temperature, humidity, sound
levels, cost, members, ages,
etc.
Quantitative Quantity
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WHAT IS QUANTITATIVE
ANALYSIS?
Qualitative Data
Example 1:
Oil Painting
Quantitative Data
Example 1:
Oil Painting
FIGURE 1.1
THE QUANTITATIVE
ANALYSIS APPROACH
Defining the Problem
Developing a Model
Acquiring Input Data
Developing a Solution
Testing the Solution
Analyzing the Results
Implementing the Results
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18
$ Sales
STEP 2:DEVELOPING A
MODEL
$ Advertising
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STEP 2:DEVELOPING A
MODEL
Physical
/Scale
models
Verbal
models
Schematic
models
Mathematical
models
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STEP 2:DEVELOPING A
MODEL
Mathematical model an abstract model that
uses mathematical language to describe the
behavior of a system.
Models generally contain variables and
parameters
Parameter
- known
Variablequantity
unknown
and must
quantity and
be
must be
measurable
measurable
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STEP 4: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
Using an algorithm a series of repeating
steps
to reach a solution
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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
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QUANTITATIVE ANALYSIS
MODEL
A mathematical model of profit:
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QUANTITATIVE ANALYSIS
MODEL
Fixed Cost- rent,
insurance,
equipment, dues,
payments on loans,
management fixed
monthly salaries
and advertising
Variable Costraw materials,
hourly production
wages, sales
commissions,
packaging
Revenue= Price
per unit times # of
units sold
Expenses=
Fixed Cost plus
Variable Cost
times #Cost=
of
Variable
Units Cost Per
Variable
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QUANTITATIVE ANALYSIS
MODEL
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
f = fixed cost
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QUANTITATIVE ANALYSIS
MODEL
The parameters
of this cost)
Profit = Revenu e (Fixed
cost + Variable
are f, v, and s as
Profit = (Selling ricemodel
per unit)(Number
of units
these
are the inputs
p
xed inherent
cost + (Variable
costs per
in the model
sold) [Fi ber of units sold)]
The decision variable of
unit)
X] interest is X
(Num
X
Profit = sX [f +
v s = selling price per unit v = variable cost per unit
f = fixed
Profit
= sXcost
fv
where
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QUANTITATIVE ANALYSIS
MODEL-Example 1
Bills company, Pritchetts Precious Time Pieces,
sells, buys, and repairs old clocks and clock parts.
Bill sells rebuilt springs for a price unit of $10. The
fixed cost of the equipment to build the springs is
$1000. The variable cost per unit is $5 for spring
material.
A.) How much will be the lost if X=0?
B.) How much will be the profit if there are 1000
units sold?
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QUANTITATIVE ANALYSIS
MODEL-Example 1
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=8
f = 1,000 v
=3
Number of spring sets sold = X
PROFITS = $8X $1,000 $3X
If sales = 0, profits
= f = $1,000
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QUANTITATIVE ANALYSIS
MODEL-Example 1
Companies are often interested in the breakeven 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
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QUANTITATIVE ANALYSIS
MODEL-Example 1
Compute the BEP for Pritchetts Precious
Time Pieces (Example No.1)
BEP for Pritchetts 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
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QUANTITATIVE ANALYSIS
MODEL-Example 2
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QUANTITATIVE ANALYSIS
MODEL-Example 3
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QUANTITATIVE ANALYSIS
MODEL-Example 4
A couple of entrepreneurial business students at state
university decided to put their education into practice by
developing a tutoring company for business students. While
private tutoring was offered, it was determined that group
tutoring before tests in the large statistics classes would be
most beneficial. The students rented a room close to
campus for $300 for 3 hours. They developed handouts
based on past tests, and these handouts cost $5 each. The
tutor was paid $25 per hour, for a total of $75 for each
tutoring session.
a. If students are charged $20 to attend per session, how
many students must enroll for the company to break even?
b. A somewhat smaller room is available for $200 for 3 hours.
The company is considering this possibility. What will be
the new break even point?
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COMPUTERS AND
SPREADSHEET MODELS
POM-QM for
Windows
An easy to use
decision support
system for use
in POM and QM
courses
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COMPUTERS AND
SPREADSHEET MODELS
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COMPUTERS AND
SPREADSHEET MODELS
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COMPUTERS AND
SPREADSHEET MODELS
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COMPUTERS AND
SPREADSHEET MODELS
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COMPUTERS AND
SPREADSHEET MODELS
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