SMATH311LC

Management Science
Getting started (part 2)
MANAGEMENT SCIENCE

 Management science is the application of the scientific

method to address problems and decisions that arise in the
business community and other organizations, such as
government and military institutions.
 This field of study, which is also commonly known as
operations research (OR), operates on the understanding
that business managers can make informed decisions only
when they have access to scientifically acquired knowledge.
(https://www.referenceforbusiness.com/encyclopedia/Man-Mix/Management-Science.html#ixzz6WLmupX1v)
APPLICATIONS OF MANAGEMENT SCIENCE

 From the videos that you have watched in the previous

module, applications of management science are abundant in
industry such as airlines, manufacturing companies, service
organizations, military branches, and in government.
 The discipline is typically concerned with maximizing profit,
assembly line performance, crop yield, bandwidth, etc. or
minimizing expenses, loss, risk, etc.
PROBLEM SOLVING and DECISION MAKING

 Problem solving can be defined as the process of

identifying a difference between the actual and the
desired state of affairs and then taking action to
resolve the difference.
PROBLEM SOLVING and DECISION MAKING

Single Criterion Optimal decision

Starting salary
Potential for advancement
Job location
PROBLEM SOLVING and DECISION MAKING
Single Criterion Optimal decision
Starting salary Manila
Potential for advancement
Laguna
Job location
Cavite

Notice that we can easily come up with a decision (same decision) if

we are only given a single criterion as basis, but that will not be the
case if the decision maker is faced with several criteria.

What if you need to consider both starting salary and job location as
basis for decision making? What will be the best possible decision that
you will choose?
Answer: may vary, it depends on the decision maker him/herself
 Overview (Decision Making Process)

Qualitative Analysis

Decision Making

Structuring the Problem Analyzing the Problem

Evaluate
Define the Identify the Determine Choose an
the
problem alternatives the criteria alternative
alternatives

Quantitative Analysis

Implement
Evaluate
the
the results
decision
Qualitative vs. Quantitative analysis
 Qualitative analysis is based primarily on the manager’s
judgment and experience; it includes the manager’s intuitive
“feel” for the problem and is more an art than a science.
 Quantitative analysis will concentrate on the quantitative
facts or data associated with the problem and develop models
or mathematical expressions that describe the objectives,
constraints, and other relationships that exist in the problem
Quantitative Analysis Process
 Model Development
 Data Preparation
 Model Solution
 Report Generation
Model Development
Model Development
Model Development
Model Development
Model Development
Model Development
examples

1. A company is planning to manufacture a certain product. The

fixed cost will be Php500,000 and it will cost Php400 to produce
each product. Each will be sold for Php600.
questions answers
a. Determine the cost-volume model for producing x
units of each product.
b. Determine the revenue model for producing x units of
each product.
c. Determine the revenue model for producing x units of
each product.
d. How many units must be sold in order to break even?
examples

2. A buko pie store can produce buko pie at Php95. It is estimated

that if the selling price of the buko pie is x pesos, then the
number of buko pie sold each day is 1000-x.
Questions Answers
a. Determine the cost-volume model for producing
buko pie.
b. Determine the profit-volume model for producing
buko pie.
c. Determine the profit-volume model for producing
buko pie.
d. If the selling price is Php160, how much will be
the daily profit?
answers

1. A company is planning to manufacture a certain product. The

fixed cost will be Php500,000 and it will cost Php400 to produce
each product. Each will be sold for Php600.
questions answers
a. Determine the cost-volume model for producing x
units of each product. 𝑪
  ( 𝒙 )=𝟓𝟎𝟎𝟎𝟎𝟎+ 𝟒𝟎𝟎 𝒙

b. Determine the revenue model for producing x units of

each product.  𝑹 ( 𝒙 ) =𝟔𝟎𝟎 𝒙
c. Determine the profit-volume model for producing x
units of each product.  𝑷 ( 𝒙 ) =𝟐𝟎𝟎 𝒙 −𝟓𝟎𝟎𝟎𝟎𝟎
d. How many units must be sold in order to break even?
 𝟐𝟓𝟎𝟎 𝒖𝒏𝒊𝒕𝒔
Note
  :  i n   order   to   breakeven ,  set   P ( X ) = 0
answers

2. A buko pie store can produce buko pie at Php95. It is estimated

that if the selling price of the buko pie is x pesos, then the
number of buko pie sold each day is 1000-x.
Questions Answers
a. Determine the cost-volume model for producing
buko pie.   )

b. Determine the profit-volume model for producing

buko pie.  𝑹 ( 𝒙 ) =𝒙 (𝟏𝟎𝟎𝟎 − 𝒙)
c. Determine the profit-volume model for producing
buko pie. 𝑷
  ( 𝒙 ) =(𝟏𝟎𝟎𝟎 − 𝒙 )(𝒙 −𝟗𝟓)
d. If the selling price is Php160, how much will be the
daily profit?   𝑷𝒉𝒑 𝟓𝟒𝟔𝟎𝟎
Practice Exercises
Practice Exercises
Answers to Practice Exercises

14/21] 𝒂
  . 𝑷 ( 𝒙 ) =𝟏𝟕 𝒙 −𝟖𝟎𝟎𝟎𝟎   . 𝑹 ( 𝒙 )=− 𝟎 .𝟐𝟕 𝒙 𝟐+𝟓𝟏 𝒙
𝒂
𝒃  . 𝒍𝒐𝒔𝒔 𝒘𝒐𝒓𝒕𝒉 𝑷𝒉𝒑 𝟏𝟐𝟎𝟎𝟎  

 𝒄 . 𝑷𝒉𝒑 𝟐𝟑  
Falls within 2 and 17
𝒅  . 𝒑𝒓𝒐𝒇𝒊𝒕 𝒘𝒐𝒓𝒕𝒉 𝑷𝒉𝒑 𝟏𝟏𝟖𝟎𝟎 exclusively