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Introduction
to
Quantitative
Analysis
To accompany
Quantitative Analysis for Management, Twelfth Edition,
by Render, Stair, Hanna and Hale
Power Point slides created by Jeff Heyl Copyright ©2015 Pearson Education, Inc.
LEARNING OBJECTIVES
After completing this chapter, 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 three categories of business analytics
4. Describe the use of modeling in quantitative
analysis
5. Use computers and spreadsheet models to perform
quantitative analysis
6. Discuss possible problems in using quantitative
analysis
7. Perform a break-even analysis
Copyright ©2015 Pearson Education, Inc. 1–2
CHAPTER OUTLINE
1.1 Introduction
1.2 What Is Quantitative Analysis?
1.3 Business Analytics
1.4 The Quantitative Analysis Approach
1.5 How to Develop a Quantitative Analysis Model
1.6 The Role of Computers and Spreadsheet Models
in the Quantitative Analysis Approach
1.7 Possible Problems in the Quantitative Analysis
Approach
1.8 Implementation — Not Just the Final Step
Copyright ©2015 Pearson Education, Inc. 1–3
Introduction
• Mathematical tools have been used for
thousands of years
• Quantitative analysis can be applied to a
wide variety of problems
– Not enough to just know the mathematics of a
technique
– Must understand the specific applicability of
the technique, its limitations, and assumptions
– Successful use of quantitative techniques
usually results in a solution that is timely,
accurate, flexible, economical, reliable, and
easy to understand and use
Quantitative Meaningful
Raw Data Analysis Information
Developing a Model
Developing a Solution
$ Sales
b0
Y=
mathematical
representations of a
situation $ Advertising
Garbage
In
Process
Garbage
Out
where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
The
Profit = Revenue – (Fixed parameters
cost of this
+ Variable cost)
Profit = (Selling price permodel are f, v,of and
unit)(Number unitsssold)
as
these are
– [Fixed cost + (Variable theper
costs inputs
unit)
(Number of unitsinherent
sold)] in the model
Profit = sX – [f + vX] The decision variable of
Profit = sX – f – vX interest is X
where
s = selling price per unit v = variable cost per unit
f = fixed cost X = number of units sold
Fixed cost
BEP =
(Selling price per unit) – (Variable cost per unit)
Copyright ©2015 Pearson Education, Inc. 1 – 25
Pritchett’s Precious Time Pieces
• Companies are often interested in the break-even
point (BEP), the BEP is the number of units sold
BEP for Pritchett’s Precious Time Pieces
that will result in $0 profit
0 BEP = f$1,000/($8
= sX – – vX, or – $3)
0 ==(s200 units
– v)X –f
Solving
• Salesfor of
X, less
we have
than 200 units of rebuilt springs
f = (s – v)X
will result in a loss
• Sales of over 200 units f of rebuilt springs will
result in a profitX = s – v
Fixed cost
BEP =
(Selling price per unit) – (Variable cost per unit)
Copyright ©2015 Pearson Education, Inc. 1 – 26
Advantages of Mathematical Modeling
POM-QM for
Windows
• An easy to use
decision support
system for use in
POM and QM
courses
• This is the main
menu of quantitative
models
• An Excel add-in