welcomewelcome mm305 quantitative analysis for management dr. bob lockwood
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WelcomeWelcomeWelcomeWelcomeMM305
Quantitative Analysis for ManagementDr. Bob Lockwood
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Seminar OutlineSeminar Outline
• Welcome!
• Syllabus Overview
• Contact Information for Instructor
• Seminar Rules and Format
• Discussion
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Syllabus OverviewSyllabus OverviewAll projects, discussion question posts, and seminar option 2 are due at 11:59 PM ET on the Tuesday that concludes each unit.
Late projects will be accepted up to three units late with a 10% penalty per late unit, with the exception of Unit 9.
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Instructor Contact InformationInstructor Contact Information
• Professor Andy Hynds
• Email: [email protected]
• Office hours: By appointment
• In order to facilitate the tracking of assignments and allcorrespondence with me, please be sure to include your Course/section number and the unit number for the learningactivity you are inquiring about.
• Your unit project MUST be saved and submitted to me using the following naming procedure: Firstname_lastname_unit #
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Seminar Rules and FormatSeminar Rules and Format
• Please show up on time for all seminars, participate often in a respectful manner, stay on topic, and stay until the end. If you do come late, please take your “seat” quietly.
• Social posts (Hi, Bye, rough day at work, my car broke down, etc.) will not help your participation grade.
• It is important that you try to participate rather than just simply watching. I highly recommend having your textbook handy and Excel QM and/or QM for Windows open during seminar.
• Usual format of seminar will involve discussing a concept and then working with the technology (Excel, Excel QM, PhStat2, or QM for Windows) applicable to that unit.
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What is Quantitative Analysis (QA)?What is Quantitative Analysis (QA)?• The use of statistical techniques to understand quantitative
data and to identify relationships between and among variables.
• QA uses the scientific approach to managerial decision making.
• The development of a (mathematical) model of a real world scenario
• The model provides insight into the solution of the managerial problem
• Deterministic Models Where all the input data values are known with complete certainty
• Probabilistic Models Where some input data values are uncertain
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What is Quantitative Analysis (QA)?What is Quantitative Analysis (QA)?• QA uses the scientific approach to managerial decision making. • Must consider both Quantitative and Qualitative factors.
• Quantitative Data Numerical factors such as expenses and revenues
• Qualitative Data Factors that effect the environment which are difficult to
quantify, e.g. weather, state laws, new technology, etc.
Raw DataRaw Data Quantitative Analysis
Quantitative Analysis
Meaningful InformationMeaningful Information
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The Quantitative Analysis (QA) ApproachThe Quantitative Analysis (QA) Approach
Steps in Modeling:
1. FormulationTranslating a problem scenario from words to a mathematical model
2. SolutionSolving the model to obtain the optimal solution
3. Interpretation and Sensitivity AnalysisAnalyzing results and implementing a solution
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The Quantitative Analysis (QA) ApproachThe Quantitative Analysis (QA) Approach
Steps in Modeling
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Modeling in the Real WorldModeling in the Real World
• Models are or can be:
• complex
• expensive
• difficult to sell
• used in the realreal worldworld by realreal organizationsorganizations to solve
realreal problemsproblems
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How to Develop a Quantitative Analysis Model
How to Develop a Quantitative Analysis Model
• Profit = Revenue – Expenses• Revenue=
(selling price per unit)*(number of units sold) • Expenses= Fixed cost + (variable cost per unit)*(number of units sold)• Profit = sX - (f + vX) = sX - f - vX, where
• s = selling price per unit• f = fixed cost• v = variable cost per unit• X = number of units sold
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Break-Even Point (BEP)Break-Even Point (BEP)• The BEP is the number of units sold that will result in $0 profit,
so Revenue = Expenses
• Profit = sX - (f + vX) = sX - f – vX $0 = sX - f - vX
$0 = (s-v)X – f
X = f/(s-v) BEP =
• Excel QM • Breakeven Analysis
• QM for Windows• Breakeven/Cost-Volume Analysis
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Excel QM’s Main Menu of Quantitative Models in Excel 2007Excel QM’s Main Menu of Quantitative Models in Excel 2007
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QM for WindowsQM for Windows
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Example: Break-Even Point (BEP)Example: Break-Even Point (BEP)Let's say you manufacture widgets. Each unit sells at $5. It costs you $2 to make each one, and the fixed costs for the period are $750. What is the break-even point in units and in sales revenue?
First, identify what you know from the problem:
• s = selling price per unit = $5• f = fixed cost = $750• v = variable cost per unit = $2We need to know:
• X = number of units sold Recall, BEP = $0 = (s-v)X – f , therefore X = f/(s-v) X = $750/($5-$2) = 250 units
break-even sales revenue = 250 * $5 = $1,250
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Example: Break-Even Analysis in Excel QMExample: Break-Even Analysis in Excel QM
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Questions?Questions?