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QMB Formula

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]

sX f vX

; Profit =

where s = selling price per unit


f = fixed cost
Break even point =

v = variable cost per unit

X = number of units sold


Fixed cost/(Selling price per unit) (Variable cost per unit)

P(event) = Number of occurrences of the event/ Total number of trials or outcomes


When two events are mutually exclusive, the law of addition is
= P (event A or event B) = P (event A) + P (event B)
Not Mutually Exclusive Events =P (A or B) = P (A) + P (B) P (A and B)
Joint probability is the probability of two or more events occurring and is the product of their
marginal probabilities for independent events
P (AB) = P (A) x P (B)
Dependent events
The formula for the joint probability of two events is
P (AB) = P (B | A) P (A)
Mean of sample

Standard Normal formula

E X X i P X i

2 Variance [ X i E ( X )]2 P( X i )
i 1

i 1

Weighted average =

(maximum in row)

EMV (alternative i)

= (payoff of first state of nature)

+ (payoff of second state of nature)

+ (1 )(minimum in row)
x (probability of first state of nature)

x (probability of second state of nature)

+ + (payoff of last state of nature) x (probability of last state of nature)


EVPI = EVwPI Maximum EMV

EVwPI = (best payoff for first state of nature) x (probability of first state of nature)
+ (best payoff for second state of nature)

x (probability of second state of nature)

+ + (best payoff for last state of nature)

x (probability of last state of nature)

EVSI = =

(EV with sample information + cost)

(EV without sample information)

Y 0 1 X
where Y

= dependent variable (response)

= independent variable (predictor or explanatory)

b0

= intercept (value of Y when X = 0)

b1

= slope of the regression line

= random error

X
X
n

b1

average (mean) of X values

Y average (mean) of Y values

( X X )(Y Y )
(X X )
2

b0 Y b1 X

SST (Y Y )2

r2

SSE e 2 (Y Y )2
SSR

(Y

Y )2

SSR
SSE
1
SST
SST

s 2 MSE

SST SSR SSE

MSR

SSR
k

MSR
MSE

degrees of freedom for the numerator = df 1 = k


degrees of freedom for the denominator = df 2 = n k 1

SSE
n k 1

DF

SS

MS

SIGNIFICANCE

Regression

SSR

MSR = SSR/k

MSR/MSE

P(F > MSR/MSE)

Residual

n-k-1

SSE

MSE = SSE/(n - k - 1)

Total

n-1

SST

Y b0 b1 X 1 b2 X 2 ... bk X k

(error)
MSE

forecast error
MAD

error

MAPE
n
Sum of demands in previous n periods
Moving average forecast
n

Ft 1

actual
n

100%

Yt Yt 1 ... Yt n 1
n

Weighted Moving Average

Ft 1

(Weight in period i)( Actual value in period )


(Weights )

Ft 1

w1Yt w2Yt 1 ... w nYt n 1


w1 w2 ... w n

Exponential Smoothening
New forecast =

Last periods forecast+ (Last periods actual demand Last periods forecast)

Ft 1 Ft (Yt Ft )
where
Ft+1 = new forecast (for time period t + 1)
Ft

= pervious forecast (for time period t)

= smoothing constant (0 1)

Yt

= pervious periods actual demand

Forecast including trend (FITt) =

New forecast (Ft)

+ Trend correction (Tt)

Exponential smoothening with trend adjustment

Tt 1 (1 )T1 ( Ft 1 Ft )
where

Tt+1 =smoothed trend for period t + 1


Tt = smoothed trend for preceding period

= trend smooth constant that we select


Ft+1 =simple exponential smoothed forecast for period t + 1
Ft = forecast for pervious period

D
Co
Q

EOQ Q *

TC

Q
Ch
2

2 DCo
Ch

D
Q
Co C h
Q
2

ROP = d * L

Upper control limit (UCL ) x z x

Lower control limit (UCL ) x z x

X-bar chart

UCLx x A2 R

LCL x x A2 R

UCLR D4 R

LCLR D3 R

UCL p p z p

LCL p p z p

Range chart

P-chart

p
c-chart

p(1 p )
n

c3

c
4

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