Professional Documents
Culture Documents
Management Science
Chapter Topics
Management Science Approach to
Problem Solving
Model Building: Break-Even Analysis
Management Science Modeling
Techniques
Business Usage of Management Science
Management Science Models in Decision
Support Systems
Management Science
A scientific approach to solving
management problems
Encompasses a number of mathematically
oriented techniques
Applications are frequently credited with
increasing efficiency and productivity of
business firms.
Can be referred to as operations research,
quantitative methods, quantitative analysis
and decision sciences
The Management
Science Process
Management Science
Approach to Problem
Solving
Observation: in order to identify problems in a
system or an organization
Problem definition: should be clear and concise,
limits well defined, should include the objectives of
the organization
Model: usually consists of mathematical relationships
in terms of numbers and symbols such as parameters
and variables.
Model solution: application of management science
techniques specific to types of models.
Implementation: actual use of the model and its
solution
Model Construction
Model: abstract mathematical representation of a
problem
Variable: symbol that represents an item which can take
different values
Parameters: known constant values that are usually
coefficients of variables in equations
Data: pieces of information from the problem environment
Functions: mathematical expressions which consist of
parameters and symbols; building blocks of models.
Decision variable: a variable whose value is set by the
decision maker
Objective function: a function that quantifies the
solution to a problem according to a specific objective
Constraint: a condition that the solution to a model
should satisfy
Break-Even Analysis
Break even: determine volume such that
total revenue = total cost.
Volume: level of production
Fixed cost: independent of volume
Variable cost: dependent on volume
Total revenue: volume times price per unit
Profit = total revenue total cost
Break even: profit = 0.
v : volume
=?
p : unit price = $23
cf : fixed cost = $10,000
cv: variable cost
Z : profit
= $8
=?
Functional relationship?
Break even point?
Graphical Solution
Graphical Solution
(Alternative)
Classification of
Management Science
Techniques
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Management Science
Modeling Applications
Management Science
Models in Decision
Support Systems
A decision support system (DSS) is a computer-based system