Chapter 1 Pearson Custom Text

What is the equation for break-even point?

BEP = f / (s-v) f = fixed cost s = selling price per unit v = variable cost per unit

What are three categories of business analytics?

Business, Predictive, and Prescriptive

What is the quantitative analysis process?

Define the Problem Develop a model Acquire input data Develop a solution Test the solution Analyze the results Implement the results (see also real world example of CSX on pg. 7)

What happened to the development of quantitative analysis during World War II?

Frederick W. Taylor pioneered the principles of the scientific approach to management. Many new scientific and quantitative techniques were created to assist military. These techniques were so successful that many companies follow suit in using them.

What is GIGO?

Garbage in, garbage out (improper data will give to misleading results)

Who was Frederick Windsor Taylor?

He pioneered the principles of scientific management

What is the equation for profit?

Profit = sX - f - vX s = selling price per unit f = fixed cost v = variable cost per unit x = number of units sold

What is the difference between quantitative and qualitative analysis?

Quantitative is a scientific approach to managerial decision making, raw data is processed and manipulated to produce meaningful information (focuses on numbers) Qualitative is an approach that uses subjective judgment based on non-quantifiable information

What are some of the organizations that support the use of the scientific approach?

Taco Bell, NBC television, Continental Airlines (see notes)

Business Analytics

a data-driven approach to decision making that allows companies to make better decisions

Quantitative analysis is

a logical, rational, and scientific approach to decision making

What is a deterministic model?

a mathematical model that does NOT involve risk or chance (all values are known with complete certainty)

What is a probabilistic model?

a mathematical model that does involve risk or chance (values in model are estimates based on probabilities)

parameter

a measurable input quantity that is inherent in a problem

Variable

a measurable quantity that is subject to change

Deterministic model

a model in which all values used in the model are known with complete certainty

Probabilistic model

a model in which all values used in the model are not known with certainty but rather involve some chance or risk, often measured as a probability variable

Mathematical model

a model that uses mathematical equations and statements to represent the relationships within the model

The term algorithm is named after

a ninth-century Arabic mathematician

An input for a model is an example of

a parameter

Sensitivity Analysis

a process that involves determining how sensitive a solution is to changes in the formulation of a problem

Quantitative Analysis (management science)

a scientific approach that uses quantitative techniques as a tool in decision making

Algorithm

a set of logical and mathematical operations performed in a specific sequence

Sensitivity analysis is most often associated with which step of the quantitative analysis approach?

analyzing the results

The point at which the total revenue equals total cost (meaning zero profit) is called the

break-even point

What are some sources of input data?

company reports/documents, employees in the firm, sampling, direct measurement

Decision variables are

controllable

Input Data

data that are used in a model in arriving at the final solution

Why is implementation important?

even if a solution is optimal, resistance from managers will cause it to fail when incorporating the solution into the company

Quantitative analysis is typically associated with the use of

mathematical models

model

representation of reality or a real-life situation

An analysis to determine how much a solution would change if there were changes in the model of the input data is called

sensitivity or postoptimality analysis

In analyzing a problem, you should normally study

the qualitative and quantitative aspects

Break-Even Point

the quantity of sales that results in zero profit

Descriptive Analytics

the study and consolidation of historical data to describe how a company has performed in the past is performing now

Prescriptive Analytics

the use of optimization menthods to provide new and better ways to operate based on specific business objectives

Predictive Analytics

the use of techniques to forecast how things will be in the future based on patterns of past data