Transcript Chapter 1

Chapter 1
Introduction to Quantitative
Analysis
What is ‘Quantitative Analysis’
and What Is It For?
• Quantitative analysis refers to using a
scientific approach for decision making.
• It helps make better or best decisions.
• Qualitative factors must also be considered.
How QA Approach Works on a
Business Problem?
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Define the problem
Select or develop a model
Acquiring data
Solving the model
Interpret and analyze the result
Implement the result
Example: P.8-9
(1 of 3)
• Given data:
– Selling price: $8 / unit
– Fixed cost: $1,000
– Variable cost: $3 / unit
(s)
(f)
(v)
• Problem:
– How many units must be sold to get break
even?
Example: P.8-9
(2 of 3)
• Select (or develop) the model to find the
break even point (BEP), p.9:
fixedcost
f
BEP 

(selling price per unit) - (variablecost per unit) s  v
Example: P.8-9
(3 of 3)
• Plug the given data in and solve the model:
BEP = 1,000/(8-3) = 200 (units)
• Interpret the result:
- 200 units must be sold in order to get break
even.
- To have profit, more than 200 units must be
sold.
- If less than 200 units were sold, loss would
occur.
The Role of Computers
• Solving the models
• Doing sensitivity analysis and if-then
analysis
• Simulation
Pitfalls of Quantitative
Approaches
• Over simplifying problem to fit a model
• Overlooking other factors (especially
qualitative factors)
• Inaccurate or incomplete data.