FINAL study guide (BIT)

# FINAL study guide (BIT) - BIT 2406 Final Exam Study Guide...

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BIT 2406 Final Exam Study Guide Chapter 1: The Management Science Approach to Problem Solving The management science approach to problem solving Observation - Identification of a problem that exists (or may occur soon) in a system or organization. Definition of the Problem - problem must be clearly and consistently defined, showing its boundaries and interactions with the objectives of the organization. Model Construction - Development of the functional mathematical relationships that describe the decision variables, objective function and constraints of the problem. Model Solution - Models solved using management science techniques. Model Implementation - Actual use of the model or its solution. Model building: break-even analysis o Break-Even Analysis – used to determine the number of units of a product to produce/sell that will equate total revenue with total cost (point where profit is zero/break-even point). o Three Components of Break-Even Analysis Volume – level of sales or production by a company (expressed as: quantity, dollar volume of sales, or percentage of total capacity available) Cost

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Fixed Costs: are independent of volume and remain constant Variable Costs: depend on the number of items produced. Profit – difference between total revenue and total cost Management science modeling techniques o Linear Mathematical Programming - clear objective; restrictions on resources and requirements; parameters known with certainty. o Probabilistic Techniques - results contain uncertainty. o Network Techniques - model often formulated as diagram; deterministic or probabilistic. o Forecasting and Inventory Analysis Techniques - probabilistic and deterministic methods in demand forecasting and inventory control. o Other Techniques - variety of deterministic and probabilistic methods for specific types of problems. o A decision support system (DSS) is a computer-based system that helps decision makers address complex problems that cut across different parts of an organization and operations. o Answers “what if?” o A DSS is normally interactive, combining various databases and different management science models and solution techniques with a user interface that enables the decision maker to ask questions and receive answers. Chapter 2: linear programming: a model formulation and graphical solution model formulation o Step 1 : Clearly define the decision variables o Step 2 : Construct the objective function
o Step 3 : Formulate the constraints maximization model example (bowl and mug) o want to maximize profit: Z = 40x 1 + 50x 2 o subject to: x 1 + x 2 <= 40 4x 1 + 3x 2 <= 120 o A feasible solution does not violate any constraints Graphical solutions of linear programming models o Graphical solutions are limited to linear programming problems with only two decision variables. o

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FINAL study guide (BIT) - BIT 2406 Final Exam Study Guide...

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