BIT 2406 EXAM 1

# BIT 2406 EXAM 1 - BIT EXAM 1 CHAPTER 1 What is Management...

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BIT EXAM 1 CHAPTER 1 What is Management Science? A scientific approach to solving management problems Encompasses a number of mathematically oriented techniques Involves the philosophy of approaching a problem in a logical manner Many applications of management science have been frequently credited with increasing the efficiency and productivity of business firms The management science approach to problem solving Observation problem definition model construction solution implementation feedback (goes back to steps 2,3,4) 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 that describe the decision o Components: Management science model: an abstract representation of an existing problem situation Variable: symbol used to represent an item that can take on any value Dependent variable Independent variable Parameters: known, constant values that are often coefficients of variables in equations Data: pieces of information from the problem environment A model is a Functional relationship : includes variables, parameters, and equations Objective function: a function associated with an optimization function that tells us how good a solution is Constraint: a condition that a solution to an optimization problem must satisfy Decision variable: quantity a decision maker controls o Maximize Z=\$20x-5x subject to 4x=100 Model solution: models solved using management science techniques o Management science solution can be either a recommended decision or information that helps a manager make a decision o Example: Information and data:

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Business firms makes and sells a steel product Product costs \$5 to produce Sells for \$20 Product requires \$4 pounds of steel to make Firm has 100 pounds of steel Business problem: Determine the number of units to produce to make the most profit, given the limited amount of steel available. Z=20x-5x subject to 4x=100 Model implementation: actual use of the model or is solution Modeling Example: Break-Even Analysis; used to determine the number of units of product to produce/sell that will equate total revenue with total cost (point where profit is zero/break-even point) Three components: o Volume: level of sales or production by a company (expressed as: quantity, dollar volume of sales, or percentage of total capacity avail.) o Cost: Fixed costs: are independent of volume and remain constant Variable costs: depend on the number of items produced o Profit: difference between total revenue and total cost Total Variable Cost = vc v o c
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BIT 2406 EXAM 1 - BIT EXAM 1 CHAPTER 1 What is Management...

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