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Management Science 1

Management science applies scientific methods to solve management problems and improve decision-making through mathematical techniques. It involves a structured approach including observation, problem definition, model construction, solution, and implementation, with business analytics leveraging big data for enhanced decision-making. Key skills for analytical careers include critical thinking, collaboration, IT skills, and data literacy, while break-even analysis helps determine the sales volume needed to achieve zero profit.

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11 views2 pages

Management Science 1

Management science applies scientific methods to solve management problems and improve decision-making through mathematical techniques. It involves a structured approach including observation, problem definition, model construction, solution, and implementation, with business analytics leveraging big data for enhanced decision-making. Key skills for analytical careers include critical thinking, collaboration, IT skills, and data literacy, while break-even analysis helps determine the sales volume needed to achieve zero profit.

Uploaded by

alolodjony
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Management science

 is the application of a scientific approach to solving management problems to help managers make better
decisions.
 encompasses a number of mathematically oriented techniques
Scientific Method Approach
1. Observation-understanding the situation
2. Define the problem- pinpointing the problem and setting objectives
3. Model construction- abstract mathematical representation of a problem
 A variable is a symbol used to represent an item that can take on any value.
 Parameters are known, constant values that are often coefficients of variables in equations
 Data are pieces of information from the problem environment.
 A model is a functional relationship that includes variables, parameters, and equations.
4. Model Solution- logical resolve to of a problem
5. Implementation- execution of the problem
Business analytics uses large amounts of data with management science techniques and modeling to help managers
makes decisions.
A key component of business analytics is the recent availability of large amounts of data—called “big data”—that is
now accessible to businesses, and that is perceived to be an integral part and starting point of the analytical process.
Developing Analytical Career Skills
Critical thinking purposeful and goal directed thinking used to define and solve problems, make decsions and form
judgements related to a particular situation.
Collaboration a necessary skill for decision scenarios that take place in a project team-based environment.
Information technology and computing skills important attributes to employers because of the reliance on computer
software to solve decision problems.
Data Literacy the ability to access, interpret, manipulate, summarize and communicate data in a decision-making
situation.
Break even analysis or profit analysis
Break-even analysis is a modeling technique to determine the number of units to sell or produce that will result in
zero profit.

The break-even point is the volume (v) that equates total revenue with total cost where profit is zero.
Basic concepts:
Profit=sales-cost
Profit- desired return
Sales- amount of money received/earned in selling goods
=Price per unit x units sold
Cost- is the amount of money to acquire or produce the goods for sale
 Levels of activity of the production affects the costs
 Cost which increases and decreases when the production level raises or drops is called variable
cost
 Cost which remain the same regardless of production level called fixed costs
Break even concept
Profit= Sales – costs
Profit= Sales- Variable costs- Fixed cost
Or Sales
 Variable costs
Contribution margin
 Fixed costs
Profit
Contribution margin- a measure of the ability of the company to recover variable costs
Expand further the formula
Profit=( price per unit x units sold)- (variable cost per unit x units sold)- fixed cost

IF THE PROFIT IS ZERO


X= (P x U)-VC x U)- FC
0=( U( P -VC) – FC

THE FINAL FORMULA TO KNOW IF ZERO PROFIT:

Break even units= Fixed cost


(Price per unit – Variable cost)

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