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    What Is Management Science

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    agcopramikai

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    What Is Management Science

    Uploaded by

    agcopramikai
    2 views3 pages

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    What is Management Science

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    2 views3 pages

    What Is Management Science

    Uploaded by

    agcopramikai

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    I. What is Management Science?

    - A scientific approach to solving management problems


    - Can be used in a variety of organizations to solve many different
    problems
    - A.k.a operations research, quantitative methods, etc.

    A. Scientific Method Approach

    II. Linear Programming


    ➔ Is a model that consists of linear relationships representing a frim’s
    decision(s), given an objective and resource constraints.
    ➔ Linear relationship refers to the interdependence of one variable and
    another (independent & dependent)
    ➔ Achieve some objective in which there are restrictions (e.g. limited
    resources, recipes, or production guidelines)
    A. Applications
    - Production of goods which require similar raw materials
    - Sell now or process further
    - “Which to produce; how many to produce” decision-making
    B. Limitations
    - High reliance on the linear relationship of the variables
    - Does not consider other unknown variables and contingencies
    such as losses, shrinkages, and wastes
    - Does not consider increases and decreases of demand
    C. Techniques in Linear Programming
    1. Define the decision variables
    - Mathematical symbols that represent levels of activity
    - X and Y
    - Z = maximum profit or minimum cost
    2. Define the objective function
    - A linear mathematical relationship that describes the objective of
    the firm in terms of the decision variables
    - Maximizing or minimizing
    3. Define the constraints
    - Restrictions or limitations in achieving our objectives, that is to
    maximize profit and minimize cost

    III. Cost Concepts


    ➔ sum of money spent to acquire or produce and sell a unit of
    goods for sale
    ➔
    A. Basic Concepts
    1. Profit = Sales - Costs
    2. Sales = Price per Unit x Units Sold

    B. Variable Cost - cost which increases or decreases when the production


    level rises or drops (Direct material, Direct Labor, Overhead costs)

    C. Fixed Cost - costs which remain constant regardless of production level


    (Overhead costs, Selling costs)

    D. Mixed Cost - have characteristics of both fixed and variable costs (Taxi
    fare, Water bills, Commission)

    y = a + bx
    1. Scatter Graph Segregation Method
    2. High-Low Method
    3. Regression Analysis/ Least Squares Method

    E. Costs to Produce + Costs to Sell


    1. Costs to Produce
    a) Production Costs
    (1) Direct Materials
    (2)Direct Labor
    b) Conversion Costs
    (1) Direct Labor
    (2)Overhead
    2. Costs to Sell
    a) Selling Cost

    IV. Break-Even Analysis


    A. Break-Even Concept
    - No profit, no loss
    - How many units have to be sold to at least recover the costs?
    - How many units have to be sold to start earning profit?

    1. Profit = Sales - Variable Costs - Fixed Costs

    Sales
    (Variable Costs)

    Contribution Margin
    (Fixed Costs)

    PROFIT

    2. Contribution Margin - measure of the ability of the company to


    recover the variable costs with the revenue

    3. Profit = [Price per unit x Units Sold] - [VC per unit x Units sold] - FC
    𝐹𝐶
    BEP (Units) =
    𝑃 − 𝑉𝐶

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