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Introduction to Management Science

Management science is a scientific approach to solving management problems through logical problem solving techniques. It involves observing problems, defining them, constructing mathematical models to represent the problems, solving the models, and implementing solutions. Management science encompasses techniques like break-even analysis that use variables, parameters, equations and sensitivity analysis to determine optimal decisions under uncertainty. The chapter provides an overview of management science and its applications to business problems.

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Shane Khaye Lenz Tariao
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95 views1 page

Introduction to Management Science

Management science is a scientific approach to solving management problems through logical problem solving techniques. It involves observing problems, defining them, constructing mathematical models to represent the problems, solving the models, and implementing solutions. Management science encompasses techniques like break-even analysis that use variables, parameters, equations and sensitivity analysis to determine optimal decisions under uncertainty. The chapter provides an overview of management science and its applications to business problems.

Uploaded by

Shane Khaye Lenz Tariao
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Chapter 1

Management Science
Management science is a scientific approach to In general, an increase in price lowers the break-
solving management problems. even point, all other things held constant.
Management science can be used in a variety of In general, an increase in variable costs will
organizations to solve many different types of increase the break-even point, all other things
problems. held constant.
Management science encompasses a logical In general, an increase in fixed costs will
approach to problem solving. increase the break-even point, all other things
The steps of the scientific method are (1) held constant.
observation, (2) problem definition, (3) model A deterministic technique assumes certainty in
construction, (4) model solution, and (5) the solution.
implementation. Management science is an art.
A management scientist is a person skilled in the Summary
application of management science techniques. In the chapters that follow, the model
A variable is a symbol used to represent an item construction and solutions that constitute each
that can take on any value. management science technique are presented in
A model is an abstract mathematical detail and illustrated with examples. In fact, the
representation of a problem situation. primary method of presenting the techniques is
Parameters are known, constant values that are through examples. Thus, the text offers you a
often coefficients of variables in equations. broad spectrum of knowledge of the mechanics
Data are pieces of information from the problem of management science techniques and the types
environment. of problems to which these techniques are
A model is a functional relationship that applied. However, the ultimate test of a
includes variables, parameters, and equations. management scientist or a manager who uses
A management science technique usually applies management science techniques is the ability to
to a specific model type. transfer textbook knowledge to the business
A management science solution can be either a world. In such instances there is an art to the
recommended decision or information that helps application of management science, but it is an
a manager make a decision. art predicated on practical experience and sound
Implementation is the actual use of a model once textbook knowledge. Providing the first of these
it has been developed. necessities is beyond the scope of textbooks;
Break-even analysis is a modeling technique to providing the second is the objective of this text.
determine the number of units to sell or produce
that will result in zero profit.
Fixed costs are independent of volume and
remain constant.
Variable costs depend on the number of items
produced.
Total cost (TC) equals the fixed cost plus the
variable cost per unit multiplied by volume (v).
(cv) (cf)
Profit is the difference between total revenue
(volume multiplied by price) and total cost.
The break-even point is the volume (v) that
equates total revenue with total cost where profit
is zero.
Sensitivity analysis sees how sensitive a
management model is to changes.

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