Scribd
Upload
724 views3 pages

Management Science Prelim - Ando Rejie

Management science is the application of a scientific approach to solving management problems in order to help managers make better decisions. It encompasses quantitative techniques adapted from other disciplines like mathematics. The 5-step management science approach is observation, problem definition, model construction, solution, and implementation. Break-even analysis determines the quantity needed to achieve zero profit. The two types of costs are fixed costs, which remain constant, and variable costs, which depend on quantity produced. AB Jeans produces denim and has a fixed monthly cost of $2,100 and variable cost per yard of $0.45. At a volume of 18,000 yards per month, the total cost is $10,200, revenue is $23,400,

Uploaded by

Rejie Ando
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
724 views3 pages

Management Science Prelim - Ando Rejie

Management science is the application of a scientific approach to solving management problems in order to help managers make better decisions. It encompasses quantitative techniques adapted from other disciplines like mathematics. The 5-step management science approach is observation, problem definition, model construction, solution, and implementation. Break-even analysis determines the quantity needed to achieve zero profit. The two types of costs are fixed costs, which remain constant, and variable costs, which depend on quantity produced. AB Jeans produces denim and has a fixed monthly cost of $2,100 and variable cost per yard of $0.45. At a volume of 18,000 yards per month, the total cost is $10,200, revenue is $23,400,

Uploaded by

Rejie Ando
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
You are on page 1/ 3

Management Science Prelim

Test A
1. Define Management Science.
Answer:
Management science is the application of a scientific approach to solving
management problems in order to help managers make better decisions.
As implied by this definition, management science encompasses a number
of mathematically oriented techniques that have either been developed
within the field of management science or been adapted from other
disciplines, such as the natural sciences, mathematics, statistics, and
engineering.

2. Enumerate the 5 management science approach to problem solving.


Answer:
a. Observation
b. Problem Definition
c. Model Construction
d. Solution
e. Implementation

3. What is break even analysis?


Answer:
Break-even Analysis is also called as profit analysis, where it is a modeling
technique to determine the number of units to sell or produce that will
result in zero profit.
4. What are the 2 types of cost?
Answer:
The two types are Fixed Costs and Variable Costs

5&6. Define each type of cost


Answer:
Fixed costs are independent of volume and remain constant. Variable costs
depend on the number of items produced.
Test B
7. AB Jeans produce denim. The fixed monthly cost is 2,100, and the variable cost
per yard of denim is 0.45 . The mill sells a yard of denim for 1.30 .
a. For a monthly volume of 18,000 yards of denim, determine the total cost, total
revenue, and profit
Answer:
Total Cost: TC = cf + vcv
cf = 2,100 ; cv = 0.45 ; v = 18,000
TC = 2,100 + 18,000(0.45)
TC = 2,100 + 8,100
TC = $10,200

Total Revenue = vp ( volume and price per unit)


= 18,000(1.30)
Total Revenue = $23,400

Total Profit = Total Revenue – Total Costs


Z = vp – (cf + vcv) or Z = vp- cf – vcv

Total Profit = $23,400 – $10,200


Total Profit = $13,200

b. Determine the annual break even volume for the AB Jeans.


Answer:
Z = vp – cf – vcv
0 = v(p - cv) – cf
v(p – cv) = cf
v = cf / p – cv

Z = v(1.30) – 2,100 – v(0.45)


0 = v(1.30) – 2,100 – v(0.45)
0.85v = 2,100
0.85 v = 2,470.59 (12)
v = 29, 647.08 annual break-even volume.
8. XYZ Furniture produces chairs and tables from two resources—labor and wood.
The company has 80 hours of labor and 36 board-ft. of wood available each day.
Demand for chairs is limited to 6 per day. Each chair requires 8 hours of labor
and 2 board-ft. of wood, whereas a table requires 10 hours of labor and 6 board-
ft. of wood. The profit derived from each chair is 400 and from each table, 100.
The company wants to determine the number of chairs and tables to produce
each day in order to maximize profit.
a. Formulate a linear programming model for this problem.
b. Solve this model by using graphical analysis.
Note: The answers for this number were written on the paper. Please look at the
pictures.

You might also like