Ziyang Liu
Chapter 1 – 3
Review Questions
1-1. What is the difference between quantitative and qualitative analysis? Give several
examples.
Quantitative is used to classify features, count them, and even construct more complex statistical
models in an attempt to explain what is observed. And the aim of qualitative analysis is a complete,
detailed description. In addition to quantitative analysis, qualitative factors should be considered,
such as the weather, state and federal legislation, new technological breakthroughs, and the outcome
of an election.
1-2. Define quantitative analysis. What are some of the organizations that support the use of
the scientific approach?
Quantitative analysis is the scientific approach to managerial decision making in which raw data are
processed and manipulated to produce meaningful information.
1-3. What are the three categories of business analytics?
Business analytics is often broken into three categories: descriptive analytics (the study and
consolidation of historical data), predictive analytics (forecasting, and prescriptive analytics.
1-4. What is the quantitative analysis process? Give several examples of this process.
Step 1: Defining the problem. Step 2: Developing a model. Step 3: acquiring input data. Step 4:
developing a solution. Step 5: testing the solution. Step 6: analyzing the results. Step 7:
implementing the results.
1-5. Briefly trace the history of quantitative analysis. What happened to the development of
quantitative analysis during World War II?
In the early 1900s, Frederick W. Taylor developed the principles of the scientific approach.
During World War II, quantitative analysis was intensified and used by the military. Because
of the success of these techniques during World War II, interest continued after the war.
1-6. Give some examples of various types of models. What is mathematical model? Develop
two examples of mathematical models.
Deterministic models are mathematical models that do not involve risk or chance. Conversely,
probabilistic models are mathematical models that involve risk or chance. For example, the market
for a new product might be “good” with a chance of 60% or “not good” with a chance of 40%.
1-7. List some sources of input data.
There are a number of sources of input data, such as company’s reports and documents, interviews
with employees or related people, sampling and direct measurement, and statistical sampling
procedures.
1-8. What is implementation, and why is it important?
Implementation is the process of incorporating the solution into the company. Even if the solution is
optimal, if managers resist the new solution, all of the efforts of the analysis are of no value.
Experience has shown that a large number of quantitative analysis teams have failed in their efforts
because they have failed to implement a good, workable solution properly.
1-9. Describe the use of sensitivity analysis and postoptimality analysis in analyzing the
results.
Sensitivity analysis and postoptimality analysis allow the decision maker to determine how
the final solution to the problem will change when the input data or the model change. This
type of analysis is very important when the input data or model has not been specified
properly. A sensitive solution is one in which the results of the solution to the problem will
change drastically or by a large amount with small changes in the data or in the model.
When the model is not sensitive, the results or solutions to the model will not change
significantly with changes in the input data or in the model.
1-10. Managers are quick to claim that quantitative analysts talk to them in a jargon that does
not sound like English. List four terms that might not be understood by a manager. Then
explain in nontechnical terms what each term means.
The break-even point is the number of units that must be sold to make zero profits. To
compute this, we must know the selling price, the fixed cost, and the variable cost per unit.
1-11 Why do you think many quantitative analysts don’t like to participate in the
implementation process? What could be done to change this attitude?
The implementation process can involve political aspects, convincing people to trust the
new approach or solutions, or the frustrations of getting a simple answer to work in a
complex environment.
1-12 Should people who will be using the results of a new quantitative model become involved
in the technical aspects of the problem-solving procedure?
People who will be using the results of a new quantitative model need not become involved in
technical aspects of the QA technique, but they should have an understanding of what the
limitations of the model are, how it works,the jargon involved, and the ability to question the
validity and sensitivity of an answer handed to them by an analyst.
1-13 C. W. Churchman once said that “mathematics … tends to lull the unsuspecting into
believing that he who thinks elaborately thinks well.” Do you think that the best QA models
are the ones that are most elaborate and complex mathematically? Why?
Many people do not want to appear ignorant and question an elaborate mathematical model;
yet the entire model, its assumptions and its approach, may be incorrect.
1-14 What is the break-even point? What parameters are necessary to find it?
The break-even point is the number of units that must be sold to make zero profits. To
compute this, we must know the selling price, the fixed cost, and the variable cost per unit.
Problems
1-15. (a) Total revenue = $15✕20 = $300
Total variable cost = $8✕20 = $160
(b) BEP =
$350
$15−$8
= 50 units
Total revenue = $15✕50 = $750
1-18. Total fixed cost = $400 + $1,000 = $1,400
BEP =
$1,400
$5−$3
= 700 units
1-20. BEP =
$2,400
$40−$25
= 160 cues/week
Total revenue = $40 ✕160 = $6,400
$2,400
