YARDSTICK

INTERNATIONAL COLLEGE

MASTERS OF BUSINESS ADMINISTRATION

QUANTITATIVE ANALYSIS IN MANAGEMENT DECISIONS

COURSE MANAGER: DR. B DAYAL

ASSIGNMENT ONE

By: Daniel Awoke

ID Number: M/1522/21

October 12, 2021

QUESTION 1:
A pharmacy has determined that a healthy person should receive 70 units of proteins,
100 units of carbohydrates and 20 units of fat daily. If the store carries the six types of
health food with their ingredients as shown in the table below, what blend of foods
satisfies the requirements at minimum cost to the pharmacy? Make a mathematical
model for the given problem.

Foods Protein units Carbohydrates Fat units Cost per unit

units
A 20 50 4 2
B 30 30 9 3
C 40 20 11 5
D 40 25 10 6
E 45 50 9 8
F 30 20 10 8

SOLUTION
Suppose X1= the number of food A in the mix
X2= the number of food B in the mix
X3= the number of food C in the mix
X4= the number of food D in the mix
X5= the number of food E in the mix
X6= the number of food F in the mix
The objective is to minimize cost, Z:
Z= 2 times the number of food A in the mix plus 3 times the number of food B in the mix
plus 5 times the number of food C in the mix plus 6 times the number of food D in the mix
plus 8 times the number of food E in the mix plus 8 times the number of food F in the mix,
Minimize Z = 2X1 + 3 X2 + 5 X3 + 6 X4 + 8 X5 + 8 X6
Subject to the constraints:
20 X1 + 30 X2 + 40 X3 + 40 X4 + 45 X5 + 30 X6 ≥ 70
50 X1 + 30 X2 + 20 X3 + 25 X4 + 50 X5 + 20 X6 ≥ 100
4 X1 + 9 X2 + 11 X3 + 10 X4 + 9 X5 + 10 X6 ≥ 20
And X1, X2 X3, X4, X5, X6 ≥ 0

QUESTION 2:

1
A local manufacturing firm produces four different metal products, each of which must
be machined, polished and assembled. The specific time requirements (in hours) for
each product are as follows:

Machining, Polishing, hours Assembling,

hours hours
Product I 3 1 2
Product II 2 1 1
Product III 2 2 2
Product IV 4 3 1

The firm has available to it on weekly basis, 480 hours of machining time, 400 hours of
polishing time and 400 hours of assembling time. The unit profits on the product are
Birr 360, Birr 240, Birr 360 and Birr 480, respectively. The firm has a contract with a
distributor to provide 50 units of product I, and 100 units of any combination of
products II and III each week. Through other customers the firm can sell each week as
many units of products I, II and III as it can produce, but only a maximum of 25 units
of product IV. How many units of each product should the firm manufacture each week
to meet all contractual obligations and maximize its total profit? Make a mathematical
model for the given problem. Assume that any unfinished pieces can be finished the
following week.

SOLUTION
Suppose X1= the number of unit of product I to be produced
X2= the number of unit of product II to be produced
X3= the number of unit of product III to be produced
X4= the number of unit of product IV to be produced
The objective is to maximize profit, Z:
Z= 360 times the number of Product I plus 240 times the number of Product II plus 360 times
the number of Product III plus 480 times the number of Product IV.
Maximize Z = 360 X1 + 240 X2 + 360 X3 + 480 X4
Subject to the constraints:
3X1 + 2 X2 + 2 X3 + 4 X4 ≤ 480
1 X1 + 1 X2 + 2 X3 + 4 X4 ≤ 400
2 X1 + 1 X2 + 2 X3 + 1 X4 ≤ 400
And X1, X2 X3, X4, ≥ 0
QUESTION 3:
2
A firm manufactures two products; the net profit on product 1 is Rupees 3 per unit and
Rupees 5 per unit on product 2. The manufacturing process is such that each product
has to be processed in two departments D1 and D2. Each unit of product1 requires
processing for 1 minute at D1 and 3 minutes at D2; each unit of product 2 requires
processing for 2 minutes at D1 and 2 minutes at D2. Machine time available per day is
860 minutes at D1 and 1200 minutes at D2. How much of product 1 and 2 should be
produced every day so that total profit is maximum. Make the mathematical model for
the given problem.

SOLUTION
Suppose X1= the number of unit of product 1 to be produced
X2= the number of unit of product 2 to be produced
The objective is to maximize profit, Z:
Z= 3 times the number of Product 1 plus 5 times the number of Product 2
Maximize Z = 3 X1 + 5 X2
Subject to the constraints:
1 X1 + 2 X2 ≤ 860
3 X1 + 2 X2 ≤ 1200

And X1, X2 ≥ 0

QUESTION 4:

3
Discuss few areas for application of quantitative analysis in your organization or
organization you are familiar with for decision making.

ANSWER

The name of my Organisation is HKB Construction PLC, which is grade One Construction
company working on Water Supply, Irrigation and Civil work construction Projects.

As the construction sector needs careful management of every of its functions there are
different area of applications of Quantitative analysis. Starting from project identification for
bidding up to execution and handover of projects we utilize Qualitative analysis techniques.

For example during bidding process most of projects announced for bid by government
offices are evaluated based on 70/30 evaluation method. Which implies 30% of weight is
given for financial offer of the bidders and 70% weight is given for technical offer of bidders.

Accordingly as a company we focus on improving our technical documents and capability so

that we can succeed in the extreme competition of the construction sector.

Based on this overall frame work our technical teams’ first work in bidding process is to
identify the criteria that are given more weight in the evaluation criteria of the client.
Accordingly criteria that are given more weight will be given due consideration and time by
every member of the team working on the bid.

The other area of application of quantitative analysis is during project execution, where
project engineers are preparing construction materials according to project agreements. For
example during preparation of concrete for civil work structures, the order give to the project
engineer is to prepare a quantity of concrete with different material ratios.

For example an engineer may be ordered to prepare 100 quintal of concrete with material
ratio of 1:1.5:3 (cement, sand, aggregate) in a day.

Based on the above ratio the engineer will do mathematical calculations to decide the amount
of Cement, sand and aggregate that is required to prepare the mentioned amount of concrete
with the given ratio in a day.

Accordingly the prescribed concrete mix ratio 1:1.5:3 indicates that 1 cubic meter of the
concrete must contain 1 part cement, 1.5 part sand and 3 part aggregate. Based on these the
total volume of cement, sand and aggregate required for the day calculated in detail.

These are some of the areas of applications of quantitative analysis in our company.

QUESTION 5:

4
Take the data of the output of your organisation summarise them with some tool (like
bar chart, pie chart, etc.) and discuss the result. Give your opinion to improve the
results in the future.

ANSWER

HKB Construction PLC, a construction company working in water supply, Irrigation and
Civil work projects, is a company I am working in as Administrative and Financial manager.
I have taken Five Years financial data of my company and tried to summarise them with
some tool s (like bar chart, pie chart, etc.) and I will discuss the result with improvement
suggestions.
Historical Financial Data (HKB Construction PLC)

Type of
Financial Historic information for previous four years,
information (amount in currency, currency, exchange rate, ETB equivalent)
In (currency)

1st Years 2ndYears 3rd Years 4th year 5th Year

(2008)
(2009) (20010) (2011) (2012)
Statement of Financial Position (Information from Balance Sheet )

Total Assets (TA) 2,950,414.49 3,987,033.17 7,327,168.30 6,513,454.05 21,169,328.40

To End
Total Liabilities 548,605.34 855,854.75 3,978,962.41 4,283,487.57 4,283,487.57
(TL)
Working 2,099,372.83 2,871,018.95 2,383,625.21 2,229,966.48 2,229,966.48
Capital(WC)
Information from Income Statement
Total Revenue
(TR) 54,925,417.9 24,074,746.61 81,357,824.21 97,124,789.24 98,92
1 5,673.14
Profits Before
Taxes (PBT) 836,426.55 939,630.91 835,312.29 2,007,996.35 2,366,958.53
Cash Flow Information

Cash Flow from 956,000 2,000,000 2,915,867.98 2,672,523.46 6,672,523.46

Operating
Activities

5
Accordingly I will present the total revenues and Profit before taxes and average annual
turnover data of the company for the last five years and analyse the trend of these financial
data. As it can be observed from the table the Total revenue of company had improved over
time since 2009 EC.

Historical Financial data of HKB Construction PLC

120,000,000.00

100,000,000.00

80,000,000.00

60,000,000.00

40,000,000.00

20,000,000.00

0.00
2008 EC 2009 EC 2010 EC 2011 EC 2012 EC

Total Revenue Profit Before Tax Column4

It was evident from the charts that the total revenue had fallen from 54,925,417.91 ETB in
the year 2008EC to 24,074,746.61 ETB in the year 2009 EC. As an insider to the company
this fall of revenue happens due to absence of sufficient projects during the year. Starting
from the year 2009, up to 2012 the company annual turnover has grown from
24,074,746.61ETB to 98,925,673.14 ETB with varying rate of increments.
Accordingly the Profits Before tax and Total asset of the company had shown a steady
increment from year to year.
From the above data it can be observed that the percentages of revenue retained as profit by
the company is very limited as compared to the financial standards in the business.

Year % Revenue Retained as Profit

2008 7%
2009 14%
2010 5%
2011 5%
2012 5%

6
For example as it can be shown from the above table, the company had retained only 7 % of
its revenue. In 2009 the company had retained 14% of its total revenue as a profit which is
relatively better performance by the company. In the remaining consecutive years the
company had retained very limited percentage of it total revenue as Profit.
This can be more elaborated in the following charts.

Tital Revenue vs Profi t Before Tital Revenue vs Profi t Before Tax

Tax 2008 2009
Total Revenue Profit before Tax Total Revenue Profit before Tax

7% 14%

93% 86%

Tital Revenue vs Profi t Before Tax Tital Revenue vs Profi t Before Tax
2010 2011
Total Revenue Profit before Tax Total Revenue Profit before Tax

5% 5%

95% 95%

Based on the above data analysis it can be concluded that the company is retaining only small
amount of its revenue as its annual profit, and this an indicator of some problem with in the
company.
This is Financial ratio indicates that the company have two main problems that needs
improvement. The first is the ratio indicates that the company is not utilizing its fixed asset
properly to maximize profit. This implies that the company needs to improve the efficiency
and effectiveness of its fixed asset. This can be achieved through proper fixed asset
management, machine assignment and minimization of down time.
The second problem may arise due to excessive cost incurred for purchase of supplies, and
other expenses. Hence the company must minimize its costs and expenses associated with
every functions and departments.