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Problem Solving and Decision Making: Chapter 1 (AE 4)

Here is a mathematical model for satisfying the demand at the Des Moines retail store at minimum cost while considering the constraints: Min 0.20x + 0.25y Subject to: x + y = 5,000 x ≤ 4,000 y ≤ 3,000 x, y ≥ 0

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Belleza Andrea
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97 views

Problem Solving and Decision Making: Chapter 1 (AE 4)

Here is a mathematical model for satisfying the demand at the Des Moines retail store at minimum cost while considering the constraints: Min 0.20x + 0.25y Subject to: x + y = 5,000 x ≤ 4,000 y ≤ 3,000 x, y ≥ 0

Uploaded by

Belleza Andrea
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Problem Solving and

Decision Making
Chapter 1 (AE 4)
Problem Solving
It can be defined as the process of identifying a difference between the
actual and the desired state of affairs and then taking action to resolve
the difference.
Seven Steps of Problem Solving:
1. Identify and define the problem.
2. Determine the set of alternative solutions.
3. Determine the criterion or criteria that will be used to evaluate the
alternatives.
4. Evaluate the alternatives.
5. Choose an alternative.
6. Implement the selected alternative.
7. Evaluate the results to determine whether a satisfactory solution has been
obtained.
Decision Making

It is the term generally associated with the first


five steps of the problem solving process.
Example:
For the moment, assume that Mr. Chris P. Bacon is currently unemployed and that he
would like to apply to a position that will lead to a satisfying career. Suppose that his
job search has resulted in offers from Mekeni Rogers (a restaurant), Chicha Hut (a
chicharon store), Bread Pit ( a bakery) and Wa-Thirst (a water refilling station).
Alternatives Starting Salary Potential for Job Location
Advancement

Mekeni Rogers P10,000.00 Average Average

Chicha Hut P 8,500.00 Excellent Good

Bread Pit P 8,500.00 Good Excellent

Wa-Thirst P 9,000.00 Average Good


Four Problems and Scenarios that will use
Steps in Problem Solving:
1.Where to enrol?
2.Where to eat?
3.Where to get money?
4.Where to spend vacation?
Quantitative Analysis and Decision Making
- The first three steps of the decision making process is called “Structuring the
Problem” and the latter two steps are included in “Analyzing the Problem”. In the
analysis phase of the decision making process it may take two basic forms:
qualitative and quantitative.
- Qualitative analysis is based primarily on the manager’s judgment and experience; it
includes the manager’s intuitive “feel” for the problem and is more an art than
science. If the manager has had experience with similar problems or if the problem is
relatively simple, heavy emphasis may be placed upon a qualitative analysis.
However, if the manager has had little experience with similar problem, or if the
problem is sufficiently complex, then a quantitative analysis of the problem can be
especially important consideration in the manager’s final decision.
Reasons why a Quantitative Approach might be used
in Decision Making:
1. The problem is complex, and the manager cannot develop a good solution
without the aid of quantitative analysis.
2. The problem is especially important and the manager desires a thorough analysis
before attempting to make a decision.
3. The problem is new, and the manager has no previous experience from which to
draw.
4. The problem is repetitive, and the manager saves time and effort by relying on
quantitative procedures to make routine decision recommendations.
Models
These are representation of real objects or situations and can be presented
in various forms.
Different Types of Models:
1. Iconic Models - these are physical replicas of real objects.
2. Analog Models - these are physical in form but do not have the
same physical appearance as the object being modeled.
3. Mathematical Models - include representations of a problem by a
system of symbols and mathematical relationships or expressions .
Definition of Terms:
Constraints - are restrictions or limitations imposed on a problem.

Objective Function - a mathematical expression that describes the problem’s objectives.

Uncontrollable Inputs - these are environmental factors that are not under the control of
the manager or decision maker.

Controllable Inputs - these are the decision alternatives specified by the manager or
determined by the decision maker.
Definition of Terms:
Optimal Solution - the specific decision variable value or values providing the
“best” output.

Infeasible Solution - if a particular decision alternative does not satisfy one or


more of the model constraints.

Feasible Solution - if all constraints are satisfied.


Models of Cost, Revenue and
Profit
Example:
Nowlin Plastics produces a line of cell phone covers. Nowlin’s best selling
cover is its Viper model, a slim but very durable black and gray plastic cover.
Several products are produced on the same manufacturing line, and a setup
cost is incurred each time a changeover is made for a new product. Suppose
that the setup cost for the viper is $3000. This setup cost is a fixed cost that is
incurred regardless of the number of units eventually produced. In addition,
suppose that variable labor and material costs are $2 for each unit produced.
Construct the COST model.
COST Model
C = 3,000 + 2x

What if we produce 1,200? What will be the cost?

If x = 1,200

Then,

C = 3,000 + 2 (1,200)

= 3,000 + 2,400

C = 5,400
Example:

Management of Nowlin Plastics will also want


information on the projected revenue associated with
selling a specified number of units. Thus, a model of the
relationship between revenue and volume is also needed.
Suppose that each Viper cover sells for $5.
REVENUE Model
R=5x

What if we produce 1,200? What will be the revenue?

If x = 1,200

Then,

R (1,200) = 5 (1,200)

R = 6,000
Construct the PROFIT model.
PROFIT Model
P = R (x) - C (x)

= 5 x - (3,000 + 2 x)

= 5 x - 2 x - 3,000

= 3 x - 3,000

= 3 (1,200) - 3,000

= 3,600 - 3,000

P = 600
Breakeven Analysis
Breakeven Analysis
P (x) = 3 X - 3,000

3 X = 3,000

X = 3,000/3

X = 1,000

To Check:

P = 3 (1,000) - 3,000

=0
Example:
The O’Neill Shoe Manufacturing Company will produce a special-style shoe if the order
size is large enough to provide a reasonable profit. For each special-style order, the
company incurs a fixed cost of $2,000 for the production set-up. The variable cost is $60
per pair and each pair sells for $80.

1. Let x indicate the number of pairs of shoes produced. Develop a mathematical model
for the total cost of producing x pairs of shoes.
2. Let P indicate the total profit. Develop a mathematical model for the total profit
realized from an order of x pairs of shoes.
3. How large must the shoe order be before O’Neill will break even.
Objective Function (with two
variables) and constraints
Scenario
A retail store in Des Moines, Iowa, receives shipments of a particular
product from Kansas City and Minneapolis.

Let:

X = number of units of the product received from Kansas City

Y = number of units of the product received from Minneapolis


1. Shipments from Kansas cost $0.20 per unit, and
shipments from Minneapolis cost $0.25 per unit.
Develop an objective function representing the
total cost of shipment to Des Moines if they want
to minimize cost.

Answer:
Min 0.20x + 0.25y
2. Assuming the monthly demand at the
retail store is 5,000 units, develop a
constraint that requires 5,000 units to be
shipped to Des Moines.

Answer:
X + Y = 5,000
3. No more than 4,000 units can be shipped
from Kansas City, and no more than 3,000
units can be shipped from Minneapolis in
a month. Develop constraints to model this
situation.
Answer:
X ≤ 4,000 Kansas City
Y ≤ 3,000 Minneapolis
4. Of course, negative amounts cannot be
shipped. Combine the objective
function and constraints developed to
state a mathematical model for
satisfying the demand at the Des
Moines retail store at minimum cost.
Min 0.20x + 0.25y

St: x + y = 5,000
x ≤ 4,000
y ≤ 3,000
x,y≥0

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