Management 1

Course Title: Management Science

Course Description:
This is a course on the use of Management Science in solving management decision problems and is meant to assist
students in acquiring a special competence in the scientific management approach to problem solving. It aims to
provide students with an awareness of standard tools in Management science/Operations Research (MS/OR), and an
appreciation of relevant techniques in mathematical model building, mathematical programming and decision analysis.
The course also seeks to develop within the student the ability to recognize potential application areas in their future
jobs, as well as the meaningful utilization of the Management Science tools and techniques in the government, the
local industry, and in business, particularly in the areas of finance, marketing, production, and human resource
management.
CHAPTER 1: REVIEW OF LINEAR EQUATIONS AND LINEAR INEQUALITIES
1.1 Linear Equations in one variable https://youtu.be/hRH96EIDq8Y
Example 1: 6x + 4 =46
3−𝑋 𝑋
Example 2: x+ ( )= 3
3

1 1 4 2
Activity 1: − 9 = 9 − 3𝑋
𝑋

1.2 Linear Equations in two variables https://youtu.be/UG-S9G1ntgE

(the solution is the set of points on the line that satisfies the given equation) Example 3: 5x + 3y = 15

QUIZ 1. _____________________ is defined by two perpendicular number lines: the x axis and y axis.
QUIZ 2. The X axis is (vertical/horizontal).
QUIZ 3. The Y axis is (vertical/horizontal).
QUIZ 4. The French mathematician who formalize the “CORRECT answer in quiz 1” ____________________
QUIZ 5. “CORRECT answer in quiz 1” is divided into (1 / 4 / 3) quadrant/s.

Activity 2: 4x – 8 = 4y + 16

1.3 System of Linear Equations https://youtu.be/Q0fTXSlZjrw

(two or more EQUATIONS with the same variables)
>Algebraic solution (elimination and substitution method)
>graphical method
Example 4: 2x + y = 4
x –2y= 7

Activity 3: find the value of x and y using the 3 methods; Substitution, Elimination & graphical method
x+y=4
x–y=2

1.4 Linear Inequalities in One Variable https://youtu.be/fP8VnYFJ1Wg

“note: if we multiply or divide a negative integer to both sides of the inequality, we have to reverse the order of the
inequality symbol”

Example 5: Find the solution set of

7x – 8 < 4x + 7

Example 6: Find the solution set of

𝑦−3 𝑦
−1 ≥
4 2

QUIZ 6. If a < b & c ≠ 0, then ac < bc if c < 0 (TRUE/FALSE)

QUIZ 7. If a < b & c ≠ 0, then ac > bc if c < 0 (TRUE/FALSE)
Activity 4: find the solution set of
2−3𝑥 𝑥+1
>
6 2

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1.5 Linear inequalities in two variables https://youtu.be/EJsbiTaZwIU
To find the solution set of a linear inequality
Rules:
1. Replace the inequality symbol by an equal sign.
2. Graph the line. If the symbol is < or > use a dashed line to indicate that the line is not part of the solution set.
3. Choose any point that does not lie on the line, if possible (0,0) and substitute to the inequality. If the point satisfies
the inequality all the points on the same half plane is the solution set, otherwise, the solution is the half plane not
containing the test point.

Example 7: 3x + 2y ≤ 6
1
Example 8: x + y > 4
2

Activity 5: 2x + y ≥ 0

1.6 System of Inequalities in one or more variables https://youtu.be/slFYSt3hT8Q

(A combination of at least two inequalities in one or more variables which require a simultaneous solution.
To solve this, you need to find the ordered pairs which will satisfy all the conditions imposed on the variable.
The solution set is also known as the feasible region.
Example 9: Find the feasible region
x–y≤1
x+y≤3

Example 10: Find the feasible region

x + 2y ≤ 10
3x + y ≤ 9
x≥0
y≥0

Activity 6: Find the feasible region

5x + 4y ≤ 20
4x + y ≤ 8
x≥0
y≥0

CHAPTER 2: LINEAR PROGRAMMING (Graphical) https://youtu.be/UMiyu3eymZs

Scarcity of resources is one of the main problems in operations management. So, managers must be able
to allocate resources in the best possible way. Linear programming refers to the several related mathematical
techniques that are used to allocate resources among competing demands in an optimal way.
Example
A firm manufactures 2 products, A and B. each product is processed by 2 machines, M1 and M2. Each
unit of type A requires 1 hour of processing by M1, and 2 hours in M2 and each unit of type B requires 3 hours
on M1 and 1 hour on M2. The profit on product A is P20 per unit and on product B is P30 per unit. If M1 is
available for 200 hours each month and M2 is available for 300 hours, how many units of each type can be
manufactured in one month in order to maximize profits?
Step 1 Let x be the product A and y be the product B.
X Y Available/Required
Profit 20 30
M1 1 3 200 hours
M2 2 1 300 hours

Step 2.
Maximize Profits= 20x + 30y (Objective function)
Subject to: x + 3y ≤ 200 (Explicit Constraints)
2x + y ≤ 300
x, y ≥ 0 (Implicit Constraints)

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Step 3
x + 3y = 200 2x + y=300
Let x=0 Let x=0
y= 66.67 y=300
(0, 66.67) (0, 300)
Let y=0 Let y=0
x=200 x=150
(200, 0) (150, 0)

Step 4 Graph
300 (0, 300)
2x + y = 300

200

100 (140,20)
(200, 0)
(0, 66.67)
100 200 300 x + 3y = 200
(150,0)

Step 5 Vertices are (0, 66.67) (150,0) (140,20)

Maximize: 20x + 30y
20 (0) + 30 (66.67) = P2,000
20 (150) + 30 (0) = P3,000
20 (140) + 30 (20) = P3,400
Step 6 Decision: x=140 units of product A
Y= 20 units of product B
Maximum profit of P3,400

Example
Minimize cost: 50x + 60y
Subject to: x + 2y ≥ 10 3x + 2y = 18
3x + 2y ≤ 18
x ≥2 9
x ,y ≥ 0
(2,6)
x + 2y = 10 (0,5) (10,0)
3x + 2y = 18 (0,9) (6,0) 5
(4,3)
x =2
(2,4)

2 6 10 x + 2y = 10

x=2
Vertices: (2,6); (2,4) and (4,3)
Minimize cost: 50x + 60y
50 (2) + 60 (6) = P460
50 (2) + 60 (4) = P340
50 (4) + 60 (3) = P380
Decision: 2 units of x and 4 units of y; minimum cost of P340

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Activity 7: Choose ONLY one (1) problem to graph and solve. (step 1-6)

1. The nutritionist of CMU Hospital serves lunch consisting of two courses, A and B. Each unit of A has 6
grams of fat, 6 grams of carbohydrates and 18 grams of protein whereas each unit of B has 8 grams of fat,
4 grams of carbohydrates and 24 grams of protein. If the nutritionist wants to provide the patients no more
than 40 grams of fat, no more than 28 grams of carbohydrates, how many units of A and B should be
served to maximize the amount of protein?

2. The manager of a snack section of a grocery superstore has just learned that the department store has 70
pounds of mayonnaise approaching expiration date and must be used. In order to use up the mayonnaise,
the manager has decided to prepare two items: a ham spread and a chicken spread. Each bottle of the ham
spread will require 1.4 pounds of the mayonnaise while each bottle of the chicken spread will require 1
pound. The manager has received an order of no less than 10 bottles of ham spread and no less than 8
bottles of chicken spread. In addition, the manager has decided to have at least 15 bottles of each spread
available for sale. Both spread will cost 120 per bottle to make, but ham spread sells for 200 per bottle
and chicken spread sells for 280 per bottle.
A. Determine the solution that will maximize the profit.
B. Determine the solution that will minimize the cost.

3. A rancher raises milking cows and goats which he feeds with two types of mixes, Vita and Vigo. Each
bag of Vita costs P100 and contains 100 units of calcium and 400 units of protein. Each bag of Vigo costs
P150 and contains 200 units of calcium and 200 units of protein. The livestock need a minimum of 6,000
units of calcium and 12,000 units of protein per day. What combination of mixes should the rancher buy
in order to minimize the daily feed cost?

4. You’re on a special diet and know that your daily requirement of five nutrients is 60milligrams of vitamin
C, 1,000 milligrams of calcium, 18 milligrams of iron, 20 milligrams of niacin, and 360 milligrams of
magnesium. You have two supplements to choose from: Vega Vita and Happy Health. Vega Vita costs 20
cents per tablet, and Happy Health costs 30 cents per tablet. Vega Vita contains 20 milligrams of vitamin
C, 500 milligrams of calcium, 9 milligrams of iron, 2 milligrams of niacin, and 60 milligrams of
magnesium. Happy Health contains 30 milligrams of vitamin C, 250 milligrams of calcium, 2 milligrams
of iron, 10 milligrams of niacin, and 90 milligrams of magnesium. How many of each tablet should you
take each day to meet your minimum requirements while spending the least amount of money?

CHAPTER 3: LINEAR PROGRAMMING (Simplex algorithm) https://youtu.be/wOEqtWmXOHM

Example
Maximize Profits= 20x + 30y
Subject to: x + 3y ≤ 200
2x + y ≤ 300
x, y ≥ 0

Therefore,
manufact
ure 120
units of A
and 20
units of B
for a profit
of P3,400

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 Activity 8: Solve the following (1-3) using ANY Simplex algorithm mobile app.
Instruction: 1. Ask somebody to take a picture of you showing the downloaded app. (1 file)
2. Provide a long screenshot of each solution using the application (with conclusion) (3 files)

1. A computer system manufacturer has just introduced two time sharing programs for the generations of a
wide range of statistical output useful to decision makers. Preliminary market research indicates that each
hour of usage of REG will result in P400 profit, and each hour of STAT will result in P360 profit for the
company. The company is capable of producing a combined total of 1,000 hours per month for both
programs. In addition, production requires processing in two divisions, programming and storage. There
is a maximum monthly budget of P400,000 for programming and P600,000 for storage. Each hour of REG
uses P200 of programming budget and P500 of storage budget, while each hour of STAT uses P800 of
programming budget and P1,000 of the storage budget. What combination of REG and STAT should the
manufacturer produced in order to maximize the company’s profit?

2. A dietician has been asked by the athletic director of a university to develop a snack that athletes can use
in their training programs. The dietician intends to mix two separate products together to make the snack.
The following information has been obtained by the dietician:
Contribution per ounce
Nutrient Minimum Amt Req Product A Product B
Carbohydrates 20 2 5
Protein 12 6 1
Calories 45 9 5

Product A costs P20 per ounce and Product B costs P10 per ounce. Determine the optimal mix of Product
A and Product B that minimizes the snack's overall cost.
3. A chemist produces two types of fertilizer: X and Y. The profits realized from a kilo of Type X is P50,
and from a kilo of Type Y is P75. The raw materials from which the fertilizers are made are nitrogen,
sulfur and potassium which are used in the following quantities:
Nitrogen Sulfur Potassium
X 4 kilos 4 kilos 9 kilos
Y 3 kilos 2 kilos 1 kilo
The available stocks include 1,500 kilos of nitrogen, 1,200 kilos of potassium and 1,200 kilos of
sulfur. Find the amount of X and Y to be produced in order to maximize the profit.

CHAPTER 4: FORECASTING
The art and science of predicting future events
Approaches to forecasting:
I. Qualitative forecast
-based on judgement or opinion
II. Quantitative Forecast
A. Naïve Forecast (simple)
Example: if the demand last week was 100 units, then the naïve forecast for the upcoming
week is 100 units)
B. Moving average
Σ 𝑣𝑎𝑙𝑢𝑒𝑠 𝑖𝑛 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑛 𝑝𝑒𝑟𝑖𝑜𝑑𝑠
Moving average=
𝑛
Where n is the number of periods in the moving average
Example: Compute a three-mark moving average forecast for period 6 given the following
demand for cars for the last 5 years
Period/yr Demand
1 70
2 80
3 65
4 90
5 85

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 85+90+65
MAF6= = 80 cars
3

Activity 9:
Compute a four-mark moving average forecast for period 7, if the actual demand for 6th period is
95. MAF7=?

Σ (𝑤𝑒𝑖𝑔ℎ𝑡 𝑓𝑜𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 𝑛)(𝑣𝑎𝑙𝑢𝑒)

C. Weighted moving average =
Σ𝑤𝑒𝑖𝑔ℎ𝑡

Example: compute a three-period weighted moving average forecast given the following demand
for cars, with an assign weight of 1, 2 and 3.
Period/yr Demand
6 70
7 80
8 65
9 90
10 85

Σ 85(3)+90 (2)+ 65 (1)

WMAF6 = = 83 cars
6

Activity 10:
Compute a four-mark weighted moving average forecast for period 7, if the actual demand for 6th
period is 95. Assigned weight: 1,2 ,3 and 4. WMAF7 =?

D. Exponential smoothing

Ft= Ft-1 + α (At-1 – Ft-1)

Where:
Ft = New forecast
Ft-1 = Last Periods forecast
At-1 = Last period’s actual value
α = Smoothing constant
Example Activity 11
α=.10 α=.40
Period Actual Demand Forecast Error Forecast Error
1 50 - -
2 52 50 2
3 48 50.20 -2.2
4 51 49.98 1.02
5 50 50.08 -.08
6 54 50.07 3.93
7 52 50.46 1.54
8 50 50.61 -.61
9 55 50.55 4.45
10 53 51 2
11 51.20 ???

E. Trend Line Forecast

Yt = a + bt
Where: Yt = Forecast for period t
a = Value of Yt @ t = 0

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 b = slope of the line
t = specified number of time periods from t = 0

𝑛Σty− Σt Σy
b=
𝑛Σ𝑡²−(Σ𝑡)²

Σy− b Σt
a=
𝑛
where n = number of periods
y = value of the time series
Example: predict the sales for period 11 and 12
Week(t) Unit sales (y) t2 ty
1 800 1 800
2 810 4 1,620
3 830 9 2,490
4 820 16 3,280
5 850 25 4,250
6 810 36 4,860
7 825 49 5,775
8 840 64 6,720
9 805 81 7,425
10 830 100 8,300
Σt = 55 Σy = 8220 Σt² = 385 Σty = 45,340

10 (45,340)−(55)(8,220)
b= = 1.60
10 (385)−(55)²

8220−1.60 (55)
a= = 813
10

t=11 t=11
Yt = a + bt Yt = a + bt
=813 + 1.60 (11) =813 + 1.60 (12)
= 831 units = 832 units

Activity 12: Complete the table and predict sales for period 11. Formulas and solutions are not required

Week(t) Unit sales (y) t2 ty

1 820
2 800
3 825
4 815
5 835
6 825
7 810
8 800
9 830
10 840

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 F. Simple Linear Regression
Involves a linear relationship between two variables
Yx = a + bx
Where: Yx = Predicted (dependent) variable
x = Predictor (independent) variable
a = Value of Yx @ x = 0
b = slope of the line

𝑛Σxy− Σx Σy
b=
𝑛Σ𝑥²−(Σ𝑥)²

Σy− b Σx
a=
𝑛
where n = number of observations
Example
JC Hamburgers has chain of 10 stores in Southern Leyte. Sales figures and profit for the stores
are given in the following table. Predict profit for a store assuming sales of P30 million.

(in millions) (in millions)

Sales (x) Profit (y) x² xy
15 8 225 120
17 9 289 153
21 13 441 273
18 10 324 180
19 11 361 209
22 14 484 308
16 8.5 256 136
17 10 289 170
25 15 625 375
20 13 400 260

Σx =190 Σy =111.5 Σx 2=3694 Σxy = 2184

𝑛Σxy− Σx Σy 10 (2,184)−(190) (111.5)

b= = = .78
𝑛Σ𝑥²−(Σ𝑥)² 10 (3,694)−(190)²

Σy− b Σx 111.5−(.78)(190)
a= = = -3.67
𝑛 10

y=a+bx
= -3.67 + (.78) (30)
= 19.73
profit of P19,730,000 if sales is P30,000,000

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 Activity 13:
Complete the table and predict profit assuming sales of P20 million
(in millions) (in millions)
Profit Sales
5 18
7 19
4 13
8 23
9 24
5.5 16

Check your answers (optional) (Not Required) Scientific Calculator regression or trend line
https://www.youtube.com/watch?v=GG3sJYuwAKc
https://www.youtube.com/watch?v=Zrxz7jgFVos
https://youtu.be/k_HN0wOKDd0

CHAPTER 5: Inventory Model https://youtu.be/xmC_dRzghqk

An inventory is a store of goods.

Inventory Problems
A. Proper Quantity of Inventory to Order (How Much to order?)
B. Proper Time to order the quantity (When to order?)

>Holding or Carrying Cost- Opportunity cost associated with owing the inventory (Specified as a
percentage of unit price or peso amount)
>Ordering cost or set up cost- cost associated with ordering or receiving inventory. Include cost
of labor & materials used in setting up machinery for the production run (Expressed as a
peso amount per order, regardless of order size)

HOW MUCH TO ORDER-THE ECONOMIC ORDER QUANTITY (EOQ) MODEL

-Applicable only when demand for the item has a constant or nearly constant rate and when the
entire quantity ordered arrives in the inventory at one time.

EOQ= √ 2𝑎𝐷
𝑘
a= Ordering cost or set up cost
k= Carrying cost or holding cost
D= Demand

𝐸𝑂𝑄 𝐷
Average Inventory = Number of orders =
2 𝐸𝑂𝑄

𝐸𝑂𝑄 𝐷
Annual Carrying cost =
2
(k) Annual ordering cost =
𝐸𝑂𝑄
(a)

Total annual cost = Annual carrying cost + Annual ordering cost

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 Example
Suppose R & C Beverages Company has a beverage product that has a constant annual demand
rate of 7200 cases. A case of soft drink costs R & C P288. Ordering cost is P200 per order and inventory
carrying cost is charged @ 25% of the cost per case. Identify the following:
a. EOQ
b. Average inventory
c. Annual carrying cost
d. Number of orders
e. Annual ordering cost
f. total annual cost

D = 7200 cases
Purchase price = 288/case
a = 200/order
k = 288 (25%) = 72

a. EOQ= √ 2𝑎𝐷
𝑘
√ =
2 (200 (7200)
72
= 200 cases

𝐸𝑂𝑄
b. Average Inventory = = 200/2 =100 cases
2
𝐸𝑂𝑄
c. Annual Carrying cost = (k) = 100 (72) = P7200
2
𝐷
d. Number of orders = = 7200/200 = 36 orders
𝐸𝑂𝑄

𝐷
e. Annual ordering cost = (a) = 36 (200) =P7,200
𝐸𝑂𝑄

f. Total annual cost = Annual carrying cost + Annual ordering cost = P7,200 + P7,200= P14,400

Activity 14:
A. Apollo Corporation manufactures various glass products including a car window. The setup cost to
produce the car window is $1,200. The cost to carry a window in inventory is $3 per year. Annual
demand for the car window is 12,000 units. Identify the following:
a. EOQ
b. Average inventory
c. Annual carrying cost
d. Number of orders
e. Annual ordering cost
f. total annual cost

B. Dalisay Company annually consumes 10,000 units of Part C. The carrying cost of this part is $2 per
year and the ordering costs are $100. The company uses an order quantity of 500 units. By how much
could the company reduce its total costs if it purchased the economic order quantity instead of 500 units?

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 CHAPTER VI: NETWORK ANALYSIS
Project Scheduling: https://www.youtube.com/watch?v=-TDh-5n90vk

Example
ACTIVITY Schedule ES EF LS LF SLACK CRITICAL
Time (weeks) LS-ES PATH
1-2 5
1-3 5
2-4 10
3-4 7
2-6 6
4-6 11
4-5 6
6-7 5
5-7 4
a. Network diagram
b. Enumerate the path; determine the critical path and the completion time
c. Complete the activity schedule table.

a. Network Diagram
1-2 5
0 5 6-7 5
0 5 26 31
26 31

4-6 11
2-4 10 15 26
5 15 15 26 Finish
Star 5 15
t
5-7 4
1-3 5 3-4 7 4-5 6 21 25
0 5 5 12 15 21 27 31
3 8 8 15 21 27

b.
1-2 2-6 6-7
=5+6+5 =16 weeks

1-2 2-4 4-6 6-7 =5+10+11+5 =31 weeks

1-2 2-4 4-5 5-7 =5+10+6+4 =25 weeks

1-3 3-4 4-6 6-7 =5+7+11+5 =28 weeks

1-3 3-4 4-5 5-7 =5+7+6+4 =22 weeks

c.
ACTIVITY Schedule ES EF LS LF SLACK CRITICAL
Time (weeks) LS-ES PATH
1-2 5 0 5 0 5 0 YES
1-3 5 0 5 3 8 5 NO
2-4 10 5 15 5 15 0 YES
3-4 7 5 12 8 15 7 NO
2-6 6 5 11 20 26 6 NO
4-6 11 15 26 15 26 0 YES
4-5 6 15 21 21 27 6 NO
6-7 5 26 31 26 31 0 YES
5-7 4 21 25 27 31 6 NO

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 Activity 15
Activity Predecessors Time(weeks) ES EF LS LF SLACK CRITICAL PATH
(YES/NO)
A None 2
B None 3
C A 3
D A 1
E B 2
F C 4
G D,E 1

a. Network diagram
b. Enumerate the path; determine the critical path and the completion time
c. Complete the activity schedule table.

End

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