Manuel S.

Enverga University Foundation

Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

H083
MME 321 / QUANTITATIVE TOOLS IN ENGINEERING MANAGEMENT

JOHN YVES G. NAÑEZ

MM-EM

DR. GUILLERMO M. RAGO JR.

September 28, 2019

 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

I. DEFINE OR DESCRIBE:
1. Algorithm
A set of logical and mathematical operations performed in a specific sequence.
2. Break-Even Point
The quantity of sales that results in zero profit. Thus, the cost of the product is
equal to the revenue of the business.
3. Descriptive Analytics
The study and consolidation of historical data to describe how a company has
performed in the past and how it is performing now. Descriptive analytics is the
interpretation of historical data to better understand changes that have occurred in
a business. Descriptive analytics describes the use of a range of historic data to
draw comparisons.
4. Input Data
Data that are used in a model in arriving at the final solution.
5. Mathematical Model
A model that uses mathematical equations and statements to represent the
relationships within the model.
6. Parameter
A measurable input quantity that is inherent in a problem.
7. Problem
A statement, which should come from a manager, that indicates a problem to be
solved or an objective or a goal to be reached.
8. Quantitative Analysis
A scientific approach that uses quantitative techniques as a tool in decision
making. This field of study has several different names including quantitative
analysis, management science, and operations research.
9. Sensitivity Analysis
A process that involves determining how sensitive a solution is to changes in the
formulation of a problem. Sensitivity analysis investigates how our decision
might change given a change in the problem data.
10. Variable
A measurable quantity that is subject to change. Variables can be controllable or
uncontrollable. A controllable variable is called a decision variable.

II. QUESTIONS:
A. How can quantitative analysis techniques inform and support decision making within
organizations?
Quantitative analysis techniques are extensively used in the real world now. These
techniques are used by small, medium and large companies to predict what is the
company needs now, in the next decades or in the future. Quantitative analysis
helps countries and companies of all sizes to save millions, predict or plan for the
future, increase revenues and provide higher-quality products and services.
Quantitative analysis techniques support the decision making of an organization

NAÑEZ, JY. G. 2
 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

through representation of mathematical models that is a representation of reality

and will strongly support these decisions.

B. Outline the key features of each of the seven steps in the quantitative analysis
approach.
(1) Defining the Problem
a. Most important and most difficult step
b. Go beyond symptoms of the problem and identify the true causes
c. Selecting those problem whose solution is most beneficial
d. Develop specific, measurable objectives
e. The real problem should be kept in mind
f. Avoid setting specific and measurable objectives that may not solve the
real problem
(2) Developing a Model
a. Model is a representation (usually mathematical) of a situation
b. A mathematical model is a set of mathematical relationship
c. A variable is a measurable quantity that may vary or is subject to change
d. A parameter is a measurable quantity that is inherent
e. The model developer has to be careful to include the appropriate amount
of detail to be solvable yet realistic.
(3) Acquiring Input Data
a. Obtaining accurate data for the model is essential
b. Improper data will result in misleading results
c. Sources of data are reports and documents, interviews, sampling and direct
measurement and statistical sampling procedure.
(4) Developing a Solution
a. Involves manipulating the model to arrive at the best (optimal) solution to
the problem.
b. Requires that an equation be solved for the best decision
c. You can use a trial-and-error method
d. You can use complete enumeration
e. The accuracy of a solution depends on the accuracy of the input data and
the model
(5) Testing the Solution
a. A solution needs to be tested completely
b. Determining the accuracy and completeness of the data used by the model
c. One method of testing the data is to collect additional data from a different
source
d. The model can be checked to make sure that it is logical and represents the
real situation.
(6) Analyzing the Results
a. Starts with determining the implications of the solution
b. The sensitivity of the solution to changes in the model and input data is a
very important part of analyzing the results.

NAÑEZ, JY. G. 3
 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

c. Sensitivity analysis or postoptimality analysis determines how much the

solution will change if there are changes in the model or the input data.
(7) Implementing the Results
a. Large number of quantitative analysis teams have failed in their efforts
because they have failed to implement a good, workable solution
properly.
b. After the solution has been implemented, it should be closely
monitored.
c. Causes of modification of the original solution are changing economy,
fluctuating demand and model enhancements requested by managers
ad decision makers.

C. Briefly describe and discuss your understanding of the phrase garbage in, garbage out.
Garbage in, garbage out means that improper data will result in misleading
results. In gathering data, many methods that can be used, there are data that can
be obtained through written documents and reports, some are from interviews and
questionnaire and some are statistically collected in the field. Some of this data
are invaluable to the study and can make confusion and can make misleading
results to the study. These data should be filtered and choose wisely and
appropriately. Statistical data are always the best data that will support your
decision based on the model. This method of filtering and choosing data is the
best representation of garbage in, garbage out situation. Unnecessary and
invaluable data should be disregarded to produce a proper and reliable results.

D. List down at least six (6) patented actions that a quantitative analyst could undertake to
ensure that the implementation stage of a project is successful.
(1) Prepare the infrastructure. Many solutions are implemented into a production
environment that is separate and distinct from where the solution was
developed and tested. It is important that the characteristics of the production
environment be accounted for. This strategy includes a review of hardware,
software, communications, etc. In our example above, the potential desktop
capacity problem would have been revealed if we had done an evaluation of
the production (or real-world) environment. When you are ready for
implementation, the production infrastructure needs to be in place.
(2) Coordinate with the organizations involved in implementation. This may be as
simple as communicating to your client community. However, few solutions
today can be implemented without involving a number of organizations. For
IT solutions, there are usually one or more operations and infrastructure
groups that need to be communicated to ahead of time. Many of these groups
might actually have a role in getting the solution successfully deployed. Part
of the implementation work is to coordinate the work of any other groups that
have a role to play. In some cases, developers simply failed to plan ahead and
make sure the infrastructure groups were prepared to support the
implementation. As a result, the infrastructure groups were forced to drop

NAÑEZ, JY. G. 4
 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

everything to make the implementation a success.

(3) Implement training. Many solutions require users to attend training or more
informal coaching sessions. This type of training could be completed in
advance, but the further out the training is held, the less information will be
retained when implementation rolls around. Training that takes place close to
the time of implementation should be made part of the actual implementation
plan.
(4) Install the production solution. This is the piece everyone remembers. Your
solution needs to be moved from development to test. If the solution is brand
new, this might be finished in a leisurely and thoughtful manner over a period
of time. If this project involves a major change to a current solution, you may
have a lot less flexibility in terms of when the new solution moves to
production, since the solution might need to be brought down for a period of
time. You have to make sure all of your production components are
implemented successfully, including new hardware, databases, and program
code.
(5) Convert the data. Data conversion, changing data from one format to another,
needs to take place once the infrastructure and the solution are implemented.
(6) Perform final verification in production. You should have prepared to test the
production solution to ensure everything is working as you expect. This may
involve a combination of development and client personnel. The first check is
just to make sure everything is up and appears okay. The second check is to
actually push data around in the solution, to make sure that the solution is
operating as it should. Depending on the type of solution being implemented,
this verification step could be extensive.
(7) Implement new processes and procedures. Many IT solutions require changes
to be made to business processes as well. These changes should be
implemented at the same time that the actual solution is deployed.
(8) Monitor the solution. Usually the project team will spend some period of time
monitoring the implemented solution. If there are problems that come up
immediately after implementation, the project team should address and fix
them.

E. What is the break-even point? What parameters are necessary to find it.?
The break-even point is where the revenue of a company equates the total cost of
product and services of the company, therefore making its profit equal to zero. To
find the break-even point of a company, selling price per unit, variable cost per
unit and fixed cost should be known. Therefore, break-even point is the ratio of
fixed cost and selling price per unit deducted by its variable cost per unit.

NAÑEZ, JY. G. 5
 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

III. PROBLEM SOLVING:

1. Gina Lopez has started her own company, Love Shirts, which manufacture imprinted
shirts for special occasions. Since she has just begun this operation, she rents the
equipment from a local printing shop when necessary. The cost of using the equipment
is P2350. The materials used in one shirt cost P100, and Gina can sell these for P150
each.
a. If Gina sells 20 shirts, what will her total revenue be? What will her total variable
cost be?
b. How many shirts must Gina sell to break even? What is the total revenue for this?

Answer:
(1) Profit = Revenue – Cost
Profit = Revenue – (Fixed Cost + Variable Cost)
Revenue = Selling Price * Item Sold
Variable Cost = Cost per Item * Item Sold

Revenue = Selling Price * Item Sold

= 150 * 20
= P3,000.00

Variable Cost = Cost per Item * Item Sold

= 100 * 20
= P2,000.00
(2) Profit = Revenue – (Fixed Cost + Variable Cost)
P = R – (FC + VC)
P = (SP*X) – (FC + (CI*X))
P = (SP*X) – FC - (CI*X)
P = (SP – CI) * X – FC
If Break-Even, profit is equal to 0.
P = (SP – CI) * X – FC
0 = (150 – 100) * X – 2350
2350 = (150 – 100) * X
2350 = 50 * X
X = 2350/50
X = 47 shirts should be sold to break even.

Revenue = Selling Price * Item Sold

R = (SP*X)
R = 150 * 47
R = P7,050.00

NAÑEZ, JY. G. 6
 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

2. Zoe Garcia is the manager of a small office support business that supplies copying,
binding and other services for local companies. Zoe must replace a worn copy
machine that is used for black and white copying. Two machines are being considered
and each of these has a monthly lease cost plus a cost for each page that is copied.
Machine 1 has a monthly lease cost of S600 and there is a cost of S0.010 per page
copied. Machine 2 has a monthly lease cost of S400 and there is a cost of S0.015 per
page copied. Customers are charged S0.05 per page copies.
a. What is the break-even point for each machine?
b. If Zoe expects to make 10,000 copies per month, what would be the cost for each
machine?
c. If Zoe expects to make 30,000 copies per month, what would be the cost for each
machine?
d. At what volume (the number of copies) would the two machines have the same
monthly cost? What would the total revenue for this number of copies?

Answer:

(1) Machine 1, Break-Even point

P = (SP – CI) * X1 – FC
0 = (0.05 – 0.01) * X1 – 600
600 = 0.04*X1
X1 = 15,000 copies

Machine 2, Break-Even point

P = (SP – CI) * X2 – FC
0 = (0.05 – 0.015) * X2 – 600
400 = 0.035*X2
X2 = 11,429 copies

(2) Machine 1, Total Cost

C = FC + (VC*X)
If 10,000 copies
C = 600 + (0.010*10,000)
C = $700.00
Machine 2, Total Cost
C = FC + (VC*X)
If 10,000 copies
C = 400 + (0.015*10,000)
C = $550.00

(3) Machine 1, Total Cost

C = FC + (VC*X)
If 30,000 copies
C = 600 + (0.010*30,000)

NAÑEZ, JY. G. 7
 Manuel S. Enverga University Foundation
Lucena City, Philippines
Granted Autonomous Status
CHED CEB Res. 076-2009

C = $900.00
Machine 2, Total Cost
C = FC + (VC*X)
If 30,000 copies
C = 400 + (0.015*30,000)
C = $850.00

(4) Machine 1 Cost = Machine 2 Cost

C1 = C2
When,
C1 = 600 + (0.010*X)
C2 = 400 + (0.015*X)
Therefore,
600 + (0.010*X) = 400 + (0.015*X)
(0.015 – 0.010) * X = 600 – 400
0.005 * X = 200
X = 200/.005
X = 40,000 copies

Total Revenue
R = SP * X
= 0.05 * 40,000
R = $2,000

NAÑEZ, JY. G. 8